2022 Special Session Recap
This recap was prepared by our team of MOST Policy Fellows- Dr. Ramon Martinez, Dr. Tomotaroh Granzier-Nakajima and Dr. Sarah Anderson.
Over the last month, the Missouri General Assembly gathered for a 3-week special session. Between September 14-October 4th, 2022, legislators worked to approve two tax bills:
These are the last legislative actions likely to occur in the 101st Missouri General Assembly.
Agricultural Economic Opportunities
During the 2022 regular legislative session, both chambers passed HB 1720- a large “omnibus” bill that contained several elements related to agricultural economic opportunities, including:
- agricultural tax incentives (see our Science Note on tax credits and this policy memo that summarizes similar tax incentives in other states)
- anhydrous ammonia oversight
- recycled asphalt shingle permitting and usage.
Governor Parson vetoed the bill for two main reasons:
- The section of HB 1720 that was related to recycled asphalt shingles did not follow the single subject rule.
- Many of the agricultural tax incentives were set to expire in two years, which was considered too early to have their desired impact.
Special Session Action
HB 3 addressed Governor Parson’s concerns by removing the recycled asphalt shingles provision and extending the sunset dates for the agricultural tax incentives to 2028. Tax incentives included in HB 3 include:
- A tax credit of $5 per ton of processed wood material for wood energy. There is an annual cap of $6 million
- A tax credit of 25% of the cost of modernizing or expanding a meat processing facility. There is an annual cap of $2 million.
- A tax credit of 5 cents per gallon to retailers for gasoline between 15% and 85% ethanol. There is an annual cap of $5 million.
- A tax credit of 2 cents per gallon to retailers for biodiesel blends between 5% and 10% and 5 cents per gallon for blends between 10% and 20%. There is an annual cap of $16 million.
- A tax credit of 2 cents per gallon for producers of biodiesel fuel. There is an annual cap of $4 million.
- A tax credit of 50% of the expenses for establishing or improving an urban farm, not to exceed the taxpayer’s state tax liability for that year. There is an annual cap of $200,000.
- A sales tax exemption for the sale of certain farm machinery including agricultural utility vehicles.
According to the fiscal note, the bill could cost up to $40 million by 2025. Governor Parson signed the bill on October 5, 2022.
Income Tax
During the 2022 regular legislative session, lawmakers passed HB 2090, a one-time tax rebate for Missourians in the amount of $500 or $1000 for individuals or joint tax filers making under $150,000 or $300,000, respectively. Governor Parson vetoed this bill and tasked the General Assembly to pass a more substantive and permanent income tax cut during the special session.
For an overview of how taxes work in Missouri, check out our Missouri Tax Overview Science Note.
Special Session Action
On October 5th, Governor Parson signed an estimated $1 billion tax cut package (SBs 3 & 5) to take effect beginning January 1st, 2023.
Missouri’s top income tax rate currently stands at 5.3% for those making over ~$23,000. Under the provisions of these new bills, the tax rate will drop from 5.3% to 4.95% for these individuals. The bills also eliminate the lowest income tax bracket of 1.5% for those making under $14,000.
The bill also allows for a gradual decrease in the top income tax rate if certain increased revenue levels are met over time. These requirements include an additional 0.15% tax cut if $175 million more in taxes is brought into the treasury than the previous several years, and a further 0.1% tax cut if $200 million more is brought in than the previous several years.
A final top income tax rate of 4.5% can be achieved after several years if revenue levels are met under the provisions of these new laws.
Due to a constitutional provision that limits tax increases above a specific threshold — the Hancock Amendment —future increases in income taxes (for example, to respond to potential budget deficits) are limited.
Want to see more of the research that we share with our state lawmakers? Visit Legislative Science Notes — MOST Policy Initiative.
