BUDGET & TAX POLICY

Emerging Tax Policy Issues

Since 2014, state lawmakers have approved a number of tax bills that together will reduce state general revenue by $1.83 billion annually when they are fully implemented. Most recently, last fall lawmakers approved reductions to the top rate of individual income tax that will reduce Missouri’s top rate of tax from 5.3% in 2022 to 4.95% in 2023 and to 4.5% when the reductions are fully implemented.

These cuts are likely to mean that Missouri’s current flush budget reserve will be short-lived.

• As lawmakers consider additional changes to the tax code, we must ask them to be cautious and focus on targeted tax changes that help those Missourians that haven’t been reached by previous cuts.
• Improvements in the circuit breaker tax credit for seniors and people with disabilities with modest incomes, and the earned income tax credit are affordable alternatives to broad-based tax changes that would do little to help the Missourians who need it the most.

Eliminating corporate income tax in Missouri would cost $700 million annually – an amount equal to 20% of state general revenue for local schools. Moreover, a large portion of the tax cut would flow to companies who are located outside of Missouri.

Social Security & Annuity Exemptions

Several bills have been filed that would exempt social security income from state income tax. While this sounds reasonable at face value, Missouri already exempts social security and public pension income from state income tax for seniors within income limits. Moreover, some of the proposal would exempt not only social security benefits and public pensions, but also annuities regardless of age or income.

• A compromise was reached in 2008 to exempt social security income from state income tax for older Missourians with low and middle incomes  -  single filers with incomes up to $85,000 and married filers with incomes up to $100,000. As a result, older Missourians who rely solely on social security income are already exempt from income tax.
• Moreover, many private pensions are also exempt, as are pensions from local, state and federal governments (like for teachers, police, and firefighters), depending on income. 

The new effort to exempt ALL social security from income tax would mostly benefit only the wealthiest seniors (who will already benefit significantly from the recent cuts to the top rate of state income tax.

• The proposed change would cost $320 million annually.
•  In context, that amount is about two-thirds the amount of general revenue the state provides to Missouri’s Division of Senior and Disability Services – which uses the funds to provide the Long-Term Care Ombudsman Program; funding for the Area Agencies on Aging to provide home delivered and congregate meals, transportation, legal and other services and coordinates and oversees home and community-based services.

MBP's Improving the Circuit Breaker Property Tax Credit to Help Seniors, Missourians with Disabilities Stay in Their Homes outlines ways that the credit can be strengthened, many of which are included in Senate Bill 15 (Cierpiot). Several organizations testified in support of the bill, including AARP, Empower Missouri, Missouri Association of Areas on Aging, Marillac Mission Fund, Missouri Budget Project, Paraquad, and Voyce, and others submitted written testimony.

• $870 million increase in general revenue for transportation to widen the I-70 corridor.
• Full funding for K-12 education funding formula and school transportation.
• $78 million to increase child care provider rates.
• $70 million to increase core funding for higher education institutions.
• $56 million to increase access to Pre-K for 17,000 children.
• $22 million to invest in restructuring and increases in staff at the Children’s Division.
• $16.8 million to support the transition from the public health emergency and reenrollment. process in Medicaid at the Department of Social Services.
• $42.8 million provider rate increase for Children’s Residential Treatment providers.
• $88 million to expand access to behavioral health care.
• $3.8 million to incentivize Local Public Health Agencies to become accredited.
• $1 million to continue the work on the 988 Crisis Hotline.

Legislative budget committees will begin hearing budget overviews next week. 

Appropriations Hearings 

House Subcommittee on Appropriations - Education

Date: Monday, January 23, 2023, 10:30 a.m. Room: House Hearing Room 3

Organizational meeting. Informational overview by the Council on Public Higher Education, Missouri Community College Association, and the University of Missouri System.
 

House Budget

Date: Monday, January 23, 2023, 12 p.m. Room: House Hearing Room 3

HB 14 -- APPROPRIATIONS BILL

Office of Administration and Departments presentation regarding the emergency supplemental budget, regular supplemental budget, and the American Rescue Plan Act budget.

Public testimony will be taken on the emergency supplemental budget, regular supplemental budget, and the American Rescue Plan Act budget.

House Subcommittee on Appropriations - Health, Mental Health, and Social Services

Date: Tuesday, January 24, 2023, 8 a.m.  Room: House Hearing Room 3

Budget presentations from the Department of Social Services: Support Divisions, Children's Division, Family Support Division, and Division of Youth Services.
 

House Subcommittee on Appropriations - Agriculture, Conservation, Natural Resources, and Economic Development

Date: Tuesday, January 24, 2023, 8 a.m. Room: Joint Hearing Room (117)

Budget presentations from the Department of Economic Development and the Department of Natural Resources.

Senate Appropriations
 

Date: Tuesday, January 24, 2023, 8 a.m.  Room: Senate Committee Room 2
Governor's FY 2024 Budget Recommendations Overview

Date: Wednesday, January 24, 2023, 8 a.m.  Room: Senate Committee Room 2
Department of Corrections