Holden signs tax rebate measure

JEFFERSON CITY, Mo. -- Missourians who received tax rebates from the federal government won't have to pay state taxes on the money under a bill signed Tuesday by Gov. Bob Holden.

Holden, who made the tax issue part of a special legislative session last month, had urged lawmakers to pass the one-time tax exemption.

There was little opposition to the bill during the special session, identical House and Senate versions which were signed by the Democratic governor in his Capitol office.

"I'm pleased that by this legislative action, we have now ensured that all taxpayers receive the full benefit of the federal rebate," Holden said.

The federal government sent rebate checks of up to $300 to individuals, $500 to heads of households and $600 to married couples.

Had legislators not exempted the checks from taxes, the rebates would have triggered an extra state tax of $18 per individual, $30 per head of household and $36 per couple.

That's because the Missouri income tax code -- and those of nine other states -- treats federal income taxes as a deduction. With lower federal taxes, there is less to deduct from state taxes, meaning a higher state tax bill.

Sen. Michael Gibbons, R-Kirkwood and a bill sponsor, said that given uncertainty over the economy after the terrorist attacks, the law will provided needed relief.

"This is important legislation particularly in these days when we are battling for freedom," Gibbons said.

The tax breaks to Missourians, however, will mean a revenue loss to Missouri's government.

During the state fiscal year that began in July, Missouri government would have taken in anywhere from $29 million to $33 million in new taxes because of the federal tax rebate.

But Holden said he did not want Missourians to face a heavier tax burden.

"I did not feel it was right to balance the state budget on the backs of Missouri's working families," Holden said.

The bill was the last of three passed by lawmakers and signed by Holden.

Also making it into law was a bill creating a new prescription drug plan for elderly Missourians and another revising a contentious livestock pricing law.

\The Missouri Chamber of Commerce praised Holden and lawmakers for getting the legislation passed.

"We are encouraged that the majority of Missouri lawmakers saw fit to allow the first phase of President Bush's tax relief package to work in the manner for which it was intended -- to stimulate the economy -- not fill the state's coffers," said Dan Mehan, chamber president.