Missouri Governor Michael L. Parson has signed legislation that reduces the top rate of individual income tax with the possibility of further reductions if state revenues meet or exceed certain thresholds and exempts taxpayers’ first $1,000 of income from taxation. (L. 2022, S3 (1st Extra. Sess.), applicable to tax years beginning on or after 01/01/2023.)
2023 calendar year.
The legislation repeals all currently scheduled rate reductions and, applicable to tax years beginning on or after January 1, 2023, reduces the top rate of individual income tax from 5.3% to 4.95%.
2024 calendar year.
Beginning with the 2024 calendar year, the top rate of tax may be reduced by 0.15% to 4.8% if the amount of net general revenue collected in the previous fiscal year exceeds the highest amount of net general revenue collected in any of the three fiscal years prior to such fiscal year by at least $175 million. Any modification of tax rates only will apply to tax years that begin on or after a modification takes effect.
Additional reductions.
The legislation provides for three additional potential 0.1% reductions in the top rate of tax, for an eventual rate of 4.5%. Such additional reductions only will be effective if the amount of net general revenue collected in the previous fiscal year exceeds the highest amount of net general revenue collected in any of the three fiscal years prior to such fiscal year by at least $200 million and exceeds the amount of net general revenue collected in the fiscal year five years prior, adjusted annually by the percentage increase in inflation over the preceding five fiscal years. The amount of net general revenue collected required to reduce the top rate of tax from 4.8% to 4.5% will be adjusted annually by the percent increase in inflation. Any modification of tax rates will only apply to tax years that begin on or after a modification takes effect.
Exemption for taxable income.
Under current law, there is no tax on taxable income of less than $100. For all tax years beginning on or after January 1, 2023, there will be no tax on taxable income of less than or equal to $1,000.
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