Missouri House endorses bill that would cut state income taxes

Wednesday, April 22, 2009 | 7:14 p.m. CDT

JEFFERSON CITY — The Missouri House on Wednesday endorsed a proposed income tax cut that could total hundreds of millions of dollars.

The legislation lowers the top income tax rate for middle-income earners, increases the deduction for people with children and raises the maximum amount of federal taxes that can be deducted on a Missouri return.

The House gave the bill first-round approval Wednesday on a voice vote. It needs another vote to move to the Senate. There are about three weeks left in the legislative session.

Currently, Missouri income over $9,000 is taxed at a 6 percent rate. The legislation reduces the rate by one-half percentage point for people with incomes up to $50,000. Incomes higher than that ceiling would still be taxed at 6 percent.

The legislation also would allow people to further reduce the amount of their income that is taxable. It would increase Missouri's current $1,200 deduction per child to $1,600.

Taxpayers also would be able to deduct more of their federal income taxes from their Missouri taxable income. Single taxpayers could deduct up to $7,500 in federal taxes rather than the current $5,000. Married taxpayers could deduct $15,000 instead of the current $10,000 in federal taxes.

A fiscal analysis by legislative staff shows the cuts could reduce state tax revenues by $360 million annually, starting in fiscal year 2011 when the cuts kick in.

But sponsoring Rep. Scott Lipke, R-Jackson, says analysts have told him the bill's actual cost is roughly $180 million. Even so, he argued cutting taxes stimulates economic activity that ultimately would generate more tax revenue.

"The idea is to put more money back in the pockets of taxpayers who earned it," Lipke said. "Without a doubt it's going to come back around through sales taxes or income taxes."

Democrats said the bill comes during a lean budget year when many state programs are facing cuts. They said cutting so much in taxes would be imprudent because it could endanger state funding for services such as public schools.

"There are so many things we do with our tax dollars that make the quality of our life better," said Rep. Jeanette Mott Oxford, D-St. Louis. "This is a big hit to the tax revenue to our state at a time when we're already underfunding many critical programs."

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