Missouri lawmakers pass income tax cut
JEFFERSON CITY –Missourians will soon be able to keep a little more money from their paychecks, after a state House committee voted to cut taxes Thursday night in a 101-40 vote.
Missouri's individual income tax rate is set to drop from 5.9 percent to 5.5 percent if state revenue meets the target revenue goal. The bill lawmakers passed Thursday would decrease another 0.4 percent off the tax rate, bringing it down to 5.1 percent.
January 1, 2018 marked the first year income tax cuts occurred for Missourians in nearly 90 years. The previous change happened in 1931.
Columbia CPA Aric Schreiner said, “I think it’s great whenever politicians lower taxes. It’s always a boost to all the taxpayers and to the economy, and it’s more money in their pockets.”
“Just to put it in context, if somebody has $50,000 of taxable income, it’s going to save them about $307,” Schreiner said.
Financial Planners of Missouri owner Adam Bethel said Missouri is trying to mirror recent national tax law.
"They’re trying to slightly reduce the taxes owed by most people, but not all, which would result in people being able to control a little bit more of your own income,” he said.
This year federal taxes were cut by two percent. Republican Gov. Eric Greitens called on lawmakers earlier this year on his tour to approve cuts worth more than $800 million.
According to the Congressional Budget Office, individual income taxes are the federal government's top source of revenue.
Schreiner said, “Basically anything over $9,000 has been getting taxed at a straight 6 percent and it’s been that way for decades, now anything over $9,000 is going to be taxed at 5.25 percent.”
If less money is coming in to Jefferson City for politicians to spend, Schreiner said, they still have to find money to spend on different programs.
“I don’t know how they’re going to work around replacing that money,” he said.
Bethel said when tax rates go down, people can keep and control more of their income. He said with the extra money coming in, it’s smart to save.
“For a lot of people it’s a great opportunity to increase retirement savings that will benefit them in the future. If you set aside $50 a month and put it into a retirement account, you’ll have more money in the end without costing you anything,” he said.
Even though consumers might not always act logically, Schreiner said, he is hopeful of the income tax cut.
“When the economy picks up, people are more positive, instead of hoarding money and thinking the world’s going to end,” he said. “They’re more likely to buy that new car or take that vacation or even change jobs.”
Bethel said most people will live longer than when they can earn income, which forces them to make vital decisions.
“People can think money isn’t important but it matters to everyone. Having an idea of what money comes in and what goes out on a weekly and a monthly basis is very important in order to plan for future,” he said.
Schreiner said lower federal or state taxes is always a good thing as long as the politicians in charge of those funds properly run everything.
The House now needs to send the bill to Gov. Greitens, who needs to sign it for it to become law.