JEFFERSON CITY, Mo. (AP) — House members on Wednesday voted to advance a proposal to cut the income tax rate for businesses and most Missouri residents to 5 percent as part of a broader Republican-led effort to change state tax law.
The individual income tax rate for most people is now 5.9 percent, although it’s set to gradually drop to 5.5 percent over time. Missouri’s current corporate income tax rate is 6.25 percent.
Republican House Speaker Pro Tem Elijah Haahr’s bill would go further, enacting the 5 percent rate more quickly. And House members on Wednesday agreed to add an earned income tax credit for low-income workers to the proposal. The measure needs another vote to go to the Senate.
Haahr is trying to offset revenue loss by ending or cutting back on some tax perks, including changing how some multistate corporations can calculate their taxable income.
Haahr’s bill also would eliminate a tax credit for low-income senior renters, increase vehicle fees, and phase out a federal income tax deduction, ending it for those earning more than $150,000 a year.
It’s unclear exactly what the impact on state finances would be. It needs another fiscal review because of changes adopted by House members Wednesday.
Haahr’s bill is one of several competing proposals to change Missouri tax policy, although any proposal faces challenges making it across the finish line this year.
It’s difficult passing broad policy changes in only one legislative session, and Republican Senate leaders have raised concerns about the potential impact tax cuts could have on state finances. But Haahr said he’s still “optimistic.”
“We knew from day one that these big bills take time, so we’ve been a little more deliberative,” Haahr said.
Democratic Minority Whip Kip Kendrick during House debate asked lawmakers to take more time to review what the legislation would do. He warned against going too far and facing the same fate as Kansas, which was hit with severe fiscal problems after enacting tax cuts.
“If we don’t get this bill right in this pass, then we are doubling down on tax cuts,” Kendrick said. “We are Kansas on steroids if we don’t get this right, folks.”