Reducing individual income tax rates on the basis of excess general fund tax collections. (FE)

2. For taxable income exceeding $7,500, but not $15,000, 5.21 percent.

3. For taxable income exceeding $15,000, but not $225,000, 6.27 percent.

4. For taxable income exceeding $225,000, 7.65 percent.

Under current law, the tax rates in each bracket for married persons filing jointly and married persons filing separately are the same, but the dollar amounts in each bracket vary. The bill decreases the tax rate for each type of taxpayer as follows:

1. The rate in the first bracket is decreased to 2.15 percent.

2. The rate in the second bracket is decreased to 2.85 percent.

3. The rate in the third bracket is decreased to 3.20 percent.

4. The rate in the fourth bracket is decreased to 4.50 percent.

Tax rates after 2022 Under the bill, if the amount of taxes submitted to the Department of Revenue and deposited into the general fund in any taxable year after 2022 exceeds the estimated amount of such taxes for the corresponding fiscal year under the biennial budget act, DOR must determine how much the individual income tax rates in each tax bracket will be reduced for the next taxable year in order to decrease individual income tax revenue for that taxable year by the excess amount. The bill requires DOR to reduce the individual income tax rates listed in each bracket in proportion to the share of gross tax attributable to each of the tax brackets. The change in the tax rates must carry forward to subsequent taxable years.

Under the bill, DOR must certify and report the change in the tax rates to the Department of Administration, the governor, the Joint Committee on Finance, and the Legislative Audit Bureau. If LAB arrives at a different calculation of the tax rates than that determined by DOR, JCF decides which tax rates apply for the next taxable year.

Under current law, if the amount of moneys projected to be deposited in the general fund during the fiscal year that are designated as “Taxes" in the summary of the biennial budget act is less than the amount of such moneys actually deposited in the general fund during the fiscal year, the DOA secretary must deposit 50 percent of the excess amount into the budget stabilization fund. However, the secretary is not required to make the transfer if the balance of the budget stabilization fund on June 30 of the fiscal year is at least equal to 5 percent of the estimated expenditures from the general fund during the fiscal year. Under the bill, the DOA secretary does not transfer moneys to the budget stabilization fund in any fiscal year corresponding to the taxable year in which an individual income tax rate reduction takes effect, as provided under the bill. In addition, no tax rate reduction made under the bill may cause the general fund balance on June 30 of the fiscal year corresponding to the taxable year to be less than the general fund balance that is required under current law for that fiscal year.

Because this bill relates to an exemption from state or local taxes, it may be referred to the Joint Survey Committee on Tax Exemptions for a report to be printed as an appendix to the bill.