Governor calls for special session to pass income tax cut

JEFFERSON CITY, Mo. — Gov. Mike Parson on Monday called on lawmakers to return to work Sept. 6 for a special legislative session to cut income taxes.

The Republican told reporters gathered in his Capitol office that he wants lawmakers to cut the top income tax rate from 5.3% to 4.8% and increase the standard deduction by $2,000 for single filers and $4,000 for couples.

A single adult caring for two children and making at most $35,000 a year would see income taxes drop by about $140 a year, according to estimates provided by the governor's office.

Parson specified that, based on the limits in his special session call, lawmakers cannot cut income taxes so deeply that the state loses more than $700 million per year in revenue.

The governor also recommended cutting income taxes entirely for individuals who make $16,000 or less in a year or for couples filing jointly who make less than $32,000.

Missouri has more money on hand than ever before, thanks partly to a combination of inflation, higher wages and federal funds. The state closed out its 2022 fiscal year with a general revenue balance of nearly $4.9 billion — more than double the previous record set just one year ago.

Parson said some of that money should go back to taxpayers.

"Our plan puts more of Missourians' hard-earned dollars back in their pockets and aims to make it a little easier for families to put food on the table and gas in the car," Parson said.

The special session is scheduled weeks before voters in November will decide whether to reelect current House members and some senators, which puts heavy pressure on Republicans to support the tax cuts.

But Democrats and other skeptics warned that Parson's plan could put the state in financial jeopardy.

Missouri Budget Project president and CEO Amy Blouin credited the huge influx of pandemic-related federal funds for the state's current budget surplus. The Missouri Budget Project analyzes how economic policies impact low-income families.

"Quite simply, relying on the current surplus to fund permanent tax changes isn't fiscally sustainable, or responsible, and will ultimately require cuts to state services like we saw in Kansas a few years ago," Blouin said.

Under former Republican Gov. Sam Brownback, Kansas enacted a nationally notorious income tax cut experiment in 2012 and 2013. Those cuts were largely repealed in 2017 following massive, persistent budget shortfalls that forced GOP lawmakers to repeatedly cut spending and boost other taxes to keep lower income taxes.

Missouri House Democratic Minority Leader Crystal Quade called Parson's tax cut proposal "a textbook example of fiscal irresponsibility."

Parson proposed the income tax cut as an alternative to lawmakers' planned one-time tax refund, which he vetoed in June.

Under the bill passed by lawmakers this year, taxpayers would have gotten a one-time tax credit of up to $500 for individuals and $1,000 for couples. The refunds would have gone only to individuals earning less than $150,000 and couples making less than $300,000 annually.

In practice, people would have received a $1 refund for each $1 of tax owed until their tax bill reached the refund limit of $500.

Democratic lawmakers had argued the tax refund would only benefit middle-income families because the poorest workers don't pay income taxes and not enough money was set aside to provide the full $500 or $1,000 for everyone who qualified, a concern Parson echoed Monday.

In his call for a special session, Parson also asked lawmakers to extend several tax credit programs aimed at benefiting farmers and ranchers.

Lawmakers passed the agricultural tax credits during their regular legislative session that ended in May, but they only approved the programs for two years. Parson wants the tax credit programs to be in place at least six years before expiring.