Speaking at a signing ceremony at Lenoir Woods retirement community Thursday, Gov. Matt Blunt praised lawmakers for cutting taxes on senior citizens’ Social Security benefits.
“This is about fairness,” he said. “Taxing Social Security penalizes years of hard work and sacrifice.”
Blunt said he felt the current tax on Social Security amounted to double taxation because Social Security benefits were drawn from the recipient’s payroll taxes.
The new law will eventually eliminate income tax on Social Security for virtually all of Missouri’s seniors, Blunt said.
Currently, individuals with an annual income of $25,000 or less pay no income tax on their Social Security benefits. For married couples, the cutoff is $32,000 a year.
The new law will increase the exemption threshold to $85,000 a year for individuals and $100,000 a year for couples. Individuals and couples with incomes above $85,000 and $100,000 respectively will be taxed on their Social Security benefits based on how much their income exceeds this threshold.
The complete exemption will not go into effect immediately. This year, only 20 percent of seniors’ Social Security benefits will be exempt from income taxation. That percentage will increase over the next six years until, in 2012, all Social Security income will be exempt. By that time, the cost of the tax cut is expected to be upwards of $150 million a year.
Public employees like school teachers, firefighters and police officers, who draw on a public pension rather than Social Security, will receive an identical exemption under the new law.
The bill was championed by Missouri House Speaker Rod Jetton, R-Marble Hill, who campaigned on bringing “tax justice” to senior citizens.
Supporters hope the tax cut will make Missouri a more attractive retirement destination for in-state as well as out-of-state retirees.
“We want all our senior citizens to stay right here close to home,” said Rep. Steve Hobbs, R-Mexico.
As previously reported by the Missourian, however, the incomes of most Missouri seniors are already low enough to qualify for full exemption.
Critics of the new law include the Missouri branch of the AARP and the Missouri Catholic Conference. They have argued that the lost revenue caused by the tax cut could have been spent on restoring cuts to state programs like Medicare and Medicaid that benefit seniors.
— The Associated Press contributed to this article.