When S.B. 153 was signed into law on June 30, 2021, Missouri became the final state with a sales tax to adopt an economic nexus law for remote sales tax collections, requiring remote sellers and marketplace facilitators with more than $100,000 in annual sales into Missouri to collect Missouri’s state and local sales taxes starting January 1, 2023. This new law will result in increased sales tax collections in the future, so instead of pocketing the extra revenue, policymakers decided to use their windfall to reduce individual income taxes.
Under S.B. 509, adopted in 2014, tax triggers are currently in place to reduce the top individual income tax rate by one-tenth of 1 percent per year, subject to revenue availability, for a total of five reductions. S.B. 153 builds upon these reforms by allowing two additional reductions, also subject to revenue triggers. While S.B. 509 specified that no reduction would occur in 2024, the new law provides that the top rate will be reduced by 0.1 percent, with no triggers necessary.
If revenue triggers are met each year, Missouri’s individual income tax rates would be reduced as shown in Table 7. While Missouri was late to adopt a sales tax nexus law, policymakers were prudent to take the step—largely disregarded in other states—of using the revenue to reduce taxes elsewhere.
|Missouri’s Projected Top Rate under S.B. 509 (2014) and S.B. 153 (2021) (Subject to Revenue Triggers)|
|Tax Year||Top Rate|
Note: Assumes years revenue triggers will be met in line with state projections. Inflation-adjusted bracket widths for 2021 were not available as of publication, so table reflects 2020 inflation-adjusted bracket widths.
Source: Missouri Committee on Legislative Research Oversight Division.
For more information on tax reforms: https://taxfoundation.org/2021-state-income-tax-cuts/#Missouri