Tax cap difficult to calculate

JEFFERSON CITY, Mo. -- Voters gave overwhelming approval six years ago to a constitutional amendment limiting the amount of tax and fee increases that lawmakers can impose annually.

That's part of the reason that a $483 million increase in the state sales and fuel taxes is on the November ballot. Even if lawmakers had wanted to impose it themselves, the tax increase far exceeded the constitutional limit and would have triggered a statewide vote.

Yet calculating the tax limit has seldom proved so simple.

In fact, there is no official calculation of what the limit is each year. Nor is there an official calculation of the total amount of tax and fee increases approved annually by the legislature.

But there is an official explanation: "It's a calculation that has never needed to be performed, because no one has suggested we've come close to violating or exceeding" the limit, said Brian Long, director of the state Division of Budget and Planning.

Quickly gets complicated

An unofficial calculation by The Associated Press shows that lawmakers approved around $71 million in higher taxes and fees during the 2002 session, including a new tax on pharmacies and higher fees for vehicle and driver's licenses.

At first glance, that would appear to be above the $50 million limit established in the voter-approved constitutional amendment.

But that's where the complicated calculations begin.

The amendment allows the tax cap to be adjusted annually by the percentage change in personal income in Missouri.

Accounting for such inflation, Long's office determined that the $50 million cap in 1996 equals about $70 million today -- coincidentally about the same size as this year's tax and fee increases.

Yet the calculating continues.

Under the constitutional amendment, the revenue from new taxes and fees are to be offset by "all contemporaneously occurring tax or fee reductions in that same fiscal year."

When some lawmakers inquired about the constitutional tax limit this past session, Long's office said at least two major tax deductions (both linked to federal law) should be included in the calculation.

A federal economic stimulus package allowed businesses to claim income tax writeoffs more quickly -- a provision that was estimated to reduce state taxes by $58 million because the state tax code is linked to the federal ones.

State tax revenue were estimated to fall another $29 million because lawmakers last September decided to exempt from state income taxes a special batch of federal tax rebate checks.

The constitutional amendment does provide one clear-cut route for determining if the state has exceeded its annual tax limit -- a lawsuit could be brought by any taxpayer and heard by the state Supreme Court.

So far, no one has sued.