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Missouri's 100th session convenes

State Rep. Elijah Haahr, R-Springfield, addresses the 100th assembly from the dais on Wednesday, Jan. 9, 2019, after being elected speaker of the house in Missouri's 100th legislative session at the Jefferson City Capitol. Photo by Christian Gooden, cgooden@post-dispatch.com

JEFFERSON CITY — A state income tax cut is likely off the table in Missouri next year after revenues fell short of their target.

For the second time since 2016, preliminary figures show tax money flowing into state coffers during the most recent fiscal year grew by just under $100 million.

The less than 1% growth in net revenue does not appear to meet the threshold needed to lower the current top income tax rate of 5.4% to 5.3% as part of a phased-in tax cut approved by the Republican-led Legislature and GOP Gov. Mike Parson last year.

Although a final tally is still being assessed by the Parson administration, aides are already warning the tax cut won’t be happening.

“I don’t foresee the next tax cut trigger being hit,” noted Adam Koenigsfeld, chief budget analyst for the Missouri Senate in a memo obtained by the Post-Dispatch.

“I think it’s a safe assumption,” added Justin Alferman, Parson’s legislative director.

Parson last year signed legislation to reduce the top personal income tax rate for 2019 to 5.4%, down from 5.8%.

Included in the new law were three additional one-tenth of 1% annual reductions that would bring the top rate down to 5.1%.

When fully implemented in 2023, budget analysts said it will result in an estimated $5.8 million drop in revenue.

Opponents, including some GOP leaders, raised red flags about the reduced revenue, saying it could hurt the state’s ability to adequately fund schools, universities and social service programs.

Supporters, including House Speaker Elijah Haahr, R-Springfield, argued the cuts would boost the economy by giving business owners more money to expand and hire additional workers.

Sen. Andrew Koenig, a Manchester Republican who championed the tax cuts, said the triggers were put in place in order to ensure the state budget would not be underfunded.

“It’s not a surprise that we would take a year off from triggering another one,” Koenig said.

Alferman said despite the failure to trigger the tax cut, the state’s $30 billion budget is in good shape.

“I think our financials going into next year are really strong,” Alferman said. “We’re optimistic that we are going to have a very strong budget year.”

Similar tax cuts in 2012 caused massive financial headaches in neighboring Kansas, where lawmakers were later forced to raise taxes in order to adequately fund education and other services.

Despite that outcome, economist Arthur Laffer, the architect of similar tax cut schemes, recently was awarded the Presidential Medal of Freedom by President Donald Trump.

Laffer, who helped write Trump’s campaign tax plan, believes that reducing certain tax rates can increase government tax revenue by accelerating economic growth.

Earlier this year, Laffer lunched with Parson at the governor’s mansion as part of a meeting between the Republican chief executive and Rex Sinquefield, a wealthy political donor who also supports tax cuts.

It’s not the first time a phased-in tax cut has been put on hold because of anemic revenue.

In Democratic Gov. Jay Nixon’s final year in office, the state’s revenue growth failed to trigger the threshold, postponing a decrease that would have gone into effect in 2017.

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Kurt Erickson is a reporter for the St. Louis Post-Dispatch