This week the Missouri Senate and Missouri House of Representatives both returned to the state capitol to address two issues brought forth by Governor Mike Parson (R) in his call for special session. Governor Mike Parson called the General Assembly back to session this month to enact an income tax cut for all Missourians and passage of several issues related to agriculture as part of an omnibus agriculture incentive bill. This week, the House passed agricultural incentives legislation and the Senate passed an income tax reduction bill. These bills will now cross over to the other chamber for consideration next week. It is expected that both bills will easily pass as the terms have been negotiated and the Governor will sign them into law upon receipt.  

AGRICULTURE INCENTIVES

The Missouri House voted 83-28 to pass House Bill 3 sponsored by Rep. Brad Politt (R-Sedalia) on Wednesday Sept 21st. HB 3 is an inclusive agriculture bill that includes most of the provisions that were passed during the regular session as House Bill 1720, which was ultimately vetoed by the Governor.  

HB 3 includes provisions related to land surveys; ethanol and biodiesel incentives; wood energy production tax credit; urban farming tax credit; freight line company tax credits; soybean producer check off modification; sales tax exemptions for utility vehicles for agriculture purposes; updates to log truck weight restrictions; creation of an agricultural specialty crop loan program; creation of a family farm livestock loan program; and extensions to existing tax credit programs within the Missouri Small Business Development Authority within the Department of Agriculture. Several provisions added to the bill are outside the initial special session call of the Governor, however, they have been negotiated and are unlikely to trigger any objections from the Governor moving forward.  

STATE INCOME TAX REDUCTION

The Missouri Senate voted 24-4 to pass Senate Bill 3 & 5 sponsored by Sen. Lincoln Hough (R-Springfield) and Sen. Andrew Koenig (R-Manchester). The legislation would lower the state’s income tax rate. 

Current law provides for reductions to the top rate of income tax at 5.3% to an eventual rate of 4.8 percent over a period of years if certain net general revenue collection triggers are met. The Senate bill repeals all such scheduled reductions and immediately reduces the top rate of income tax to 4.95 percent beginning in the 2023 calendar year. 

The bill adds one additional potential 0.15 percent reduction in the top rate of tax. Such additional reduction shall only be effective if the amount of net general revenue collected in the previous fiscal year exceeds the highest amount of net general revenue collected in any of the three fiscal years prior to such fiscal year by at least $175 million. 

Finally, the bill adds three additional potential 0.1 percent reductions in the top rate of tax, for an eventual rate of 4.5 percent. Such additional reductions shall only be effective if the amount of net general revenue collected in the previous fiscal year exceeds the highest amount of net general revenue collected in any of the three fiscal years prior to such fiscal year by at least $200 million and exceeds the amount of net general revenue collections from the fifth prior fiscal year, adjusted annually for inflation. The amount of net general revenue collected required to reduce the top rate of tax from 4.8 percent to 4.5 percent shall be adjusted annually by the percent increase in inflation. 

Current law exempts the first $100 of a taxpayer's income from taxation. For all tax years beginning on or after Jan. 1, 2023, SB 3 & 5 exempts the first $1,000 of income from taxation. The bill includes an emergency clause.