Missouri Department of Revenue officials may have violated the law when they adjusted the state’s income tax withholding tables once again earlier this year, according to a report from state Auditor Nicole Galloway.
The January adjustment came after two prior adjustments in response to the federal tax cuts that took effect last year.
“The decision to take more money out of paychecks without going through the legally required process shows a clear pattern of mismanagement,” Galloway said in a statement. “It should be simple: follow the law, get it right and stop misleading taxpayers.”
The audit cites a state law that requires officials to tell the General Assembly and the public when they make changes to the income tax withholdings formula.
But after an appearance in Kansas City, State Treasurer Scott Fitzpatrick said that the law was outdated and that department officials were upfront about the changes.
“If the department would have complied with their own regulation, the withholding problem would have been much, much worse,” Fitzpatrick said. “They were complying with the law, and the regulation that they had on the books just wasn't up to date with the changes to the tax code. And so I know that they're working on adjusting that now.”
The audit also criticizes the agency for its handling of the situation, saying officials kept taxpayers in the dark. Revenue Director Joel Walters resigned last month after months of intense criticism from lawmakers over the issue.
The withholding adjustments have been blamed for contributing to a drop in state revenues, which are down 3.96% year-over-year as of April 1. But that number continues to improve as more people file tax returns. Revenues were down 5% just days ago.
“I think that the trends are going in the right direction,” Fitzpatrick said. “I don't know that we'll hit the consensus revenue estimate necessarily, but I think we're moving back towards a neutral place.”
MO ABLE Program Grows
Fitzpatrick was in Kansas City for events surrounding Financial Literacy Month and the MO ABLE program. MO ABLE is a savings and investment program for individuals with disabilities. With 984 members, Missouri’s program is one of the largest in the country.
“We have some of the friendliest tax treatment on the program of any state,” Fitzpatrick said “You can get a $16,000 deduction for contributions you make if you're married filing jointly and $8,000 if you're single.”
Fitzpatrick hopes the program reaches 1,000 members by the end of the month, even though it does not have the marketing budget of Missouri’s 529 College Savings Plan. The program was made possible by the federal Achieving a Better Life Experience (“ABLE”) Act.
Samuel King is the Missouri government and politics reporter at KCUR 89.3. Follow him on Twitter: @SamuelKingNews