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Impact of Missouri Revenue Increases Disputed

September 22, 2003
By: Thomas Warren
State Capital Bureau

JEFFERSON CITY - After months of budget woes being voiced by Missouri administration officials, the state's Revenue Department is reporting an upswing for the last two months.

The department reports tax and revenue collections for July and August were more than 6 percent higher than during the same period last year. Revenue for the month of August is up 4.4 percent.

While this is a step in the right direction, it is not the answer to Missouri's collective prayers, said Missouri Budget Director Linda Luebbering.

"It's good because it's positive and we have not been positive for a long time," Luebbering said. "But it is not enough by a long stretch."

Luebbering warned that the upswing may not be as good as the figures indicate.

In 2002, a larger number of tax refunds were paid in August. This year, more were paid in June. As a result, the 2003 revenue collection figures are artificially higher because they do not include the same quantity of tax refunds.

That disparity impacts on total budget-year collections because Missouri's fiscal year starts on July 1.

When these these differences are accounted for, gross tax collections are closer to a 2 percent increase, Luebbering said. The Missouri legislature has assumed 5 percent growth to fully fund the state budget. The increases are not enough to release the $240 million in spending withholdings announced by Gov. Bob Holden, Luebbering said.

"Even when the economy is improving we are not necessarily improving tax revenue because we're cutting taxes," she said, citing the impact of federal tax cuts on Missouri's income.

Because Missouri's income tax is applied to the income calculated for federal taxation, federal tax cuts that reduce the caculated federal taxable income results in a reduction in Missouri taxes.

Some Missouri Republicans, however, have expressed greater optimism about the revenue-collection increases. House Budget Committee Chairman Carl Bearden, R-St. Charles, pointed out that revenue increases in the typically slower months of July and August show great promise for the state.

"It shows the economy is in a recovery," Bearden said. "I believe the governor's withholdings were very premature."

Senate Republicans are expressing a bit more caution. Senate Appropriations Committee Chairman John Russell, R-Lebanon, said the budget will only be affected if growth continues over the entire year.

"It would be foolhardy to say our budget woes are over," Russell said.

There are other indicators that show the Missouri economy is on the rebound. The state unemployment rate is lower and personal income growth higher than national averages, said Jim Grebing, spokesman for Missouri's Economic Development Department.

However, Grebing said he does not foresee immediate relief for the state's budget problems.

"It's a question of how soon that translates into increased revenue," he said. "It takes time."