Gov. Mike Parson planning income tax cut as part of special session later this year

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JEFFERSON CITY — Gov. Mike Parson said he planned to call legislators back to the Capitol later this year to develop a new state tax plan that includes the "largest income tax cut in our state's history."

The outlined proposal came during a news conference outside Parson's office on Friday as he announced vetoes of several bills, including a tax rebate program pushed by House Republican leaders and extensions of agricultural tax credit programs, which will also be addressed in a special session later this year.

Under the previewed plan, the first $16,000 in earned income for single filers and $32,000 for joint filers would not be taxed; there would be an overall reduction of the base income tax rate; increased deductions and allowances; fewer tax brackets; and "further simplifying" aspects of the state tax code.

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Parson could not give an estimate for what the plan would cost but said he was aiming for the base income tax rate to end up around 4.7 to 4.8 percent. He painted a stark contrast between the Republican-controlled approach in Missouri and the Democratic-led Congress and White House.

"The answer to record inflation, high gas prices and increasing grocery bills is not to make the same spending mistakes as the federal government. In Missouri, we want to provide permanent tax cuts for permanent relief, not temporary stimulus."

The announcement comes on the heels of Parson signing a $47.5 billion budget that was fueled by federal American Rescue Plan Act dollars and a surplus in state revenue. He dismissed any concerns that the plan would create financial issues going forward.

"Some of the first questions will be 'Governor, can you afford to do this?' And I will tell you, yes we can. We're still going to have money on the bottom line for years to come."

Missouri's base income tax rate currently sits at 5.4 percent for most taxpayers. Under Parson's administration, the state has reduced the rate twice before.

The governor vetoed a $500 million tax rebate program that would have sent taxpayers up to $500 checks if they make less than $150,000. He called the proposal flawed in its "short-term" mindset, and said low-income residents and seniors would not have seen benefits from it.

"No one was ever going to receive direct checks for $500 or $1,000," Parson said. "Due to the temporary program being underfunded, some Missourians would have received somewhere between $100 and $200, while many others would have received nothing."

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Sen. Lincoln Hough, a Springfield Republican who serves as vice chair of the budget committee and proposed a similar tax rebate bill during the legislative session, called the veto "frustrating and disappointing."

"I am disappointed the governor decided to veto what could have been a financial shot in the arm for countless hardworking Missourians throughout our state," Hough said in a statement. "When I first proposed this idea back in February, I couldn’t imagine we would be where we are today with gas prices nearing $5 a gallon and skyrocketing food prices — and its only getting worse."

Hough said he would work with Parson and legislators to pass the tax cut "in the near future.

Missouri Budget Project, a budget analysis group, praised the veto and called for legislators to use the special session for taxes to address the state's "regressive tax structure."

"A special session could be an opportunity to right this injustice, so that the responsibility for providing services to Missourians doesn’t fall disproportionately on low- and middle-income Missourians — but the devil will be in the details," said Amy Blouin, president and CEO of the group.

Parson is also calling for legislators to take another shot at extending tax credits and establishing several new ones focused on agricultural industries. He is calling for those credits to be extended for six years, rather than the proposed two in lawmakers' initial proposal, as well as increase how many small farms qualify for the loan-based Family Farms Act.

He did not provide a timeline for when the special session would take place but said he aimed to have the new tax plan implemented by Jan. 1, 2023.

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Galen Bacharier covers Missouri politics & government for the News-Leader. Contact him at gbacharier@news-leader.com, (573) 219-7440 or on Twitter @galenbacharier.

This article originally appeared on Springfield News-Leader: Missouri governor calls for income tax cut in special session plan