JEFFERSON CITY - Where to cut taxes rather than whether to cut is emerging as the dominate tax issue for Missouri lawmakers.
Gov. Mel Carnahan started the debate when he proposed that lawmakers cut the state sales tax one-quarter of a penny.
The urgency for a tax cut has been expedited by a tax surplus of about 150 million dollars above the amount the state is allowed to collect under the Hancock Amendment.
The governor's proposed tax cut was intended to eliminate or reduce Hancock tax refunds, which the administration says will cost more to calculate and implement than simply cutting the tax rate.
The state has "two options given the strength of the economy and the Hancock limitation," said MU Economist Edward Robb. "Continue at the current tax level and give back the excess, or reduce the amount of tax received. By mitigating the need to reduce the amount of taxes we're collecting, we won't have to refund at the end of the year," Robb said.
The governor's proposal would cut the sales tax rate from 4 percent to 3.75 percent. Consumers would save a penny for every $4 spent and it would cost the state about $150 million.
But once the governor opened the door to the idea of tax cuts, other ideas walked into the legislative halls.
One alternative to the governor's plan has been offered by Rep. Rich Chrismer, R-St. Peters, who has been campaigning for three years for a bill that would eliminate sales tax on food.
Chrismer said people will save more with his bill and the cost to the state will be the same as the governor's tax cut. In addition, Missouri would join 27 other states that exempt food from state sales tax.
"Under my bill, people can save up to four dollars per 100 dollars," Chrismer said. " With (the governor's) it would be 25 cents per 100 dollars. Rich people save more under the governor's tax cut, but my tax break is for all citizens of the state of Missouri."
But House Ways and Means Committee Chairman Ken Jacob, D-Columbia, disagreed.
"It costs too much money to do," Jacob said of the food exemption bill. "That's the major problem with it. And under the governor's bill, everyone benefits the same. It doesn't favor anyone, it's across the board. The more money you spend, the more disposable income you have."
Sen. Frank Flotron, R-St. Louis County, has proposed a similar bill that would exempt food from sales tax and increase tax deductions for dependent children and elderly.
Another tax cut bill sponsored by Rep. Russell Gunn, D-St. Louis County, proposes a sales tax exemption on clothing that costs less than $1,000.
"I'm trying to get some relief for people who have to buy clothes," Gunn said. "They are a basic need. Other states, including New Jersey, Delaware and Minnesota don't have sales tax on clothes. It would benefit everybody."
In addition to giving families a break when buying clothes for growing children, Gunn said the bill might bring the price of some clothing down.
Meanwhile, scores of other, lesser known tax cut bills wait in the wings for a chance to be heard in the legislature.
"They could vote for both mine and the governor's bills, but I'm not going to hold my breath," Chrismer said.
Indeed, the administration throws cold water on that idea.
The administration's budget director, Mark Ward, said the governor's two measures are estimated to cost $150 million -- the amount of the tax surplus -- but that the state would not be able to handle any additional tax cuts.
The proposal "does not take into account any other tax cuts," Ward said. "If there are other proposals, discussion centers on one or the other but not both."
Meanwhile, there's been a hint from Republicans they may propose an income and corporate tax cut by eliminating the education tax increases passed a couple of years ago.
Republicans charge it's that tax increase package, pushed by the governor, which has brought state revenues above the Hancock limit.
"It's inaccurate to call it (the governor's tax cut plan) a tax cut bill," Flotron said. "It's really a tax shift. We would have had to make refunds on income tax and this would curtail that. It's political spin doctoring."
When the governor's bill was presented to the House Ways and Means Committee last month, Republicans argued that a tax cut never would have been needed if the Democratic governor had not increased taxes in 1993.
"Sometime soon, it'll be time for us to propose a vote on (the 1993) tax increase," said Flotron, the Senate Republican leader.
"It's made a number of people angry for a long time and I believe we ought to put it to the people for a vote."
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