The tale of 2022’s legislative activities has been a bit of an odyssey. Hopes were high in January that reforms—from tax cuts to government transparency—were in the offing, but when the regular session ended in May with very little progress on these items, I made my frustrations known, and of course, I wasn’t alone in that.
Then as the summer began, rumors percolated that a special session would be called to reduce income taxes, and in July, Governor Parson declared his intention to bring the legislature back for that purpose. Show-Me Institute experts supported that move. The special session gaveled in September, and the governor signed that tax cut bill—SBs 3 & 5—into law yesterday.
The details of the tax cut bill accord with the original recommendations for reform from Institute analysts in July, so you may be unsurprised that I’m keen on the final product. Starting next year, the income tax will drop below 5% for the first time, to 4.95%, and then (subject to revenue triggers) will migrate toward 4.5% over a period of years. The bill also modestly cuts taxes from the bottom alongside these top-rate cuts, exempting the first $1,000 of a taxpayer’s income from taxation. All in all, a good strategy.
That said, I sure hope future legislators plan on accelerating the process sometime in the next few legislative sessions. At the current tax cut pace, the income tax would be due to be eliminated in roughly 50 years . . . assuming tenth-of-a-point cuts continue to be scheduled in the future and happen on time from the 4.5% rate. Knowing the way the legislature operates, the issue of income tax cuts may not be broached much in 2023, but the legislature should consider shortening the timeline for such cuts considerably, and soon.
That said, congratulations to the governor, the Senate, and the House for getting this across the finish line. While we look askance the agricultural tax credits that were passed alongside the tax cuts, the income tax cuts were needed and at least partially saved this year’s legislating cycle. Hopefully next year another special session won’t be required because the regular session ends up being very productive. Fingers crossed.
