COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.:0284S.01I Bill No.:SB 236 Subject:Taxation and Revenue - Income Type:Original Date:January 15, 2025Bill Summary:This proposal reduces the top rate of income tax.
FISCAL SUMMARY
ESTIMATED NET EFFECT ON GENERAL REVENUE FUNDFUND
AFFECTED
FY 2026FY 2027FY 2028Fully
Implemented
(FY 2031)
General
Revenue* $0$0$0($132,804,493)
Total Estimated
Net Effect on
General
Revenue $0$0$0($132,804,493)
*Oversight notes the state individual income tax rate (4.7% in TY 2025) is to be reduced in
annual increments (if certain triggers are met) until it reaches 4.5% pursuant to SB 3 (2022). For
fiscal note purposes, Oversight assumes the proposed additional rate reduction will occur in Tax
Year 2030 (FY2031), bringing the top individual income tax rate to 4.4%.
ESTIMATED NET EFFECT ON OTHER STATE FUNDSFUND
AFFECTED
FY 2026FY 2027FY 2028Fully
Implemented
(FY 2031)
Total Estimated
Net Effect on
Other State
Funds $0$0$0$0
Numbers within parentheses: () indicate costs or losses. L.R. No. 0284S.01I
Bill No. SB 236
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ESTIMATED NET EFFECT ON FEDERAL FUNDSFUND
AFFECTED
FY 2026FY 2027FY 2028Fully
Implemented
(FY 31)
Total Estimated
Net Effect on
All Federal
Funds $0$0$0$0
ESTIMATED NET EFFECT ON FULL TIME EQUIVALENT (FTE)FUND
AFFECTED
FY 2026FY 2027FY 2028Fully
Implemented
(FY 31)
Total Estimated
Net Effect on
FTE 000$0
☒ 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
AFFECTED
FY 2026FY 2027FY 2028Fully
Implemented
(FY 31)
Local
Government$0$0$0$0 L.R. No. 0284S.01I
Bill No. SB 236
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January 15, 2025
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FISCAL ANALYSIS
ASSUMPTION
Section 143.011 - Individual Income Tax Rate Reduction
Officials from the Department of Revenue (DOR) note currently the individual income tax rate
is set in Section 143.011 based on language in SB 3 adopted in 2022. SB 3 set the top individual
income tax rate at 4.95% and set up four additional future reductions until it reached 4.5% based
on certain revenue triggers. In tax year 2023, the rate was 4.95%, and in tax year 2024 it was
4.8%. The individual income tax rate for tax year 2025 is 4.7%. For fiscal note purposes only,
and based on the current consensus revenue estimates, DOR will show the next reduction of the
individual income tax rate occurring in consecutive years starting in tax year 2028 at 4.6% and in
2029 at 4.5%.
This proposal will change the language in SB 3, to allow one additional rate reduction bringing
the final reduction to 4.4% in 2030.
DOR used its internal Income Tax Model that contains confidential taxpayer data from both the
federal and state tax return to calculate the fiscal impact of this proposal. Using the tax year
2022 data, the most complete data available and accounting for the SB 3 changes, DOR
estimates a loss to general revenue of $131,804,493 in tax year 2030.
When converting from tax year to fiscal year, DOR assumes a 42%/58% split based on historical
records of payments. Therefore, this provision could reduce general revenue by $55,357,887 as
early as FY 2030 and once fully implemented it would reduce general revenue by $132,804,493
annually.
This proposal will require DOR to modify the department’s MO-1040 form to show the
individual income tax rate changes. This will result in a cost of $7,327 to update the brackets in
our individual income tax computer program. Additionally, the DOR website and available
printable forms will need to be updated at a cost of $2,200.
Oversight notes the DOR requests a one-time cost of $9,527 for website income-tax changes
and updates to comply with the proposed language; however, Oversight notes that DOR receives
appropriation for routine website updates and will not show those costs in the fiscal note.
Officials from the Office of Administration - Budget and Planning (B&P) note this proposal
would allow for an additional 0.1% reduction in the top individual income tax rate, dependent on
net general revenue growth.
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 L.R. No. 0284S.01I
Bill No. SB 236
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January 15, 2025
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that the remaining two 0.1% reductions will occur for tax year 2028 (4.6%) and tax year 2029
(4.5%). Therefore, the earliest this proposed reduction could occur would be tax year 2030.
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 reduce GR by $132,139,101 as early as tax year 2030.
However, because this proposal would take effect January 1st 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. Therefore, B&P estimates that this provision could reduce GR by
$55,498,422 as early as FY30. Once fully implemented this provision could reduce GR by
$132,139,101 annually.
Oversight notes both DOR and B&P’s estimates include data from DOR’s internal Income Tax
Model.
Oversight notes that B&P uses a 42% in first fiscal year and 58% split in the second year to
convert the income tax numbers from tax year to fiscal year.
Oversight notes that it does not currently have the resources and/or access to state tax data to
produce a thorough independent revenue estimate and is unable to verify the revenue estimates
provided by DOR & B&P. Therefore, for the purpose of this fiscal note, Oversight will note
DOR’s estimated impact for this proposal.
Oversight assumes for fiscal note purposes, the proposed additional rate reduction will occur in
tax year 2030, with the fully implemented impact occurring in FY 2031, bringing the top
individual income tax rate to 4.4%.
FISCAL IMPACT – State
Government
FY 2026
(10 Mo.)
FY 2027FY 2028Fully
Implemented
(FY 2031)
GENERAL REVENUE FUNDRevenue Reduction - §143.011 -
Reduction of individual income
tax rate$0$0$0($132,804,493)
ESTIMATED NET EFFECT
ON GENERAL REVENUE
FUND $0$0$0($132,804,493) L.R. No. 0284S.01I
Bill No. SB 236
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FISCAL IMPACT – Local
Government
FY 2026
(10 Mo.)
FY 2027FY 2028Fully
Implemented
(FY 2031)
$0$0$0$0
FISCAL IMPACT – Small Business
Certain small businesses’ taxation could be impacted by this proposal.
FISCAL DESCRIPTION
Current law authorizes reductions in the top rate of income tax contingent on certain state
revenue collections, with an eventual top rate of 4.5%. This act provides for an additional 0.1%
reduction, for an eventual top rate of 4.4%.
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
Department of Revenue
Office of Administration - Budget and Planning
Julie MorffJessica HarrisDirectorAssistant DirectorJanuary 15, 2025January 15, 2025