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Uncertainty surrounds status and potential payout of Missouri income tax credit

This Missouri State Capitol on Tuesday, Dec. 14, 2021, in Jefferson City, Missouri.
Brian Munoz
St. Louis Public Radio
This Missouri State Capitol on Tuesday, Dec. 14, 2021, in Jefferson City, Missouri.

The future of a one-time, nonrefundable tax credit for some who paid Missouri income tax this year is uncertain.

The uncertainty includes whether Gov. Mike Parson will sign the bill into law and how much people who qualify for the tax would actually receive.

Under the legislation, some Missourians who paid state income taxes would qualify for a tax credit equal to the amount they paid the state, up to $500 for single filers, or up to $1,000 for those filing jointly. Individuals making at least $150,000 or couples earning $300,000 would not qualify for the credit.

In addition to passing the credit itself, the legislature added into the budget $500 million from the state’s general revenue to pay for the credits.

“If we have the opportunity, I perceive that it's always a good idea to be able to send some money back to taxpayers,” Sen. Dan Hegeman, R-Cosby, said.

While the credit received bipartisan support in the Senate, Democrats in the House spoke repeatedly against the credit, saying it does nothing to help the Missourians who need it the most but don’t qualify because they didn’t pay income taxes.

“I absolutely don't think it's appropriate for us to be giving this money out to other folks and not the third of Missourians that make the least,” Rep. Peter Merideth, D-St. Louis, said.

But there are factors that complicate how much someone who does qualify would get back from the state.

According to a fiscal note attached to the bill in May, the Department of Revenue says the credit would automatically apply to those who qualify.

“Which means that this isn't a situation where just a lot of people will forget to do it or not bother and so more people get more money. It's that everyone that's qualified will get it,” Merideth said.

Because the amount of money going toward the credit is a fixed amount of $500 million, it will likely run out before everyone would be able to get back the exact amount they would be technically entitled.

This means for everyone to receive at least some of their tax credit, the amount paid out to each person or couple would likely be less than they paid.

Under the original version of the credit, which allocated $1 billion in state revenue to fund it, Merideth said estimates from the Department of Budget and Planning stated that once everything was divvied up, the highest amount someone would have received was less than $400.

But with a new pool of only $500 million to spend on the credits, that new amount could be smaller.

“If we base it on the $1 billion cap that said if everyone gets it, it's $387 a person, that would suggest it would be under $200 a person when you cut that cap in half,” Merideth said.

The apportionment process, according to the fiscal note, would likely begin this November.

But before that process can even begin, the bill must be signed into law by Parson, which isn’t a guarantee.

During a bill signing ceremony a few weeks ago, Parson expressed concerns over the tax credit, saying he felt it was put together quickly and did not like some of its provisions, including the salary cap.

“I'm not for sure doing something right now, just to be able to take $500 million, and just be able to put it out there, and really what’s the accountability for that,” Parson said.

While he doesn’t agree with all of Parson’s concerns over the bill, Merideth is still hoping he vetoes it.

“My hope is common sense wins out and he says this wasn't well thought through. Frankly, we can figure it out again, if we need to do it in a better way. Or we can look at ways we can spend that $500 million in ways that actually grow our state and invest in our state,” Merideth said.

Instead of a one-time credit, Parson said he would be more amenable to another income tax cut.

“I think we're going to do something, and probably what I would be calling the legislators to do is cut everybody's income tax, make it fair across the board. We can afford to do that right now. And I think it's a good time to do it,” Parson said.

Follow Sarah Kellogg on Twitter: @sarahkkellogg

Copyright 2022 St. Louis Public Radio. To see more, visit St. Louis Public Radio.

Sarah Kellogg is a first year graduate student at the University of Missouri studying public affairs reporting. She spent her undergraduate days as a radio/television major and reported for KBIA. In addition to reporting shifts, Sarah also hosted KBIA’s weekly education show Exam, was an afternoon newscaster and worked on the True/False podcast. Growing up, Sarah listened to episodes of Wait Wait...Don’t Tell Me! with her parents during long car rides. It’s safe to say she was destined to end up in public radio.