Tag: income tax

Income tax cut, reform likely topics in expected special session

      A tax break for most Missourians and a restructuring of the state’s income tax brackets will likely be considered by legislators in a special session that Governor Mike Parson (R) is expected to soon call.

Representatives Peter Merideth (left) and Cody Smith (Photo: Tim Bommel, Missouri House Communications)

      That’s according to House Budget Committee Chairman Cody Smith (R-Carthage), who says he’s looking forward to seeing what the Governor outlines in a plan to be aimed at helping Missourians facing high prices and high inflation.  The top Democrat on the Budget Committee, Peter Merideth (D-St. Louis), says he wants a plan that goes beyond changing income taxes, so that all Missourians would be helped; not only those who pay that.

      Governor Parson earlier this month vetoed a proposed $500-million tax rebate plan sent to him by legislators in May, saying he prefers a permanent tax cut.  He has said he will call for a special session of the legislature to consider that cut. 

      Smith, who spearheaded that tax rebate plan as the best proposal thought possible at the time, said he would also prefer a permanent cut.  He spoke to Parson on Tuesday to get a better idea of what the governor might propose.

      “We are busy now collaborating with the senate and the governor himself to try to find a starting point and then from that point the legislature will take over and will hopefully put forth a good product, at the end of the day, for the governor to sign,” said Smith.  “It’s important that we try to keep this simple and try to make it as impactful to as many Missourians as possible.  I think the income tax is the best way to do that, and trying to simplify the tax code in the process I think is also a worthy goal.”

      Merideth said he and fellow Democrats were glad that the rebate plan was vetoed, but he’s concerned that a cut to the income tax won’t help the Missourians who need help the most. 

      “A third of Missourians don’t make enough money to pay [the income tax], and those are, of course, the third of Missourians that are having the hardest time right now, so if all we’re focused on is a tax cut on income, that’s not really a big help for people,” said Merideth. 

“That said, our income tax brackets are completely out of date.  We haven’t had updated brackets in like 100 years.  Democrats have actually long advocated for updating those to a more progressive tax rate structure.  Now, we have yet to see what that proposal’s going to look like but there’s a path that we could get on board with,” he added.  “Democrats are generally supportive of relief for those that make the least and generally resistant to relief for those that are doing just fine, at the expense of our long-term budget.”

      Smith agrees that the state’s brackets are outdated and should be revised, if not eliminated, and doing so would help all income earners.

      “Our highest tax bracket in Missouri is for anyone that makes over $9,000 annually.  At one time that was a considerable amount of money … but now most folks who work at all generally make more than $9,000 per year … so we [would be] helping lower income folks by addressing that top line number.  Additionally I think we can take a look at some of the tax brackets on the lower end and see if we can reconfigure those or eliminate those entirely so that folks on the lower end of the income spectrum won’t pay taxes up to a certain amount.  That would provide relief on those lower income folks.”

Merideth thinks permanently cutting the income tax right now is not a good idea.  He said the state is in a great position with revenue right now, but the next time there’s a downturn, cuts made now could put the state in a bad position. 

The governor has expressed confidence that Missouri’s good fortune will continue, and Smith agrees. 

      “I would guess that we may have a general revenue surplus in excess of $2-billion by the time we come back to the next legislative session and that is just unprecedented … we’ve got federal money set aside for Medicaid, we’ve got general revenue dollars sitting in the state’s treasury for all purposes, and I think there’s never been a better time to cut taxes and still be able to protect the priorities that we have in the budget,” said Smith.  “I think we’re probably looking at 3 to 5 years where we are very well situated even after a tax cut.”

      Smith said while the state is enjoying increased revenues and never-before-seen surpluses, Missourians are dealing with high inflation, high gas prices, and other factors that are causing many to struggle.  He said this is the right time for the legislature to do something to help.

      “Rather than issue stimulus checks, which is talked about in Washington from time-to-time, certainly we’ve seen that … I believe the best way to combat things like inflation is let [Missourians] keep more of their own money,” said Smith. 

      Merideth said he and other Democrats would also like to see the legislature talk about things besides the income tax, such as eliminating taxes on groceries and other essentials.   

      The governor has said he is also planning to have the legislature consider six-year extensions to tax credits under the Missouri Agriculture and Small Business Development Authority.  He vetoed a bill that would have extended them by two years.

      Dates for a special session have not been set. 

House plan would ease late payment penalties, interest, in response to surprise tax bills

The House has given preliminary approval to giving Missourians a break on late payment of taxes, because many Missourians might have been surprised this year with a higher-than-anticipated tax debt.

Representative Dean Dohrman (photo: Tim Bommel, Missouri House Communications)

“I’m also frustrated with the situation that brought us here, but today we can’t do anything about that,” said La Monte representative Dean Dohrman (R), the sponsor of House Bill 1094.  “But today, as Winston Churchill once said, ‘We can do the best we can with what we got.’”

HB 1094 would block late payment penalties on tax debt owed to the state by individual taxpayers through the end of this year.  It would also waive any interest owed on such debt until May 15.  For those who might pay penalties before the bill would become law, it would require that those Missourians receive refunds.

The bill is a bipartisan response to an issue with the Department of Revenue’s tax tables that resulted in many Missourians being faced with greater debt than expected.  Lawmakers heard stories of individuals who anticipated a tax refund from the state instead getting hit with bills for hundreds, or even thousands, of dollars.

Representative Nick Schroer (R-St. Charles) is the vice-chairman of the House oversight committee that’s been investigating that situation.  He said the Department’s explanations have changed, and he blames its former director, who resigned last month amid the crisis.

Representative Crystal Quade (photo: Tim Bommel, Missouri House Communications)

“We still don’t really know the true cause of what is happening.  We’re still digging and trying to figure that out, but I think this is one way that we can lessen this tax burden on these people who … dollars count to these people, whether it’s diapers, groceries,” said Schroer.

That oversight committee has continued to schedule hearings to investigate what caused the problems and how the Department responded.

House Minority Leader Crystal Quade (D-Springfield) also sits on that oversight committee, and pre-filed similar legislation in December.  She said the Department knew about the tax issue as early as September yet didn’t act for months to notify taxpayers.  She said she’s frustrated the House is only now taking action.

“Tax day’s in five days.  If folks in this body … I mean I hate to say it; if we were really concerned about these surprise tax bills and what was happening to citizens, we would’ve dealt with this much, much sooner,” said Quade.

“I heard time and time again from the director of revenue as well as the liaison that this isn’t a lot of money – that we’re talking an average of $85 or it could be upwards of several hundred dollars, and as I said before we have [legislative assistants] in this building who are seeing swings of $3500,” said Quade.

Lawmakers including Columbia Democrat Kip Kendrick, another oversight committee member, want Missourians to understand that their issues with tax debt might not be over after this year.

Representative Nick Schroer (photo: Tim Bommel, Missouri House Communications)

“If they’re concerned with their bill this year then they need to go back and look at their W-4 because next year, 2019, their current year, it’s going to be a full four quarters of potential under-withholding and not just three quarters,” said Kendrick.

Republicans, including Noel representative and oversight committee member Dirk Deaton, maintain that while some Missourians could see greater tax bills this year, changes in the federal tax code mean their overall debt is down.

“Missourians are keeping more money in their pockets, so we’ve got to fix this withholding thing but at the end of the day Missourians, as they should, are keeping more of their hard-earned money,” said Deaton.  “That’s what I think people need to realize.”

Another favorable vote would send HB 1094 to the Senate.

House committee: Missourians not properly warned about possible smaller refunds, greater taxes owed

House members investigating the Department of Revenue say it hasn’t prepared Missourians for owing more income tax debt or getting smaller tax refunds this year, and that many Missourians could suffer because of it.

Missouri Department of Revenue Director Joel Walters testifies to the House Special Committee on Government Oversight (photo; Tim Bommel, Missouri House Communications)

An error in Missouri tax code that dates back at least to 2004 was only recently discovered.  Its end result is that while changes in federal tax code will cause Missourians’ overall tax debt to decrease, they could see a greater remaining income tax bill or a smaller refund than they anticipated.

Members of the House Special Committee on Government Oversight looked back over the Department of Revenue’s efforts to alert Missourians about how the tax code has changed and what it could mean for them.  House Minority Leader Crystal Quade (D-Springfield) said those efforts were off message.

“I’m not seeing anywhere in here saying, ‘Hey, you might not get as much money back as you thought,’” said Quade.  “We’ve had enough conversations to understand how we got here and where we’re at, but ultimately a lot of the legislators’ concerns lies with the people who are expecting to get money back, who have budgeted their lives around this money coming back and they may not get it.”

“Are you going to do anything to make sure that people know that what they’re expecting to receive may not be the case?  ‘Cause your tweets aren’t,” Quade added.

Chairman Robert Ross (R-Yukon) said his committee’s chief goal is to make sure Missourians aren’t faced with a similar situation again, and that means the Department must do a better job of communicating.

“The Department was proud to send out press releases to talk about the bicentennial license plate that we switched over to … they spread the news whether it be on social media, whether it be in press releases, you read about that in the paper, there were different TV interviews; there was a lot of notoriety about a new license plate, however now that this mistake has occurred the Department of Revenue does not want to ‘fess up,” said Ross.  “Let the taxpayer know that an error occurred and what they should be expecting as we get closer to April.”

Lawmakers have been asking the Department for examples of how taxpayers might be affected.  Director Joel Walters said his Department has declined to offer examples because the many variables in filing means any two people filing the same way, with the same annual income, could see wildly different impacts.

Representative Robert Ross chairs the House Special Committee on Government Oversight (photo; Tim Bommel, Missouri House Communications)

Legislators told Walters they still want examples so they have a better idea what some Missourians might face.  Quade said the impact the changes will have on one Capitol employee are alarming.

“A staffer who makes about $30-thousand a year – single mom of three.  In last tax cycle she received $128 back from the state and $7,240 in federal.  This year she owes $304 to the state and [will get back $4,275 from the federal government], so that’s a $3,500 swing, and that’s for someone who works here,” said Quade.

Quade noted that it is illegal for a state worker to owe the state income tax.  She said that is just one way the situation could impact individual Missourians that they must be informed about.

Walters told the committee he agrees that communication should be improved.  He also stressed that he believes it is a minority of Missouri taxpayers who will experience a significant change in their tax returns, “but those are important people and people that we stand ready to work with.”

“We’ve created a dedicated phone line to help individuals with this.  We consistently work with taxpayers who need more time to pay their taxes or are struggling to pay their taxes, and we’ve put a page right up front on our website where immediately you go there, you can say if you need assistance – here’s where you can go to get assistance,” said Walters.

Ross said the committee will also be exploring what options are available to taxpayers who might be facing increased tax debt, “Maybe deferred payment plans … what actually the Department has the authority right now, without statutory changes occurring, but then what other options may possibly need to be addressed through statute.”

One legislator raised the question of some kind of tax debt forgiveness on the grounds that the Department made a mistake, but Ross said for such an idea to move forward seems unlikely.

The committee will meet again next week when, Ross said, it will ask more questions of Walters and review the examples that legislators have requested, which he urged the Department to at last prepare.