Proposed House bills could make major changes to Missouri taxes

By Sterling Sewell, Missouri News Network 

JEFFERSON CITY — Missouri House of Representative bills heard by a committee Wednesday could lower the Missouri corporate income tax to zero by 2029 and set a flat income tax rate of 4.7% or lower.
The bills heard by the House Special Committee on Tax Reform have been proposed by freshman representatives who seek to alter the tax system.
The bill proposed by Rep. Jeff Vernetti, R-Camdenton, would phase out the corporate income tax by 1% annually, ending the tax in 2029. Missouri’s 4% corporate rate is lower than all neighboring states. Currently, the only states without corporate income tax are South Dakota and Wyoming.
“Missouri does have a low corporate tax rate, but movements like this will certainly attract more business and will drive the business economy here in the state,” Vernetti said during the hearing.
He argued that the bill might benefit small businesses and believes that it could lower consumer prices as corporate tax rates are often passed onto consumers.
According to the bill’s fiscal note, if the bill were fully implemented it could reduce state general revenue by an estimated $893 million annually.
Committee Vice Chair Rep. John Simmons, R-Washington, pointed out that the potential nine-figure reduction accounts for just under 2% of the FY2024 state budget, and lost revenue in the first year accounts for roughly 0.2% of that budget.
“If we can’t find a 0.2% way to cut the state budget, we got our work to do,” Simmons said.

Jeremy Lafaver, a lobbyist representing Missouri Budget Project — a public policy analysis organization — spoke against the bill, expressing concerns that the easiest ways the legislature might cut funding would be in education.
“If you want to start cutting big chunks of money, eliminating schools, eliminating school districts and cutting back on some of the universities is gonna be an opportunity,” Lafaver said.
He also noted that Wyoming and South Dakota, the two states with no corporate income tax, have not attracted any Fortune 500 companies.

Another bill, proposed by Rep. Christopher Warwick, R-Bolivar, would see Missouri adopt a flat tax rate for all taxable income. The rate level will be either 4.7% across all incomes, or lower, based on tax rates as of 2026.
“This change aims to create a more straightforward and predictable tax environment for individuals and families,” Warwick said in defense of the bill.
The bill would also require the state of Missouri to have the same standard deductions as the federal government, plus an additional $4,000. This $4,000 addition would seek to help those in lower tax brackets to make up for the potential increase in taxes for those brackets from the flat tax, according to Warwick’s testimony.
The bill would also see the repeal of the Missouri Working Families Tax Credit Act. The act provides a credit equal to a certain percentage of a person’s federal earned income credit, according to the Missouri Department of Revenue website.
The federal earned income credit is aimed at low to moderate income workers and families. The Missouri Working Families Tax Credit provides an additional credit equal to a percentage of this credit. In 2023, this percentage was 10% and in 2024 it was 20%.
According to tax credit analysis done by the Missouri Department of Revenue, 452,000 Missourians utilized the Missouri Working Families Tax Credit, redeeming $102 million. This was an increase from the previous financial year which saw 425,000 Missourians utilize the credit with $51 million redeemed.