Senate Bill 509: Impacts of Section 143.011.2(4) Eliminating Top Income Tax Bracket

April 22, 2014

“With the simple stroke of my pen, this bill would separate Missouri from every state in the nation – as the only one unable to meet even the most basic obligations to its people,” Gov. Nixon said. “For generations, Democrats and Republicans have worked together to protect Missouri’s spotless AAA credit rating and keep our state on a fiscally responsible path. Now is not the time to veer off this proven course. That’s why I’m calling on members of the legislature to abandon this dangerous scheme, and work with us on a responsible approach – like the one I laid out earlier this year – that will protect public education and keep our state moving forward.”

  • Senate Bill 509 contains a provision that would eliminate entirely the income tax for Missouri taxpayers with incomes over $9,000. 
  • Missouri’s tax code contains a number of brackets, or ranges of income subject to certain levels of taxation.  Currently, the top individual income tax bracket applies to all Missourians with incomes greater than $9,000 a year.   
  • The new Section 143.011.2(4) in Senate Bill 509 provides that once the legislation is fully phased-in, the top tax bracket “shall be eliminated.” Eliminating this top tax bracket would result in a new top tax bracket that applied to taxpayers with Missouri taxable income “Over $8,000 but not over $9,000.” However, there would no longer be a tax bracket for Missourians with incomes over $9,000, thereby eliminating altogether the income tax for such taxpayers.
  • This analysis is supported by the independent legal opinion of Professor Cheryl D. Block of the Washington University School of Law. For more than thirty years, Professor Block has taught classes on tax law, legislation, and statutory interpretation. Professor Block is an expert on tax policy and author of a leading textbook on corporate taxation, which is in its fourth edition.
  • Professor Block’s analysis confirms that the language in Senate Bill 509 would “completely eliminate the top state personal income tax bracket” and, as a result, taxpayers with incomes “over $9,000 would pay no tax at all.”
  • A fiscal analysis performed by the Office of Administration, Division of Budget and Planning, shows that the provision eliminating the income tax on Missourians with incomes greater than $9,000 would reduce state general revenue by approximately $4.8 billion annually, eliminating 97 percent of all individual income tax collections and wiping out 65 percent of the state’s general revenue budget.
  • A fiscal impact of this magnitude would jeopardize even basic funding for education and vital public services and is likely to result in a downgrade to Missouri’s spotless AAA credit rating, maintained over decades and reaffirmed by all three leading independent credit rating agencies just last year.

The legal analysis from Washington University School of Law Professor Cheryl D. Block is available here.

The fiscal estimate produced by the Office of Administration, Division of Budget & Planning is available here.

Click here to view the full text of the bill.