(The Center Square) – A House committee on taxes will vote on a bill to create a flat tax on Tuesday and hold a public hearing on two joint resolutions regarding the eventual elimination of income and property taxes.
Rep. Bishop Davidson, R-Republic, and a member of the Special Committee on Tax Reform, is a sponsor of all three proposals.
The committee will vote on House Bill 2919 after it held a hearing on March 12 on the proposed state constitutional amendment requiring approval of voters.
The proposal would eliminate tax tables based on income brackets to determine personal income tax and replace it with a 4% flat tax on all income above $1,000 in 2025. If adopted during this November’s general election, the first change wouldn’t occur until the 2027 tax year.
The bill’s fiscal note estimated a decrease in the state’s general revenue of $357 million in fiscal year 2025, $781 million in 2026 and reaching $874 million if fully implemented in 2028. The Department of Revenue estimated a loss of more than $1 billion in general revenue in 2030, according to the fiscal note.
“I don’t think this would require us to cut services,” Davidson said during the March 12 hearing. “I think it would actually generate more revenue.”
Brian Colby, vice president of public policy for the Missouri Budget Project, testified against the bill.
“The bill would deprive the state of adequate resources and would seek to replace income tax with increases in the sales tax,” Colby stated in written testimony.
If the bill places a constitutional amendment on the ballot, the new tax rate of 4% could be reduced by one-quarter of a percent if the net general revenue collected in the previous fiscal year results in a $20 million surplus.
The special committee will hear testimony on House Joint Resolution 187, which proposes a constitutional amendment to establish the “Tax Reform Fund.” If the amount of net general revenue collected exceeds the anticipated expenditures by $20 million or more, any surplus above $20 million will go into the “Tax Reform Fund” and capped at $500 million. Once the fund reaches and maintains a balance of $250 million and a surplus of $20 million is realized in the following year, the legislature would be forced to decrease personal income taxes by one-quarter of 1%.
“There will be no cap on the number of triggered reductions and the triggers will remain in place until the personal income tax is reduced to zero,” according to the joint resolution summary.
The resolution’s fiscal note states once the individual income tax is eliminated, the proposed fund will be used to gradually reduce personal property tax.
Currently, the state individual income tax rate of 4.8% is to be reduced in one-tenth of a percent increments if certain revenue levels are attained until it reaches 4.5%.
The committee also will hear testimony on House Joint Resolution 188, which also proposes a similar constitutional amendment regarding a “Tax Reform Fund.”
“After both personal income taxes and personal property taxes have been reduced to zero, they will remain at zero,” according to the summary of the legislation. “After the elimination of both personal income taxes and personal property taxes, the fund will continue to collect revenue and only be used to supplement budget shortfalls following fiscal years during which the General Assembly enacts a tax reduction.”
