Retirees want to stem Social Security strain

Wednesday, January 31, 2007 | 12:00 a.m. CST; updated 8:35 p.m. CDT, Sunday, July 20, 2008

JEFFERSON CITY — John Hartman has been paying into Social Security since 1939, not long after the program’s inception in 1935. Now that he’s receiving the retirement benefit, he wants to stop paying state income tax on it.

“I think that Social Security is one thing we should eliminate the taxes on,” Hartman, who is involved with the Association of Retired Missouri State Employees, told a special House committee on tax reform Tuesday. “This would be a big help to us.”

Hartman was one of several who testified to the committee Tuesday afternoon in support of a number of House bills that would reduce or entirely eliminate state income tax on Missourians’ Social Security benefits. Exempting $100 million in Social Security taxes was a central recommendation of Gov. Matt Blunt’s tax cuts in the 2008 budget, which he presented last week in his State of the State address.

But several of the bills being considered, including one sponsored by the committee’s chairman, Bryan Stevenson, R-Webb City, would cut much more than the governor proposed. Stevenson wants to cut $275 million, while a measure from Rep. Bob Nance, R-Clay and Ray counties, would send back at least $120 million in taxes to Social Security recipients.

“I don’t think the governor took it far enough,” Stevenson said. He expects the bills to be voted on by the committee next week.

When asked whether Blunt would be willing to accept higher tax cuts, spokeswoman Jessica Robinson said, “The governor is willing to work with the General Assembly within the confines of a balanced budget.”

Although there is bipartisan backing among the committee’s members for cutting Social Security taxes, they heard nearly twice as much resistance to the idea than support.

Debate between committee members and the opposition often touched upon the philosophical issues surrounding the role of government in providing for the welfare of the people, as well as the question of who is in the best position to decide how a dollar is spent: the state or citizens.

Opponents argued that the tax cuts would primarily benefit the affluent.

“The big beneficiaries here are what I would regard as wealthy folks,” said Tom Kruckemeyer, an economist with the Missouri Budget Project.

Kruckemeyer argued that spending on education and restoring cuts in Medicaid should be a higher priority.

But Rep. Edgar Emery, R-Lamar, took issue with Kruckemeyer’s support for “redistribution of income.”

“Can you explain to me, as an economist, how that fits into the concept of capitalism?” Emery asked.

“By providing adequate health care, providing adequate education (and) adequate infrastructure, we foster ... a healthy work force that allows a capitalist economy to thrive and prosper,” Kruckemeyer responded.

The tension between cutting taxes and funding state programs led committee member and freshman Rep. Jason Grill, D-Parkville, to seek a balance between priorities.

“I want to restore Medicaid cuts and other services, but at the same time double taxation is something we shouldn’t be doing,” he said in an interview after the meeting.

Committee Democrat Jason Holsman, D-Jackson County, said that he would like to see amendments to the current bills that would allow only those who earn $75,000 or less to exempt Social Security from state income tax.

Competing bills before the committee would exempt all Social Security benefits as well as pensions for veterans, teachers and some state workers, while other proposals limit the exemption only to Social Security.

According to statistics provided at the meeting by the Institute for Tax and Economic Policy, seniors with at least $27,000 per year in income would receive some tax relief if Social Security taxes are eliminated. Those earning less than that are already exempt from paying the tax.

The committee did not take immediate action on the measures; however, the committee chairman said he expects a vote to be taken next week.

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