COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.:2481S.01I Bill No.:SB 650 Subject:Taxation and Revenue - Income Type:Original Date:March 30, 2025Bill Summary:This proposal exempts certain professions from income tax.
FISCAL SUMMARY
ESTIMATED NET EFFECT ON GENERAL REVENUE FUNDFUND AFFECTEDFY 2026FY 2027FY 2028General Revenue*($1,057,476,328)($2,517,800,780)($2,463,065,980)Total Estimated Net
Effect on General
Revenue($1,057,476,328)($2,517,800,780)($2,463,065,980)
*Oversight notes for the purpose of the fiscal note, Oversight assumes a top income tax rate of
4.7% in tax year 2025 (FY 2026) and future income tax rate reductions from SB 3 (2022) will
trigger consecutively (4.6% in FY 2027 and 4.5% in FY 2028+).
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. 2481S.01I
Bill No. SB 650
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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. 2481S.01I
Bill No. SB 650
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FISCAL ANALYSIS
ASSUMPTION
Section 143.126 - Income Tax Deduction for Certain Professions
Officials from the Department of Revenue (DOR) note this proposal starting with tax year
2026 will allow qualified employees in certain industries a subtraction of up to the first $100,000
in income for calculating individual income tax. The first $100,000 of income earned would be
subtracted from the Missouri adjusted gross income before calculating tax. DOR notes this
proposal does not state that the full $100,000 be earned from the qualifying industry just that the
employee be working in a qualified job.
This proposal lists the qualifying employees as:
First responders including peace officers, firefighters and emergency medical technicians.
Licensed nurses.
Teachers- including public, private and higher education.
Veterans.
State employees - excluding elected officials.
CDL driver.
Nursing home employees.
Childcare providers.
Laborers in the following industries:
o
o
o
o
o
Maintenance
o
DOR notes that CDL drivers are specifically listed by this proposal as being a qualified
employee, but they are also listed under the NAICS code 48-49. As such DOR has included
them under the NAICS code to prevent double counting.
Additionally, this proposal allows all veterans of any branch of the Armed Forces to receive this
subtraction. DOR notes that DOR is unable to separate veteran pay from these other careers so
assume this proposal could exceed the estimate if some veterans are employed in other
industries.
DOR does not maintain employment data on these industries but does have salary information on
the state employees eligible under this proposal. DOR then gathered data from published reports
from the Bureau of Labor Statistics’ Occupational Employment and Wage Statistics (OEWS) L.R. No. 2481S.01I
Bill No. SB 650
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and Quarterly Census of Employment and Wages (QCEW), and DOR was able to determine that
798,446 individuals could be impacted by this proposal. These employees show eligible income
of $54,734,799,564. Below is the estimated number of employees by wages.
Estimated Number of Qualified Workers
Job Class
Est. #
Employees
Median
Income
Est. Exempted
Income
(a) First Responder32,660 $59,387 $1,939,592,600 (b) Nurse123,590 $68,922 $8,281,719,500 (c) Teacher152,017 $58,919 $8,720,855,700 (d) VeteranNot estimated to prevent double counting(e) State Employee $2,674,430,894 (f) Laborer435,450 $67,308 $30,980,529,159 (g) CDL DriverIncluded in NAICS 48-49(h) Nursing Home 38,050 $39,433 $1,579,749,202 (i) Childcare
Provider16,679 $30,552 $557,922,509
Total798,446 $54,734,799,564
*(a), (b), (c) based on BLS - OEWS occupational data.*(e) based on actual payroll data.*(f), (h), (i) based on BLS - QCEW industry data.
It should be noted that subtractions do not reduce revenue on a dollar-for-dollar basis, but rather
in proportion to the top tax rate applied. SB 3 adopted in 2022 has set the tax rate at 4.7% for tax
year 2025 and based on future revenue triggers could lower the rate to 4.5%. DOR will show the
impact of this proposal through the implementation of SB 3.
Impact by Tax YearTax
Year
Tax
Rate
GR Impact
20264.70%($2,572,535,580)20274.70%($2,572,535,580)20284.60%($2,517,800,780)20294.50%($2,463,065,980)
DOR notes that when converting from tax year to fiscal year DOR assumes based on historical
records that 42% of individual income is paid during fiscal year 1 (mostly through withholdings)
and the remaining 58% is paid in fiscal year 2. DOR notes that the majority of withholdings
would be stopped for these careers and therefore with a start date of January 1, 2026, DOR
assumes impact would begin in FY 2026. The estimated impact by fiscal year. L.R. No. 2481S.01I
Bill No. SB 650
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Impact by Fiscal YearFiscal
Year
GR Impact
2026($1,080,464,944)2027($2,572,535,580)2028($2,549,546,964)2029($2,494,812,164)2030($2,463,065,980)
This proposal would require DOR to modify the department’s MO-1040 & MO-A ($2,200 each),
the department’s website and computer programming ($7,327).
Oversight notes the DOR requests one-time cost 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 beginning
with tax year 2026, employees in specific industries or job classifications would be allowed a
subtraction of up to $100,000 when determining their Missouri adjusted gross income (MAGI).
B&P notes that the subtraction authorized in this proposal is not limited to income earned
directly as a result of employment in a qualifying industry/job. Rather, the subtraction is allowed
for all income, regardless of source, for each qualifying individual.
B&P notes that the following industries and jobs would qualify under this proposal:
o
o
o
o
o
Maintenance
o
L.R. No. 2481S.01I
Bill No. SB 650
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In order to estimate the potential impact from this proposal, B&P utilized employment and salary
data published by the BLS Occupational Employment and Wage Statistics (OEWS), BLS
Quarterly Census of Employment and Wages (QCEW), as well as state employee pay data.
Based on all available information, this proposal could impact more than 798,446 individuals
and exempt over $54,734,799,564 in wages from the individual income tax. Table 1 shows the
estimated number of employees and wages by job class.
Table 1: Estimated Number of Qualified Workers
Job Class
Est. #
Employees
Median
Income
Est. Exempted
Income
(a) First Responder32,660 $59,387 $1,939,592,600 (b) Nurse123,590 $68,922 $8,281,719,500 (c) Teacher152,017 $58,919 $8,720,855,700 (d) VeteranNot estimated to prevent double counting(e) State Employee $2,674,430,894 (f) Laborer435,450 $67,308 $30,980,529,159 (g) CDL DriverIncluded in NAICS 48-49(h) Nursing Home 38,050 $39,433 $1,579,749,202 (i) Childcare
Provider16,679 $30,552 $557,922,509
Total798,446 $54,734,799,564
*(a), (b), (c) based on BLS - OEWS occupational data.*(e) based on actual payroll data.*(f), (h), (i) based on BLS - QCEW industry data.
B&P did not include an estimate for granting veterans as subtraction in order to prevent double
counting as it is unknown how many individuals already included by job class are also veterans.
Therefore, the estimates could exceed the amounts shown in this response.
B&P further notes that CDL related jobs are already included under the NAICS 48-49
classification. Therefore, B&P did not include statistics for the job class in order to prevent
double counting.
In addition, there may be some overlap between the nurse’s job class and the nursing home
industry. The overlap is not anticipated to be significant.
Based on the above information, B&P estimates that this proposal could exempt
$54,734,799,564 in wages from income tax. However, subtractions do not reduce revenues on a
dollar-for-dollar basis, but rather in proportion to the top tax rate applied. Therefore, B&P will
show the estimated impacts throughout the implementation of the tax rate reductions from SB 3
(2022). Table 1 shows the estimated impact by tax year and tax rate. L.R. No. 2481S.01I
Bill No. SB 650
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Table 1: Impact by Tax YearTax
Year
Tax
Rate
GR Impact
20264.70%($2,572,535,580)20274.70%($2,572,535,580)20284.60%($2,517,800,780)20294.50%($2,463,065,980)
B&P notes that the majority of income tax withholdings would likely stop once the subtraction
becomes effective January 1, 2026. Therefore, this proposal will begin affecting state revenues
in FY26. 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 proposal could reduce TSR and GR by $1,080,464,944 in
FY26. Once SB 3 (2022) has fully implemented, B&P estimates that this proposal could reduce
TSR and GR by $2,463,065,980 annually. Table 2 shows the estimated impact by fiscal year.
Table 2: Impact by
Fiscal Year
Fiscal
Year
GR Impact
2026($1,080,464,944)2027($2,572,535,580)2028($2,549,546,964)2029($2,494,812,164)2030($2,463,065,980)
Oversight notes both DOR and B&P’s estimates include data from DOR and B&P’s internal
Income Tax Model.
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 B&P and DOR.
Oversight notes for the purpose of the fiscal note, Oversight assumes a top income tax rate of
4.7% in tax year 2025 (FY 2026) and future income tax rate reductions from SB 3 (2022) will
trigger consecutively (4.6% in FY 2027 and 4.5% in FY 2028+).
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. L.R. No. 2481S.01I
Bill No. SB 650
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Fiscal Impact by Tax Year
Tax YearTax RateGR Impact20264.60%($2,517,800,780)20274.50%($2,463,065,980)20284.50%($2,463,065,980)
Fiscal Impact by Fiscal Year
Fiscal YearGR Impact2026($1,057,476,328)2027($2,517,800,780)2028($2,463,065,980)FISCAL IMPACT – State
Government
FY 2026
(10 Mo.)
FY 2027FY 2028GENERAL REVENUE FUNDRevenue Loss - §144.126 - Income
tax deduction for certain professions($1,057,476,328)($2,517,800,780)($2,463,065,980)
ESTIMATED NET EFFECT ON
GENERAL REVENUE FUND($1,057,476,328)($2,517,800,780)($2,463,065,980)
FISCAL IMPACT – Local
Government
FY 2026
(10 Mo.)
FY 2027FY 2028$0$0$0
FISCAL IMPACT – Small Business
No direct fiscal impact to small businesses would be expected as a result of this proposal.
FISCAL DESCRIPTION
For all tax years beginning on or after January 1, 2026, this act provides that the first $100,000 of
income shall be subtracted from a taxpayer's federal adjusted gross income if the taxpayer is
employed as any of the following: 1) a first responder, 2) a nurse, 3) a teacher, 4) a veteran of
any branch of the Armed Forces of the United States, 5) any state employee, excluding elected
officials, 6) a laborer, 7) a commercial truck driver, 8) a nursing home employee, or 9) a child
care provider, as such terms are defined in the act. L.R. No. 2481S.01I
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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 DirectorMarch 30, 2025March 30, 2025