No one likes paying taxes. And discussing taxes, exemptions and withholding tables has been known to make many eyes glaze over. Nonetheless, it is time to talk about what is going on with Missouri tax refunds.
As state treasurer of Missouri, I am charged with safeguarding and protecting the state’s financial resources so you can focus on your families and businesses.
I’m proud to have voted for the largest single-year tax cut in state history last year, when I was serving as a fiscally-conservative state representative. I’m proud that the House budget committee I chaired for the past two years tripled the state’s surplus and fully funded schools for the first time in a decade.
But I am deeply troubled by incorrect news reports, elected liberals and government bureaucrats spreading misinformation about Missouri’s tax withholdings.
It’s time to set the record straight.
In August, I became aware of unusual revenue patterns. I reached out to the department of revenue and asked them for an explanation. At that time, the department had not yet identified the problem, which was greatly concerning.
In an effort to unravel the revenue irregularity, I sent the department tax information from my own private business, which showed similar anomalies. After a series of meetings, department officials provided an explanation: They had not accounted for the standard deduction in their federal estimate, which caused state withholdings to be set too low.
It turns out that wasn’t the problem, because the standard deduction was always accounted for in federal tax tables. In October, the department issued new tables and tax instructions which actually double-counted the deduction.
So, the question remains: Where is the missing revenue? It turns out that taxpayer behavior plays a significant role in this situation.
For years, when filling out their withholding forms, many Missourians have elected zero allowances, also known as exemptions, because they want to receive a refund when they file their taxes in April. I don’t recommend this practice. Instead, you should keep your hard-earned money instead of turning it over to the state as an interest-free loan. Regardless, because of the new federal tax code, claiming zero exemptions in order to receive a refund no longer works.
Certain aspects of Missouri’s tax law, such as the standard deduction and the personal exemption, are tied to federal tax law. When the federal government cut taxes in the beginning of 2018, those changes triggered similar changes in Missouri taxes.
Overall, the federal changes lowered Missouri taxes and changed the timing of when those taxes would be paid. Instead of overpaying throughout the year and receiving a refund in the spring, people who historically elected zero allowances have already received their predicted refund — in the form of the reduced taxes taken from each paycheck.
This means many taxpayers will likely not be owed the refund to which they are accustomed, and some may even owe the state. But to be clear, Missourians’ overall tax liability has decreased.
The problems the current administration inherited are no excuse for a lack of communication from the department to Missouri taxpayers. Missourians deserve to hear the truth, not political grandstanding, when revenue issues arise.
As treasurer, I will continue working alongside the governor and the legislature to manage our state’s financial situation. But most importantly, I pledge to work for you, the taxpayer, to manage the state’s financial outlook as we all adapt to this unexpected change.
Scott Fitzpatrick is Missouri State Treasurer.