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Missouri state auditor Nicole Galloway

Missouri state auditor Nicole Galloway explains why she has launched a special task force to monitor the financial health of Missouri's rural hospitals during an interview withe business reporter Samantha Liss on Tuesday, Aug. 15, 2017, at the Post-Dispatch. Photo by Laurie Skrivan, lskrivan@post-dispatch.com

JEFFERSON CITY • Missouri Auditor Nicole Galloway said Tuesday that Gov. Mike Parson’s administration broke state law when Department of Revenue officials quietly adjusted tax withholding tables in January amid worries the state would not meet its financial targets.

Galloway said the administration of Parson, a Republican, changed tax withholding tables in January 2019, adjustments that have resulted in “over-withholding” from paychecks. She said the adjustments should have been made after a public hearing process.

While Galloway acknowledged that withholding changes do not alter the amount of tax one ultimately owes, she said the Department of Revenue’s changes had caused confusion.

The department changed tax withholding tables twice in 2018 after federal and state tax cuts. Withholding adjustments made last year are at least part of the reason the state is not currently meeting revenue projections this fiscal year, analysts and lawmakers have said.

Galloway, a Democrat, said that her office presented a draft of her audit to the Department of Revenue last month. Then-Director of the Department of Revenue Joel Walters resigned shortly thereafter, on March 15.

His resignation also followed continued digging by a Missouri House committee into the errors made last year.

The Columbia Daily Tribune also reported, shortly before Walters’ resignation, that the Department of Revenue planned to warn Missourians about the risk of surprise tax bills last year, but ultimately elected not to send out a news release imploring taxpayers to withhold more from their paychecks.

“The decision to take more money out of paychecks without following the law shows a clear pattern of mismanagement,” Galloway told reporters Tuesday, “and the resignation of one unelected bureaucrat does not equate to accountability.”

She said the 2019 changes required public input.

Because of the state’s mistakes last year, Galloway’s office said, Missourians owe an additional $134 million when filing their returns this year, and the state will pay out $232 million less in tax refunds.

In response to Galloway’s audit, Walters sent a brief letter to Galloway on March 18 saying the state would “take steps to inform taxpayers of the potential impact of changes made to the state’s withholding tables.”

Parson said Galloway was engaging in “scare tactics.”

“Our focus has consistently been on reforming and reducing taxes for hardworking Missouri families and small businesses,” Parson said. “We’re not interested in engaging with someone that prioritizes partisan politics and scare tactics over the long-term benefits of federal and state income tax cuts.”

As of Monday, state revenue was down $266 million compared with the same point last year, or 3.96 percent. If the state fails to meet revenue targets, Parson could be forced to withhold some state spending before the end of this fiscal year, June 30.

The House sent the Senate last week a $30 billion budget proposal that assumed modest revenue growth next year; the Senate could be forced to slash planned spending for next fiscal year if revenue collections don’t improve.


Editor's note: An earlier version of this story incorrectly attributed a quote by Parson to his spokeswoman

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Jack Suntrup covers state government and politics for the Post-Dispatch.