The tax cut aimed at senior citizens ballooned during House debate, and Gov. Matt Blunt is counting on the Missouri Senate to pare it back closer to its original $110 million annual price tag.
At a news conference and rally Saturday at the Cape Girardeau Senior Center, Blunt was joined by House Speaker Rod Jetton, R-Marble Hill, and other area legislators in urging support for the proposal. Blunt wants to remove Social Security benefits from calculations of taxable income.
But he also cautioned that the measure needs a lower cost. If passed in its current form, the tax cut would reduce state revenue by $286 million the first year and by $301 million annually by 2010.
"I am here to talk about the initial objective," Blunt said to reporters and about 30 older residents gathered at the center. "That is close to where we need to end up."
A Senate hearing on the bill is scheduled for Monday in Jefferson City.
Blunt began the legislative session by endorsing a proposal to eliminate the state income tax on Social Security benefits. The measure was expanded to include all benefits received from a public retirement system, such as teacher and railroad retirement, that does not allow recipients to receive full Social Security payments, as well as the first $6,000 of income from individual retirement plans.
Including teachers in the proposal is fair, Blunt said, because many teachers receive reduced Social Security payments because of their teaching pension. But the other provisions should wait, he said.
Missouri has a budget surplus of more than $500 million. Ending the tax on Social Security benefits is an affordable tax cut and a matter of fairness, Jetton said.
"To some people, it is just a tax cut to help rich old people," Jetton said. "That is wrong. Rich or poor, imposing taxes on the same money twice is wrong."
Missourians receiving Social Security pay income tax on half of their benefits if their income is above $25,000, or above $32,000 for married couples. For individuals with incomes above $32,000. the tax is based on 85 percent of Social Security benefits.
While most of the 30 senior citizens attending the meeting voiced support for the tax cut, Dorris Huey sharply questioned Blunt about whether it is needed. "This is basically going to benefit the rich, isn't it?" Huey said. "This tax cut is not going to help people who make under $32,000 a year."
Sen. Jason Crowell, R-Cape Girardeau, will be handling the bill when it moves to the Senate. The state needs to take steps to keep retirees from moving elsewhere, he said,
"When you tax retirement benefits after you have worked your whole life, it is wrong," he said.
To push the Senate to pass the tax bill, Blunt asked the senior citizens on hand to sign a petition calling for the cut. One who was glad to sign was 78-year-old Glenn Reeves, owner of Horizon Screen Printing Inc.
Some opponents of the tax cut have called for the money to be spent restoring state college and university budgets to their levels of 2001. Others have said the money should be used to restore cuts in Medicaid, the health-care program for the poor funded by state and federal tax money. To close a budget shortfall, Blunt and Republican lawmakers imposed dramatic cuts in benefits and coverage for Medicaid in 2005.
Those are all worthy programs, but with state coffers bulging, money needs to be returned to the people, Reeves said.
Taxes not withheld
As she was waiting for Blunt's arrival, Charline Caldwell said the tax bite for her Social Security benefits means she must write a substantial check every April 15. Tax liabilities for Social Security are not deducted from the payments, unlike taxes withheld from regular paychecks.
"Everything else goes in the other direction and doesn't support senior citizens who are trying to pay their own bills," Caldwell said.
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