Legislature passes tax rebate legislation

JEFFERSON CITY, Mo. -- With little opposition, the state Legislature voted Friday to exempt Missourians' federal tax rebates from being taxed by the state.

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

"The state of Missouri has suffered economic downtown. But also, the citizenry of Missouri has suffered economic downtown. This will help," said Rep. Harry Kennedy, D-St. Louis, the House sponsor of the bill.

Sen. Michael Gibbons, R-Kirkwood, said nine out of 10 Missouri individuals and three out of four couples will benefit from the legislation.

"I think we're doing the right thing," Gibbons said. "We should never have put our citizens in a position of having to suffer a tax increase because of the actions of the federal government"

The federal government is sending rebate checks of up to $300 to individuals, $500 to head of households and $600 to married couples.

Had the Legislature failed to act, it would have meant an additional state income 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 seven 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.

Kennedy said he would donate his extra $18 to victims of the terrorist attacks in New York and Washington, D.C.

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.