COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.:0647S.01I Bill No.:SB 146 Subject:Taxation and Revenue - Income Type:Original Date:February 11, 2025Bill Summary:This proposal eliminates the individual income tax.
FISCAL SUMMARY
ESTIMATED NET EFFECT ON GENERAL REVENUE FUNDFUND AFFECTEDFY 2026FY 2027FY 2028General Revenue($3,532,861,127)* ($8,515,185,571) ($8,515,185,571)Total Estimated Net
Effect on General
Revenue($3,532,861,127)* ($8,515,185,571) ($8,515,185,571)
*Oversight notes the fiscal impact for FY2026 is lesser because the top individual income tax
rate temporarily increases from 4.7% (current law) to 4.8% from August 2025-December 2025
before reducing to 0% effective January 1, 2026.
ESTIMATED NET EFFECT ON OTHER STATE FUNDSFUND AFFECTEDFY 2026FY 2027FY 2028Total Estimated Net
Effect on Other State
Funds $0$0$0
Numbers within parentheses: () indicate costs or losses. L.R. No. 0647S.01I
Bill No. SB 146
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ESTIMATED NET EFFECT ON FEDERAL FUNDSFUND AFFECTEDFY 2026FY 2027FY 2028Total Estimated Net
Effect on All Federal
Funds $0$0$0
ESTIMATED NET EFFECT ON FULL TIME EQUIVALENT (FTE)FUND AFFECTEDFY 2026FY 2027FY 2028Total Estimated Net
Effect on FTE 000
☒ Estimated Net Effect (expenditures or reduced revenues) expected to exceed $250,000 in any
of the three fiscal years after implementation of the act or at full implementation of the act.
☐ Estimated Net Effect (savings or increased revenues) expected to exceed $250,000 in any of
the three fiscal years after implementation of the act or at full implementation of the act.
ESTIMATED NET EFFECT ON LOCAL FUNDSFUND AFFECTEDFY 2026FY 2027FY 2028Local Government$0$0$0 L.R. No. 0647S.01I
Bill No. SB 146
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FISCAL ANALYSIS
ASSUMPTION
Section 143.011 - Elimination of the Individual Income Tax
Officials from the Office of Administration - Budget and Planning (B&P) note this proposal
would end the individual and pass-through entity income tax beginning tax year 2026.
B&P notes that section 143.011.4 is deleted on the effective date of the bill (August 28, 2025),
but the replacement language would not become effective until January 1, 2026. Section
131.011.3 contains the additional rate reductions created under SB 3 (2022). The first three of
which (reducing the top rate to 4.7% for tax year 2025) have been triggered and implemented.
Based on previous court precedent, income earned between January 1, 2025 and August 28, 2025
would be taxed at the current 4.7% rate, while income earned between August 28, 2025 and
December 31, 2025 would be taxed at a top rate of 4.8%. For the purpose of this fiscal note,
B&P will assume that income is generally earned equally throughout a year and will reflect
33.33% of income (4 out of 12 months) as earned during the higher tax rate period.
B&P notes that under Section 143.011, the top individual income tax rate will be 4.7% for tax
year 2025. In addition, based on current revenue forecasts and average revenue growth, B&P
estimates that net general revenue growth will not be high enough to trigger another reduction
until at least tax year 2028 (FY27 revenue). For the purpose of this fiscal note, B&P will assume
that the remaining two 0.1% reductions will occur for tax year 2028 (4.6%) and tax year 2029
(4.5%). Table 1 shows the estimated tax rates throughout the implementation of this proposal.
Table 1: Proposed Tax RatesTax YearCurrentProposed Rate
2025*4.7%
4.7% - Current Law (1/2025 - 8/2025)
4.8% - Proposal (9/2025 - 12/2025)
20264.7%0.0%20274.7%0.0%20284.6%0.0%20294.5%0.0%*The repeal of 143.011.3 would become effective 8/28/2025. While
the new language would not begin until 1/1/2026.
Using tax year 2022 data, the most recent complete tax year available, and accounting for the
changes in individual income tax law created by SB 3 (2022), B&P estimates that this provision
could increase GR by $43,648,465 for tax year 2025. Beginning tax year 2026, this proposal
could reduce GR by $8,515,185,571 annually. Table 2 shows the estimated impact by tax year. L.R. No. 0647S.01I
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Table 2: Estimated Impact by Tax YearTax YearGR ImpactTY 2025$43,648,465 TY 2026($8,515,185,571)TY 2027($8,515,185,571)TY 2028($8,515,185,571)TY 2029($8,515,185,571)
However, because this proposal would take effect January 1
st
of a tax year, individuals will
adjust their withholdings and declarations during FY1. Based on actual collections data, B&P
estimates that 42% of individual income taxes are paid during fiscal year 1 and 58% are paid
during fiscal year 2. (B&P notes this applies to tax year 2026+ changes.)
B&P notes that the change in section 143.011.3 would take effect the last four months of the tax
year, and within FY26. Therefore, B&P will reflect the full impact from tax year 2025 as
occurring during FY26.
Therefore, B&P estimates that this provision could reduce GR by $3,532,729,475 in FY26.
Beginning FY27, this proposal could reduce GR by $8,515,185,571 annually. Table 3 shows the
estimated impact from this section by fiscal year.
Table 3: Estimated Impact by Fiscal YearFiscal YearGR ImpactFY 2026($3,532,729,475)FY 2027($8,515,185,571)FY 2028($8,515,185,571)FY 2029($8,515,185,571)FY 2030($8,515,185,571)
Officials from the Department of Revenue (DOR) note this proposal eliminates the individual
income tax rate. It should be noted that SB 3 adopted in 2022, set the current individual income
tax rate top bracket at 4.95% in TY 2023 and set it at 4.8% in TY 2024 and based on certain
revenue triggers allows the tax rate to continue to fall 0.1% until it hits 4.5%. The tax rate for
tax year 2025 is 4.7%. Based on the current revenue forecasts and for fiscal note purposes only,
DOR shows the final two SB 3 rate reductions occurring in tax year 2028 (4.6%) and 2029
(4.5%).
This proposal, starting January 1, 2026, would eliminate the individual income tax.
It should be noted, this proposal is removing the current SB 3 reductions effective August 28,
2025, with the passage of this proposal. That would in essence change the individual income tax
rate to 4.8% for the rest of tax year 2025 starting August 28, 2025, from its current rate of 4.7%. L.R. No. 0647S.01I
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DOR notes that income is generally earned equally throughout a year and will reflect 33.33% of
income (4 out of 12 months) as earned during the higher tax rate period, for this fiscal note.
The newly proposed tax rate would be:
Proposed Tax RatesTax YearCurrentProposed Rate
2025*4.7%
4.7% - Current Law (1/2025 - 8/2025)
4.8% - Proposal (9/2025 - 12/2025)
20264.7%0.0%20274.7%0.0%20284.6%0.0%20294.5%0.0%*The repeal of 143.011.3 would become effective 8/28/2025. While the new
language would not begin until 1/1/2026.
The Department used its internal Income Tax Model that contains confidential taxpayer data for
tax year 2022 data (the most complete data available) to estimate the fiscal impact.
Tax Impact by Tax Year
Tax YearGR Impact
TY 2025$43,535,867
TY 2026($8,515,185,571)TY 2027($8,515,185,571)TY 2028($8,515,185,571)TY 2029($8,515,185,571)
Since this proposal would change the individual income tax rate in the middle of the first year,
DOR assumes many filers would be unable to adjust their withholdings and therefore the
department is showing the full impact of tax year 2025, in FY 26. For all other years since the
change begins each January, taxpayers would be able to adjust their withholding. Based on the
department’s collection data, the department knows that 42% of all individual income tax is
received in the first fiscal year and 58% is received in the second year. Therefore, DOR would
expect to see a loss to general revenue per fiscal year as follows: L.R. No. 0647S.01I
Bill No. SB 146
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Tax Impact by Fiscal Year
Fiscal YearGR ImpactFY 2026($3,532,842,073)FY 2027($8,515,185,571)FY 2028($8,515,185,571)FY 2029($8,515,185,571)FY 2030($8,515,185,571)
DOR notes that returns are filed between January 1st – April 15th of the year following the tax
year. Therefore, all staff will be needed through the end of 2026 to handle tax year 2025 returns.
Additionally, people will be filing amended returns and making payments for past owed tax
years past 2026. Starting in 2027, DOR could begin a phase out of staff, depending on the
remaining workload until all final returns and payments are received.
DOR assumes the eventual elimination of 194 FTE and 106 temporary staff that work with the
individual income tax.
Call Center – 64
Processing - 27
Quality Review – 77
Withholding – 9
Audits - 6
General Counsel office – 6
Mailroom – 4
Legislative Team - 1
DOR notes that this would also save future mailing costs, computer programming and other
expenses. The savings will not come until staff is fully phased out.
Any change in the individual income tax rate, requires DOR to modify the department’s
computer program at a cost of $7,327 and the department’s forms and website at a cost of $2,200
annually. For tax year 2025, and due to the two different income tax rates DOR would have to
modify it twice at a cost of $19,054.
Oversight will note the above cost to DOR for form and computer upgrades. Oversight notes
DOR anticipates savings from the elimination of the individual income tax; however, DOR does
not anticipate these savings to occur until several years after the proposed elimination as
taxpayers can still file/amend their income tax returns. L.R. No. 0647S.01I
Bill No. SB 146
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In response to another proposal from this session, HJR 1 (2025), officials from the Office of
Administration - Budget and Planning noted the elimination of individual income tax revenues
would result in a loss of approximately 64% of General Revenue.
Oversight notes the following, assuming a 64% reduction in the General Revenue spending
authority amounts for FY 2025
HBAgency
GR Spending
Authority
64%
Reduction
in GR
64% GR
FTE
Reduction
2002DESE$3,992,986,991$2,555,511,6745392003DHE$1,280,038,294$819,224,5082212004Revenue$75,718,764$48,460,009702005Transportation$580,596,245$371,581,5974272005Office of Administration$586,133,170$375,125,2298042005Employee Fringe Benefits$945,990,839$605,434,13702006Agriculture$28,214,225$18,057,1041232006Natural Resources$80,695,261$51,644,967912006Conservation$0$002007Economic Development$153,264,274$98,089,13592007Commerce and Insurance$6,250,258$4,000,165382007Labor and Industrial Relations$3,505,108$2,243,26952008Public Safety$135,621,084$86,797,4943152008National Guard$12,137,570$7,768,045712009Corrections$884,958,245$566,373,2776,0292010Mental Health$1,585,697,119$1,014,846,1561,8152010Health and Senior Services$597,179,177$382,194,6733012011Social Services$2,778,130,983$1,778,003,8297822012Elected Officials$149,464,031$95,656,9802952012Judiciary$261,531,737$167,380,3121,9782012Public Defender$62,584,900$40,054,3363652012General Assembly$47,285,590$30,262,7784392013Statewide Real Estate$101,161,943$64,743,6440
*Source: Budget Fast Facts
Officials from the Department of Commerce and Insurance, Department of Natural
Resources, and the Department of Health and Senior Services each defer to the Office of
Administration - Budget and Planning for the potential fiscal impact of this proposal.
Officials from the Department of Social Services (DSS) assume this bill could impact Social
Services' ability to carry out its functions. Officials from the DSS defer to the Office of
Administration - Budget and Planning for the potential fiscal impact of this proposal. L.R. No. 0647S.01I
Bill No. SB 146
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Officials from the Department of Economic Development
for the potential fiscal impact of this proposal.
Officials from the Missouri Department of Agriculture and the Office of the State Treasurer
each assume the proposal will have no fiscal impact on their respective organizations. Oversight
does not have any information to the contrary. Therefore, Oversight will reflect a zero impact in
the fiscal note for these agencies.
Rule Promulgation
Officials from the Joint Committee on Administrative Rules assume this proposal is not
anticipated to cause a fiscal impact beyond its current appropriation.
Officials from the Office of the Secretary of State (SOS) note many bills considered by the
General Assembly include provisions allowing or requiring agencies to submit rules and
regulations to implement the act. The SOS is provided with core funding to handle a certain
amount of normal activity resulting from each year's legislative session. The fiscal impact for
this fiscal note to the SOS for Administrative Rules is less than $5,000. The SOS recognizes that
this is a small amount and does not expect that additional funding would be required to meet
these costs. However, the SOS also recognizes that many such bills may be passed by the
General Assembly in a given year and that collectively the costs may be in excess of what the
office can sustain with its core budget. Therefore, the SOS reserves the right to request funding
for the cost of supporting administrative rules requirements should the need arise based on a
review of the finally approved bills signed by the governor.
FISCAL IMPACT – State
Government
FY 2026
(10 Mo.)
FY 2027FY 2028GENERAL REVENUE FUNDRevenue Loss - §143.011 -
Elimination of the Individual tax($3,532,842,073)($8,515,185,571)($8,515,185,571)
Cost -§143.011 - DOR - Form and
computer upgrades($19,054)$0$0
Savings - §143.011 – DOR –
administrative savingsUnknownUnknownUnknown
ESTIMATED NET EFFECT ON
GENERAL REVENUE FUND
Less than
($3,532,861,127)
Less than
($8,515,185,571)
Less than
($8,515,185,571) L.R. No. 0647S.01I
Bill No. SB 146
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FISCAL IMPACT – Local
Government
FY 2026
(10 Mo.)
FY 2027FY 2028$0$0$0
FISCAL IMPACT – Small Business
This proposed legislation could positively impact any small business that is obligated to pay
individual income tax, as such small business would pay a reduced amount of such tax(es), and
eventually no individual income tax.
FISCAL DESCRIPTION
Current law imposes an income tax on all Missouri taxable income. For all tax years beginning
on or after January 1, 2026, this act eliminates the Missouri individual income tax.
This legislation is not federally mandated, would not duplicate any other program and would not
require additional capital improvements or rental space.
SOURCES OF INFORMATION
Office of Administration - Budget and Planning
Department of Commerce and Insurance
Department of Economic Development
Department of Health and Senior Services
Department of Natural Resources
Department of Revenue
Department of Social Services
Missouri Department of Agriculture
Office of the Secretary of State
Office of the State Treasurer
Joint Committee on Administrative Rules
Julie MorffJessica HarrisDirectorAssistant DirectorFebruary 11, 2025February 11, 2025