Auditor: Missouri tax withholding change didn't follow law

JEFFERSON CITY, Mo. -- The Missouri Revenue Department broke the law by not using a public process to change tax withholding tables, the state auditor said Tuesday.

Democratic Auditor Nicole Galloway told reporters the agency didn't follow state law when it revised withholding tables in January without first proposing a regulation change. She said taking that step would have allowed for public input on an adjustment that will mean more money is withheld from paychecks.

Employers use withholding tables to calculate how much to take from workers' paychecks for income taxes.

"Over and over, this executive agency makes decisions that directly impact the daily lives of Missourians without clearly communicating with the citizens who are affected," Galloway said in a statement announcing results of the audit. "The decision to take more money out of paychecks without going through the legally required process shows a clear pattern of mismanagement."

The department now plans to work to change regulations, according to a response included in the audit. A spokeswoman for the agency did not comment further on the most recent withholding table revision.

Gov. Mike Parson in a statement said his administration is "not interested in engaging with someone that prioritizes partisan politics and scare tactics over the long-term benefits of federal and state income tax cuts."

Galloway's audit came after months of bipartisan criticism from state lawmakers who slammed the Department of Revenue for not properly warning taxpayers about changes that could mean smaller refunds or higher-than-expected bills when they file this year.

Revenue officials first amended the tables in March 2018 in response to the federal tax law overhaul championed by President Donald Trump, then revised them again in October 2018 after finding what the then-director described as a longstanding mistake in the tables. Former director Joel Walters later said there was no error.

Walters resigned in March. Galloway said the announcement of his resignation came about a week after she presented the findings of her audit to the agency.

"While we are aware that bureaucratic challenges exist, we are committed to working with new leadership within the Department of Revenue to ensure Missourians receive the full benefits of the historic federal and state income tax cuts that were signed into law last year," Parson said.

Galloway's audit sparked renewed criticism of how Parson's administration handled tax changes.

"Such a flagrant disregard for Missouri taxpayers and the hardships they face when the state plays games with their paychecks cannot be defended," House Democratic Minority Leader Crystal Quade said in a statement Tuesday. "Governor Parson must be held accountable for his administration's repeated lies and cover-ups and take all necessary steps to comply with the law and protect taxpayers."