JEFFERSON CITY (AP) – Republican Gov. Mike Parson signed an income tax cut into law Wednesday.

While signing the income-tax-cut legislation Wednesday, Missouri Gov. Mike Parson said the estimated $760 million reduction, when fully phased in, will be “the largest tax cut in the state’s history.”

“While Washington D.C. politicians ignore record inflation and skyrocketing consumer prices, we won’t make the same mistake here in the State of Missouri,” Parson said. 

Under previous law, Missouri’s top individual income tax rate already was scheduled to fall from 5.3% to 5.2% in January, with the potential to gradually drop to 4.8% if revenue-growth triggers were met in future years. The new law will cut the tax rate to 4.95% in January and exempt the first $1,000 of income from taxation. The tax rate could drop to 4.8% as soon as 2024, if state tax revenue grows by at least $175 million over the high mark of the previous three years.

Missouri’s new law also authorizes three additional annual tax cuts that could eventually reduce the tax rate to 4.5%. Each reduction would occur only if state revenue grows by an inflation-adjusted $200 million over the high mark of the previous three years, while also exceeding an inflation-adjusted baseline.

Some lawmakers have previously argued the tax cut is for the wealthy, but Parson said Wednesday it’s fair. 

“Is the number going to be larger because you make more money?,” Parson said. “Yes, but the percentage is the same. You’re paying more taxes at that level.”

About two-thirds of U.S. states have adopted some sort of tax relief this year. The tax-cut trend has been fueled by record state surpluses and large growth in state revenues after an initial downturn during the coronavirus pandemic. Missouri became the latest state to act.

“With the largest general revenue surplus in state history, and collections increasing by nearly 15% year over year, now is the time to give back to Missourians, time to give back some of their hard-earned money,” Parson said. 

Parson said the cuts amount to a 5% reduction in people’s taxes. The nonprofit Missouri Budget Project estimates that a household earning $30,000 annually would save $17 next year, and $29 once the law is fully phased in. For a household earning $152,000 annually, first-year savings would be $348 and eventual savings would reach $759.

According to the governor’s office, for a Missourian making $35,000 a year, he or she is estimated to save $141. For a single adult bringing home $25,000 a year, they can expect a tax cut of $115 whereas someone making $40,000 a year would save $170. Those earning around $75,000 a year would save $324. 

“The Republican majority should be sending a very big thank you card to President Biden,” said Senate Minority Leader John Rizzo. “He has provided the surplus that has allowed them [Republicans] to do the tax cut. We aren’t even in a special session if it’s not for the federal dollars that Joe Biden provided to the state of Missouri and the Democratic Congress.”

Rizzo’s counterpart in the House said this money should have been used to invest in state workers and the cut in unnecessary. 

“This will have a devastating impact on the state’s treasury that will take the state years to recover from and all to give an unnecessary, election year, tax cut to the wealthy,” said House Minority Leader Crystal Quade, D-Springfield. 

Parson also signed a law Wednesday authorizing $40 million of annual agricultural tax breaks benefiting meat processing facilities, urban farmers and biofuel retailers, among others.

“Agriculture needs to be treated like everybody else, and it’s a very difficult time when you look at what agriculture has been through over the last several years on just the cost of doing business,” Parson said.

Earlier this year, the governor vetoed similar legislation because it had a two-year sunset to the tax credits, which he said was too short. 

“Two years was simply not enough time for programs to remain effective, business plans to be crafted or, let alone, projects to be completed,” Parson said. 

Under the bill Parson, a farmer himself, signed Wednesday, the 10 agriculture tax credits were reauthorized for farmers and ranchers for six years.