Missouri’s Republican-led Legislature has enacted a highly contested income tax cut by overriding the veto of Democratic Gov. Jay Nixon.
The legislation will cut Missouri’s top individual income tax rate for the first time in almost a century and make Missouri just the third state to enact a special deduction for business income on personal tax returns. The cuts will occur only if revenues keep growing.
The bill is designed to reduce Missouri’s individual income tax rate from 6 percent to 5.5 percent. It also phases in a new 25 percent deduction for business income on personal tax returns. Each incremental cut would occur only if state revenues grow by at least $150 million over their high mark from the previous three years.
The tax cuts could benefit about 2.5 million individuals and families, with the wealthiest standing to gain the most, and would provide an extra boost to hundreds of thousands of people involved in a business.
The state Department of Revenue projects a married family of four earning $44,000 annually would get a tax cut of $32 once the law is fully in effect. University of Missouri-Columbia economists estimate the tax cut will eventually reduce state revenues by $620 million annually.
Nixon had denounced the cut as a reckless financial experiment that could jeopardize funding for public education and state services.
Republicans made the measure a priority after failing last year to override Nixon’s veto of a more expansive tax cut.
Republicans have large majorities in the House and Senate but still needed Democratic help to achieve the two-thirds majority required for an override.