Missouri appears on track for income-tax cuts

JEFFERSON CITY, Mo. -- The state income-tax rate for most Missouri residents is likely to fall to 5.9 percent from 6 percent in 2018 after state revenue apparently grew enough to trigger a tax cut passed by the Legislature in 2014.

Data from state budget director Dan Haug show net general revenue hit more than $9 billion during the fiscal year that ended Saturday, a roughly 2.6 percent increase compared to the year before.

Office of Administration spokeswoman Ryan Burns said officials are reviewing whether the trigger was reached.

Missouri House Budget Committee chairman Scott Fitzpatrick said it's "most likely" tax cuts will be triggered, although he said he's also waiting on final confirmation.

If it does, it will mean tax rates will drop for those who fall in the highest tax bracket. In 2016, anyone who made more than $9,000 in taxable income fell under the top bracket for a 6 percent tax rate.

"It was designed to benefit every Missourian a little bit," Fitzpatrick said, adding he's hopeful another provision that calls for business deductions will spur small businesses.

Meeting revenue growth thresholds will trigger a 5 percent deduction for business income reported on individual income tax returns, and more cuts could take effect if revenue continues to grow by at least $150 million over their high mark from the previous three years. Individual income taxes could drop to as low as 5.5 percent, and business deductions could reach as much as 25 percent.

The state faces tax cuts despite the fact Republican Gov. Eric Greitens cited sluggish revenue growth and rising health-care costs when he cut more than $250 million to balance this year's budget, including cuts in spending budgeted for K-12 school buses, higher education and social services.

Missouri lawmakers in 2014 passed the tax cuts after overriding a veto from former Democratic governor Jay Nixon, who denounced the measure as fiscally irresponsible and warned it could lead to tax cuts even in the midst of a recession.

Republican supporters at the time said it would spur the economy and noted it includes safeguards to protect the state's budget.

Missouri's tax cut is a less aggressive version of measures enacted in 2012 and 2013 in Kansas, which lowered its top tax rate and fully exempted certain categories of businesses from taxes. The state had been facing a budget hole of $889 million through June 2019 before Kansas legislators this year largely rolled back those cuts, which came to be known as the Kansas experiment.