March 3, 2022 - Associated Industries of Missouri (AIM) testified today in support of SB 902, a bill filed by Sen. Bob Onder that would accelerate a reduction in individual income taxes and increase the maximum business income deduction for sole proprietors, S corporations and partnerships from 20% to 50% over a number of years of tax revenue growth.
Ray McCarty, president and CEO of AIM, explained the business income deduction was an idea that originated from a conversation with one of his members in Kansas City.
"I was visiting with the leaders of one of our member companies about our work to eliminate corporation franchise taxes and reduce corporation income taxes," said McCarty. "They said they respected what we were doing for corporations, but pointed out these reductions did not help them because they operated as an S corporation."
McCarty said he thought about the conversation while driving back to Jefferson City and came up with an idea of providing a deduction for business income. "I proposed the idea to our 200-plus member tax committee and asked if anyone had heard of such a thing and they replied they had not, but did not know why it wouldn't work," he said. "So the AIM Tax Committee drafted the original business income deduction language and we filed it."
McCarty said before Missouri could finally pass the legislation, two other states enacted a similar business income deduction and now the federal government allows such a deduction. He said the original idea was to provide a 50% deduction - the amount that would be allowed under Sen. Onder's bill.
The bill may be acted upon as early as next week and we will continue to provide updates as the bill advances.