Oops! Missouri Department of Revenue Director Joel Walters said last year that the state's tax withholding tables had been wrong for at least 15 years. He ordered changes to tables to prevent taxpayers from withholding too much money.
On Wednesday, he said that was all a mistake. There was no error, he said, leaving some state lawmakers to question if the state's handling of taxes can be trusted.
Walters told the House Special Committee on Government Oversite that new State Treasurer Scott Fitzpatrick explained to him the error didn't exist, The Columbia Daily Tribune reported.
Walters had previously testified several times to the Legislature that the state's withholding tables didn't correctly account for the standard deduction — the amount of income taxpayers can subtract before income tax— in calculating the federal income tax deduction. Walters said the withholding error had been discovered in September after existing for at least 15 years.
Walters ordered changes to the tables that he believed would reduce the impact of taxpayers withholding too much. The change went into effect in October 2018.
"It felt like in my judgment making that formulaic change made this more accurate," Walters said. "I was trying to do the right thing and I was trying to make the calculation more accurate."
The state issued new withholding tables, reflecting lower state income tax rates and inflation-adjusted brackets, on Jan. 1, so the issue is gone now, he said.
Walters said he wasn't sure why some taxpayers are seeing large swings in their state tax costs, and said the department should determine why that is happening. The agency has told all the major tax preparation software companies to remove penalties in those situations.
Wednesday was Walters' third meeting with the government oversight committee and 11th testimony overall, which caused Gov. Mike Parson last week to criticize lawmakers for "grandstanding" on the issue and to praise Walters for his handling of it. The governor's statement had upset many lawmakers.
"It certainly appears to me that the story has been changing," Republican Rep. Dirk Deaton said Wednesday. "That is problematic."
The state expects to issue $231.5 million less in refunds and collect $134.4 million in increased payments from taxpayers. The department has processed roughly 1 million tax returns since filing began in January. The average tax refund is down $78 and the average tax due is up $65, Walters said.
Deaton asked Walters if he was completely confident nothing else in the tables was causing problems. Walters said he could not say that, even though the department and outside sources have reviewed the tables multiple times.
To meet Parson's proposed budget for fiscal 2020, tax receipts must grow 1.7 percent over the year ending June 30. Through Wednesday, receipts are down more than 5 percent, said Democratic state Rep. Kip Kendrick.