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July 31, 2024Jefferson City, Mo. |  By: AP

Missouri to cut income tax rate in 2025, marking fourth straight year of reductions

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JEFFERSON CITY, Mo. (AP) — Missouri residents will get another tax cut in 2025, marking the fourth straight year of reductions.

Gov. Mike Parson’s administration said Tuesday that the top income tax rate will decline from 4.8% to 4.7% effective Jan. 1. The reduction is a result of a 2022 state law that set a series of revenue benchmarks capable of triggering tax cuts in future years.

When Missouri’s revenue figures for the 2024 fiscal year were released earlier this month, it was not immediately clear that they were high enough to cause a tax cut. But the formula also takes into account money set aside for savings, which helped Missouri reach the threshold.

Budget Director Dan Haug said the state made larger-than-usual transfers in the 2023 fiscal year to its constitutionally required savings fund and to a maintenance and repair fund for state facilities. That reduced the base-year revenue figure used in the tax-cutting formula, making the 2024 growth sufficient to trigger another rate reduction.

The top income tax rate was 5.4% before the series of gradual reductions began in 2022.