HCS HB 444, 217, 225, 239, 243, 297, 402 & 172 -- INCOME TAX
DEDUCTION FOR SOCIAL SECURITY BENEFITS

SPONSOR:  Stevenson (Jetton)

COMMITTEE ACTION:  Voted "do pass" by the Special Committee on
Tax Reform by a vote of 8 to 0.

Beginning January 1, 2007, this substitute authorizes an income
tax deduction for Social Security benefits, Social Security
disability benefits, or benefits received from a retirement
system in lieu of Social Security for individuals 65 years of age
or older, regardless of income.

FISCAL NOTE:  Estimated Cost on General Revenue Fund of
Approximately $131,120,215 in FY 2008, Approximately $135,129,524
in FY 2009, and Approximately $138,133,245 in FY 2010.  No impact
on Other State Funds in FY 2008, FY 2009, and FY 2010.

PROPONENTS:  Supporters say that the bills provide a deduction
for Social Security benefits received regardless of income and
include Social Security disability and other pensions when the
individual was not allowed to participate in the Social Security
system.  Examples include teachers retirement, railroad
retirement, local police and fire departments throughout
Missouri, and some other local government employees
(approximately 42,000 taxpayers).  The taxpayers have already
paid taxes on their contributions.  When the federal government
started taxing benefits in 1982, only 8% of Missouri's population
was being taxed.  Now, 32% are taxed on their Social Security
benefits in Missouri.

The bills eliminate the income tax on some retirees' benefits.
There is active recruitment by some states to lure retirees to
locate in other states.  A state's tax burden is one of the top
three reasons to move to a state.  Since many patients with
kidney failure receive disability benefits through the Missouri
Medicaid or federal Medicare programs, which pay 80% of medical
costs, this deduction will help them.  Social Security benefits
have not increased as much as the cost of health care.

Testifying for HB 444 were Representative Jetton; Association of
Retired Missouri State Employees; Thomas Gerald Thompson;
Missouri Association of Veterans Organizations; American Legion,
Department of Missouri; Missouri Kidney Program; and Veterans of
Foreign Wars of the United States, Missouri Department.

Testifying for HB 217 were Representative Stevenson; Association
of Retired Missouri State Employees; Thomas Gerald Thompson;
Missouri Association of Veterans Organizations; American Legion,
Department of Missouri; Missouri Kidney Program; and Veterans of
Foreign Wars of the United States, Missouri Department.

Testifying for HB 225 were Representative Nance; Association of
Retired Missouri State Employees; Thomas Gerald Thompson;
Missouri Association of Veterans Organizations; American Legion,
Department of Missouri; Missouri Kidney Program; and Veterans of
Foreign Wars of the United States, Missouri Department.

Testifying for HB 239 were Representative Cooper (158) for
Representative Bruns; Association of Retired Missouri State
Employees; Thomas Gerald Thompson; Missouri Association of
Veterans Organizations; American Legion, Department of Missouri;
Missouri Kidney Program; and Veterans of Foreign Wars of United
States, Missouri Department.

Testifying for HB 243 were Representative Wells; Association of
Retired Missouri State Employees; Thomas Gerald Thompson;
Missouri Association of Veterans Organizations; American Legion,
Department of Missouri; Missouri Kidney Program; and Veterans of
Foreign Wars of United States, Missouri Department.

Testifying for HB 297 were Representative Flook; Association of
Retired Missouri State Employees; Thomas Gerald Thompson;
Missouri Association of Veterans Organizations; American Legion,
Department of Missouri; Missouri Kidney Program; and Veterans of
Foreign Wars of the United States, Missouri Department.

Testifying for HB 402 were Representative Denison; Association of
Retired Missouri State Employees; Thomas Gerald Thompson;
Missouri Association of Veterans Organizations; American Legion,
Department of Missouri; Missouri Kidney Program; and Veterans of
Foreign Wars of the United States, Missouri Department.

Testifying for HB 172 were Representative Cooper (158);
Association of Retired Missouri State Employees; Thomas Gerald
Thompson; Missouri Association of Veterans Organizations;
American Legion, Department of Missouri; Missouri Kidney Program;
and Veterans of Foreign Wars of the United States, Missouri
Department.

OPPONENTS:  Those who oppose the bills say that this deduction
for Social Security looks very appealing until you look at who
will benefit.  Anyone whose income falls below the income limits
of $25,000 for single and $32,000 for married receives no benefit
from the bills; 46% are already exempt.  Another 42% would
receive only a modest tax savings of $3 to $195.  The bills
benefit the wealthy.  At least $100 million annually will be lost
from this deduction when the funds could be better used for
poorer seniors in Missouri.  The state could better use the funds
by removing the 1% sales tax on food and providing more funding
for the Meals on Wheels Program.  This surplus could be one-time
money; and therefore, permanent major tax cuts should not be
considered now.  The 3% raise scheduled for state employees is
not enough.  Elementary and higher education, health care
coverage including mental health, and increased circuit breaker
credits are of higher priority than a pension deduction for the
wealthiest 11% of the senior population.  Restoring amounts cut
from the budget for agriculture and corrections is also
important.  The three most important qualities of a tax system
are fairness, adequacy, and sustainability; and these bills do
not meet these criteria.

Testifying against all the bills were Fredricka Lainoff; Missouri
Budget Project; Missourians for Tax Justice; Kelly Davis;
Missouri Association for Social Welfare; Tax Justice for a
Healthy Missouri; Missouri National Education Association; Dr.
Rea Beck; AARP; and Jerry Howard.

Missouri House of Representatives
94th General Assembly, 1st Regular Session
Last Updated July 25, 2007 at 11:19 am