JEFFERSON CITY — Thanks to a 2014 law sponsored by State Senator Will Kraus, R-Lee’s Summit, a majority of Missouri residents and small business owners will see their tax bills go down in 2018. The legislation, Senate Bill 509, took effect this year. To ensure the tax cuts only occur in years the state can afford them, the law included a trigger provision, which was recently met.
“Three years ago, I sponsored Senate Bill 509 to put more money back into the hands of the hardworking people who earned it. This responsible tax reform was specifically designed to help individuals who file taxes on an individual basis,” said Kraus. “That includes our thousands of small businesses — businesses owned by our neighbors, families and friends — that haven’t benefited from previous business tax reform. These are the businesses that employ up to 80 percent of Missouri workers.”
Under the 2014 law, beginning in 2017, if net general revenue collected in the previous fiscal year exceeds the amount collected in any one of the three previous years by at least $150 million, personal income taxes will go down by one-tenth of 1 percent, while individual income taxes on the smallest business owners — those who pay taxes through their personal tax form — will decrease by 5 percent.
The changes are to be implemented over a five-year period. Once fully phased in, the top tax rate on individual income will be 5.5 percent, and taxpayers will be able to deduct 25 percent of their business income. The legislation adds an additional $500 deduction for individuals who make less than $20,000, which took effect Jan. 1.
“These tax reforms contain solid, built-in protections. For example, in the event of another economic downturn, the cuts will stop until revenue increases again,” added Kraus. “They were carefully crafted so that not only are Missouri taxpayers protected, but so too are those who rely on state funding. No one — and I mean no one — is looking to end up like Kansas.
“Most importantly, these reforms will help improve Missouri’s tough budget situation by acting as economic drivers for our state and local economies, encouraging job growth and putting more money back into taxpayers’ pockets.”
Fiscal Year 2017 collections were $9.016 billion, $229 million more than Fiscal Year 2016, an increase of 2.6 percent.
“It’s been almost 100 years since we’ve seen a meaningful tax rate cut for individuals here in Missouri — this one will affect nearly every Missourian who files a personal tax return,” continued Kraus. “Please know my office is available to answer any questions about the details of these important changes to our tax structure,” said Kraus.