Mo. lawmakers seek to end tax break for poor

MO State Wire
Published: Yesterday

JEFFERSON CITY, Mo. (AP) – The downturn in the economy already had cost Kim Ellis more than half of her clients at her small janitorial business. Her troubles were doubled by her vehicle, which after nearly 300,000 miles had saddled her with thousands of dollars in repairs and cast doubt on her ability to work.

Thanks in part to a $750 state tax credit for certain low-income residents, Ellis has at least solved her transportation problem. She used the money from the state income tax break to pay the sales taxes and licensing fees on the purchase of a newer, used car.

"It helped me quite a bit," Ellis said, "and I would hate for them to take it away."

Yet during a special session that starts Tuesday, Missouri lawmakers are poised to repeal the low-income tax credit that benefits at least 106,000 disabled and elderly residents living in rental housing. The move could save the state $855 million over 15 years, and some lawmakers want to redirect a portion of that money to new tax breaks intended to lure Chinese cargo planes to the St. Louis airport and more businesses to Missouri.

Advocates for the disabled and senior citizens are gearing up to fight the tax-credit repeal. But they may face a tough battle, because the elimination of the so-called "circuit breaker" tax credit for low-income renters is the single largest budgetary savings being proposed to offset the cost of the new business incentives.

Supporters of the special-session proposal contend Missouri must do something dramatic to spur job growth – even if it means less money in the pockets of the poor.

"While we're not very happy with the elimination of some provisions that help people in need, we've got to get our people to work if we're ever going to have enough money in the state coffers again to support human need issues," said Herb Johnson, secretary-treasurer of the Missouri AFL-CIO, which has joined the Missouri Chamber Commerce and Industry in backing the plan.

Since 1973, Missouri has offered a state income tax break intended to offset the property taxes or rent payments of low-income seniors. Over the years, that "circuit breaker" tax break has been expanded to also cover the disabled and the surviving spouses of deceased seniors.

For the 2010 tax year, Missouri paid out nearly $117 million in such tax breaks, with about $57 million going to people in rental housing.

Last year, the Missouri Tax Credit Review Commission – appointed by Gov. Jay Nixon – recommended the tax break be eliminated for renters but continued for homeowners under the theory that renters do not directly pay property taxes. Nixon initially opposed the recommendation, saying in December that the challenging economy made it an especially bad time to end the tax break for the poor.

"Maintaining the ability of seniors to get those income-eligible circuit breakers – whether they rent or whether they own – is an important consumer protection," Nixon said in December.

But the Democratic governor has now changed his position. Last week, Nixon said he could support ending the tax credit for renters, so long as an equivalent amount of money is dedicated to be spent on senior services. Nixon said his administration is working with lawmakers drafting the legislation to include a fund earmarked for senior citizen programs.

But state Sen. Chuck Purgason, who hopes to handle the legislation, said the fund amounts to little more than a political gimmick. If it's not immediately the case, politicians would eventually use the money from the dedicated fund to offset cuts in other sources of revenue for senior programs – resulting in little net gain for seniors, Purgason said.

"The reality of it is, if you're going to believe politicians are going to set up a fund and appropriate to senior programs, that is another wool over the eyes of taxpayers," said Purgason, R-Caulfield.

That's what stokes the concerns of people such as Minnie May, 75, who recently sold her house in the southeast Missouri town of Patterson and moved into a small rental home in nearby Piedmont. May, whose gets $686 a month in Social Security payments, said she has received about $300 annually from Missouri's homeowner tax credit, which she has used to help pay her bills. Now that she lives in a rented home, May's tax break could be in jeopardy.

May uses an analogy from her farming background to describe her distaste for the legislative proposal.

"When one chicken plucks a feather out of another chicken, all the other chickens do too until there's nothing left of the chicken," May said. "And that's just what these lawmakers are doing, they're taking one feather off at a time until the elderly and disabled have nothing. And there's just no need of it, absolutely no need of it."

Ellis, 43, of south St. Louis County, has received the income tax break for renters because of her disabilities, which include rheumatoid arthritis and fibromyalgia. She calls the proposal to end the tax credit "one of the worst ideas ever."

"I think they're making a big mistake if they were to get rid of it, especially now," Ellis said. "People need something they can depend on."

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