JEFFERSON CITY, Mo. (AP) - The federal income tax overhaul backed by President Donald Trump and congressional Republicans should have a relatively minor effect on Missouri’s bottom line, the state’s revenue chief said Tuesday.
State budget leaders still are working on official projections, but Department of Revenue Director Joel Walters said he thinks that the federal tax changes could result in a loss or gain of about $100 million to Missouri’s tax revenues.
By comparison, Missouri’s overall budget is more than $27 billion this year.
“I expect it to be in a relatively narrow plus or minus range, which we’ll be able to manage,” Walters told The Associated Press.
Walters is a certified public accountant who has a master’s of law degree in taxation and previously was a partner at the accounting firm PricewaterhouseCoopers, where he led its tax section for foreign businesses investing in the U.S. He took over in April as Missouri’s revenue director under new Gov. Eric Greitens.
Calculating the effect of the federal tax changes on Missouri is complicated.
Missouri is one of 20 states with laws automatically linking any federal income tax changes to the state tax code.
That means the federal plan to roughly double the standard deduction also would result in a doubling of Missouri’s standard deduction, which would significantly reduce state revenues if that were the only change being made. But the federal plan also repeals personal tax exemptions, resulting in the elimination of Missouri’s similar exemptions, which would trigger an increase in state tax revenues if that were the only thing to consider.
Further complicating the matter is the fact that Missouri is one of just a half-dozen states allowing a state income tax deduction for at least a portion of the taxes paid to the federal government. That means if taxpayers owe less to the federal government, they will have a smaller deduction on their Missouri income taxes and thus owe slightly more to the state.
Changes in federal corporate income tax deductions also will carry over to Missouri.
Walters said a lower federal corporate tax rate could influence some businesses to restructure from classifications whose income is passed through to their owners and taxed at individual income tax rates to ones taxed through the corporate tax code. He said that has the potential to generate more corporate taxes for Missouri.
The state’s tax revenues also could receive a boost if the federal tax changes lead to a surge in the economy as Trump hopes.
Senate President Pro Tem Ron Richard said Tuesday that lawmakers will consider whether to decouple Missouri’s income tax law from the federal one when they convene in January. Until then, officials are proceeding under the assumption they will remain linked.
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Associated Press writer Summer Ballentine contributed to this report.
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