Taxing issue

Thursday, August 23, 2007

A change in Missouri's tax laws has raised the ire of some Kansas politicians, including that state's governor, Kathleen Sebelius. In this year's session, Missouri legislators repealed a deduction for out-of-state residents who work in Missouri, which allowed taxpayers to deduct the property taxes they pay on their out-of-state homes when they itemized their Missouri income taxes. Kansas, like some other nearby states, allow a similar deduction for Missourians.

A good number of Kansans work in Kansas City, St. Joseph and Joplin in Missouri and have taken advantage of the deduction. But across the state, Illinois residents who work in Missouri have enjoyed the tax break while Missourians who work in Illinois have not. Legislators this year decided to eliminate the deduction across the board, putting the state on equal footing with Illinois but upsetting the deduction trade-off with Kansas.

Gov. Matt Blunt has responded to the Kansas governor with a pledge to seek a repeal of this year's change. But legislative leaders -- both Democrats and Republicans -- say they aren't sure they want to reverse what they've done.

Key to the issue is the fact that, while Missouri would gain an estimated $11 million in revenue and Kansas would lose about $5 million because of this year's change in the Missouri law, Kansas taxpayers would wind up paying the same total tax bill. Kansans who pay more Missouri tax would see offsetting reductions in their Kansas taxes.

Rather than legislative sniping, it might be best for officials from both states -- and other states with similar arrangements -- to hash out this issue and come up with a plan that treats taxpayers in all states the same. Under such a system, taxpayers who choose to live in one state and work in another would know exactly what the consequences are.

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