Cuts aren't needed

By Robert Fulton

The Missouri House of Representatives recently approved House Bill 444, which would eliminate Missouri's income tax on Social Security benefits. Speaker Rod Jetton of Marble Hill, Mo., state Sen. Jason Crowell of Cape Girardeau and state Rep. Steve Tilley of Farmington, Mo., have advocated vigorously for this change. On its way through the House the bill was loaded up with other tax cuts so that even Speaker Jetton says final passage in its current form would damage state finances too much.

Let us hope that the Senate rejects not only the provisions that were added to the original bill, but also the provisions dealing with income taxation of Social Security benefits. This is a needless giveaway of revenue Missouri needs to restore and maintain services.

I am a retired taxpayer whose income includes Social Security payments. In working recently on my own tax returns, I have been reminded of just how badly Jetton and other local legislators are misleading the public on the issue of taxation of Social Security benefits. They argue that such benefits have already been taxed by the state. This argument apparently is based on the fact that Social Security (FICA) taxes are not deductible on federal or state income-tax returns. This was taken into account, however, when federal law was changed in 1983 to include Social Security benefits in taxable income. As Missouri's income taxes piggyback on the federal tax system, the same features that apply at the federal level also apply to Missouri's income taxation of those benefits.

First off, there is no federal or state income tax for any single individual whose income from sources other than Social Security plus one-half of his or her Social Security benefit is less than $25,000. For married couples the threshold for taxation of Social Security benefits is $32,000, consisting of one-half of Social Security benefits plus all income from other sources. Once it is determined that the taxpayer is subject to income tax on his or her Social Security benefits, 15 percent of the payments received from Social Security are disregarded. The inclusion of 85 percent of Social Security payments in the taxable income of those whose income reaches the thresholds discussed above recognizes the fact that the amount of Social Security taxes paid by the average Social Security recipient were only a small fraction of the total benefits he or she will receive.

These existing policies assure that no one who depends exclusively, or even primarily, on Social Security pays any federal or state income taxes on Social Security benefits.

An independent analysis by an established think tank indicates that at least 45 percent of Missourians receiving Social Security benefits will not benefit at all from the change in law being advocated by Jetton and his colleagues. Those who benefit in any significant way will all be senior citizens who have total incomes well above average.

In short, contrary to what they are saying, our legislators are about to cripple the state's finances by giving money back to citizens who are not struggling to pay for food, utilities and other basic needs.

Two years ago these same local legislators and their allies pushed through drastic cuts in the Medicaid program that deprived over 100,000 needy Missourians of medical care. Our legislators like to boast that they saved big bucks by getting rid of waste, fraud and abuse in the Medicaid system. The truth is that almost all of the savings came from knocking needy people off the eligibility rolls.

With the state now apparently having a temporary surplus, it would be far better for the legislature to restore some of the unwise and unnecessary cuts it made in 2005 than to give a windfall to our more well-off senior citizens.

Another better use for the surplus money would be to put it in a rainy-day fund for use in the future when revenue falls short because of economic conditions.

Robert Fulton is a Patton, Mo., resident.