Eliminates the bottom two income tax brackets
The implications of SB870 could significantly affect the state’s revenue from personal income taxes. By raising the income threshold for tax exemption, the bill effectively allows low-income residents to retain more of their earnings, presenting a potential benefit to those living at or near the poverty line. However, this alteration in tax policy may result in reduced overall tax revenues for the state, which could impact funding for public services and programs reliant on income tax streams. There may be a concern regarding the sustainability of state funding in the absence of these tax contributions from higher income brackets.
Senate Bill 870, introduced by Senator Eigel, aims to modify the income tax structure in Missouri by repealing existing tax provisions and enacting a new section that eliminates the bottom two income tax brackets. The bill proposes to replace the current tax rate for residents with a system that exempts residents from income tax on taxable incomes below $2,000 starting from tax years beginning after January 1, 2023. This shift increases the income threshold for tax exemption compared to previous legislation, which allowed for no tax on incomes below $100.
The proposal has drawn a mix of support and opposition among legislators and constituents. Proponents argue that eliminating lower tax brackets can provide much-needed financial relief to low-income earners, enhance disposable income, and stimulate local economies. Conversely, critics express concern that such reductions in income tax could favor wealthier residents disproportionately and undermine the state's ability to fund essential services. The discussion thus revolves around balancing fiscal responsibility with equitable tax practices and ensuring that reforms do not harm vulnerable populations.