Down more than half-billion in tax collections since this same time last year, Missouri officials said Wednesday higher bills and lower refunds this tax season will help cover the revenue gap.
The development sparked stinging rebukes from both Democrats and their Republican counterparts who have cut the state’s taxes in recent years in hopes of spurring economic growth.
“You’re going to have an April surprise,” said Rep. Robert Ross, R-Yukon. “That’s what’s coming.”
At the end of the day Tuesday, the state’s individual income tax revenue was down $532 million from the same date a year ago while net collections were down $536 million.
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Officials were unable to say which tax brackets would be hit the hardest by the revenue burden and how many Missourians will be impacted. But the revenue department pledged to help taxpayers and mentioned payment plans as an option.
“I’m going to have very upset constituents,” Rep. Kip Kendrick, D-Columbia said. “Everybody in this room will have very upset constituents. And somehow we’re all crossing our fingers right now hoping they’re going to owe us money? That’s terrifying to me.”
The possibility of budget cuts and the reality of a sluggish state economy also became apparent for members of the House’s budget committee that questioned Missouri Department of Revenue director Joel Walters Wednesday afternoon.
A stew of tax issues and “moving parts” have created the current revenue situation, officials said, including an error in the state’s withholding tables and withholding changes coming from President Donald Trump’s tax cuts. As one lawmaker said, the federal tax cut exposed the state’s error. The federal government is also dealing with the issue.
“We paid a billion dollars in refunds last year,” Walters said. “We’re expecting that that will be slightly lower. But there will be some people who will owe a bit more.”
Because of the Trump tax bill “everything has changed,” Walters said.
“It’s very likely many, many of those people will owe a higher number to the IRS because the exact same thing (is) happening there,” Walters said.
Because employers have not been taking enough money from paychecks, taxpayers instead may have to make up the difference.
Democrats have seized on the issue as a major concern so far in the 2019 session. House Minority Leader Crystal Quade, D-Springfield, introduced legislation extending the tax payment deadline for some Missourians.
Under her bill, people who file their returns by the legal deadline and owe less than $200 have until June 15 to pay, according to a statement from Quade’s office.
Rep. Cody Smith, the head of the House budget panel, dismissed Quade’s proposal during a press conference after the hearing Wednesday afternoon.
“(Revenue) is of the opinion, and I agree, that it does not require a change in statute when the department is already able and willing to work people on an individual basis,” Smith said.
During the hearing, lawmakers slammed department of revenue officials for a lack of communication.
“You should have discovered this issue with the withholdings and the number of exemptions when that was passed, not waiting to see consequences happen in monthly revenue and withholdings,” said Rep. David Wood, R-Versailles.
“You’re not providing the taxpayers within the state with a good enough notice to make an adjustment so that this doesn’t hit home on them,” Ross said.
Missouri passed a phased in tax cut during the 2014 session, while Gov. Mike Parson signed an additional reduction into law last summer. Budget projections show the 2014 tax cut will cost the state $320 million in the upcoming fiscal year.
Officials with the revenue department said during lawmakers questioning there is “every indication” that the under-withholding is the reason for the state’s low income.
Parson’s budget is betting on revenue growth to fund his expanded spending list. Questioned by Kendrick, the chief Democrat on the budget committee, about whether the state can still make that growth, the revenue chief didn’t hesitate.
“I am confident of that,” Walters said.