Associated Industries of Missouri’s Tax Committee issues statement disputing flawed interpretation o
Associated Industries of Missouri president Ray McCarty and AIM Tax Committee Member and MSCPA government relations consultant, Chuck Pierce, CPA, say reading SB 509 as eliminating income taxes on incomes over $9,000 is flawed.
A statement released by Governor Jay Nixon claims the bill would eliminate state income tax on income over $9,000 per year, costing the state $4.8 billion. But that interpretation requires a very strained reading of the language of the bill.
The governor’s press statement focuses on language in subdivision (4) of subsection 2 of section 143.011 of the bill that reads, “The bracket for income subject to the top rate of tax shall be eliminated once the top rate of tax has been reduced to five and one-half of a percent.” This sentence follows a reference to the Missouri Department of Revenue’s authority to enact rules to adjust the tax tables in the first sentence of subdivision (4) of subsection 2. The first sentence also makes it clear that any changes to the tax tables are supposed to effectuate the new law.
Thus the final sentence of subdivision (4) of subsection 2 must refer to the Department’s changes to the tax tables, and should be read to mean that when adjusting the tax tables to effectuate this provision, the Department should take out the “over $9,000” income bracket. That doesn’t mean that income over $9,000 will not be taxed, or that the rate for income over $9,000 is now 0% because that is not what the rest of the statute says. Instead the clear implication is that the tax table should be changed to reflect that the highest rate (5 ½ %) will apply to any income amounts over $8,000. The change to the income bracket that is currently the second highest rate, from “Over $8,000 but not over $9000” to “over $8,000” — is not explicitly stated but is implied by the context.
The AIM Tax Committee also points out that even if the top bracket is eliminated, the language on lines 30 and 31 of the bill clearly states, “The top rate of tax shall not be reduced below five and one-half percent.” That language must be given meaning and weight by the courts.
“What’s frustrating to me is that this language has been in this bill and numerous other tax cut bills and this is the first we have heard of this ‘concern,’” said Chuck Pierce. “The Department of Revenue, Office of Administration, University of Missouri and various others have reviewed this and have never raised an objection in any of the previous fiscal notes. I don’t understand why now, after the bill has been presented to the Governor, the concern is raised.”
“Once again, it appears the Governor does not want to sign a tax relief bill for Missouri taxpayers and small businesses and the administration is looking for any excuse to block our efforts to provide tax cuts out of growth in state tax revenues,” said Ray McCarty, president of Associated Industries of Missouri. “The math is simple, state services are protected. We ask the Governor to sign the bill on behalf of hard working Missourians.”
Associated Industries of Missouri’s Tax Committee is comprised of more than 110 of the top tax lawyers and accountants in Missouri.
To contact Ray McCarty, call our office in Jefferson City, (573) 634-2246, or contact Dick Aldrich by voice or text at (573) 301-4050.