JEFFERSON CITY — The Senate Committee for Fiscal Oversight approved the Republican proposal to eliminate the individual income tax, but some senators pointed to the resolutions' revenue impact as a cause for concern.
To make up for the loss in revenue that individual income tax generates for the state, the proposed House Joint Resolutions 173 and 174, if approved by voters in November, would allow the legislature to expand sales taxes on all goods and services as income tax is gradually eliminated.
Much of the discussion during the hearing was centered around the bills' fiscal note, which shows the impact of the projected loss of income taxes on the state's general revenue.
Under the resolution, for each fiscal year after approval, a 0.01% income tax rate reduction would be applied for every $20 million in the state's revenue surplus. The rate can at most be reduced by 1.6% each year under the resolution's provisions.
According to projections from the Office of Administration Budget and Planning included in the fiscal note, Missouri is currently set to meet required revenue collections to hit the maximum threshold for the rate reductions for each of the next three fiscal years. If this resolution were approved and the office's projections are correct, the income tax rate for the 2026 tax year would be reduced from 4.7% to 3.1%, from 3.1% to 1.5% in 2027 and from 1.5% to 0% in 2028, leaving the legislature responsible for filling a $8.5 billion hole in general revenue by FY 2029.
Sen. Maggie Nurrenbern, D-Kansas City, brought up concerns over impact on Missouri's general revenue. The fiscal summary notes these bills may cut $4.2 billion in general revenue from the state in fiscal year 2027, $6.2 billion in 2028 and $8.5 billion in 2029.
The fiscal note also indicates numerous departments such as Elementary and Secondary Education, Social Services and Public Safety, could see major reductions in their spending authority. The budgeted amount for full time equivalency counts, or FTE counts, for these departments could see massive reductions. For example, the Department of Elementary and Secondary Education could lose over 350 budgeted full-time equivalent employees, and the Department of Corrections could lose over 4,500, if revenues are not replaced by increased sales taxes.
"What reductions would look like in all these departments is cutting fundamental vital state services in half," Nurrenbern said. "I do not know how we are going to be able to pay the bills."
Sen. Rusty Black, R-Chillicothe, serves as the chair of the Senate Appropriations Committee and has experience working with the Missouri budget. Expressing his support for the joint resolutions, he believes the legislature can work together to effectively eliminate income taxes.
"I do not want to be in charge of the appropriations committee that's losing a billion dollars, and I don't believe that's what the plan is," Black said. "People will work together to come up with a proper plan to replace our income tax with a broadening of a sales tax."
Minority Floor Leader Sen. Doug Beck, D-Affton, warned the committee that the implementation of this resolution will have dire consequences for medium- and low-income earners in Missouri.
"This will create the most massive tax increase in the state's history, and will shift the burden of taxes to those who can't afford it," Beck said. "We will have to shut down our schools, this experiment was done in Kansas and we will no longer be able to compete with any other state."
In 2012 and 2013, Kansas lawmakers made cuts to the state's income tax and made all pass-through business income exempt from the personal income tax base. This reduced revenue for the next six years by $4.5 billion, causing general fund spending per resident to fall 5.5% along with cuts to higher education funding.
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