EXEMPT FEDERAL REFUND FROM MISSOURI TAX BITE

Missouri political leaders seem to be united, or nearly so, in their approach to one issue: The federal rebate checks coming later this summer to income-taxpayers shouldn't be subject to state taxes.

Gov. Bob Holden committed to this position week before last, joining key Senate Republicans who had already spoken out against the likelihood of such taxes.

A federal tax cut signed into law by President Bush recently will send $300 to $600 refunds to most Missourians' mailboxes later this summer. But that rebate could be subject to a state income-tax slice of $18 per person and $36 per couple. This is because Missouri's income-tax code, along with 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. During the state's fiscal year 2002 that begins Sunday, the state would take in $29.1 million in new taxes because of the federal refund, according to the Holden administration.

Holden now says he will likely add this subject to the call he will issue concerning the special legislative session he is calling in September. He had previously stated his intention to call lawmakers into special session at the time of their September veto session to consider the issue of prescription drugs for seniors. He says he has directed his legal staff to look into the matter and see how the rebates might be exempted from state taxes.

This is all to the good. A long-awaited and much deserved federal tax cut, the crown jewel of Bush's first year in office, shouldn't be the occasion for a backdoor state tax increase yielding only $29 million to the state -- a drop in the bucket when measured against a $19 billion state budget.

We hope the governor and lawmakers can get together and quickly agree on steps to make sure these rebate checks are exempted.