House Republicans now want $1 billion tax reduction

JEFFERSON CITY - With less than three weeks before the legislative session ends, Missouri House Republicans are making a last-minute push for a $1 billion tax cut.

Using funds the federal economic stimulus package, a plan unveiled Thursday would average out to a $500 savings per taxpayer by reducing the income tax rate from 6 percent to 5.5 percent over the next two years.

House speaker Ron Richard, R-Joplin, stressed that details are still being ironed out, adding that he hopes the bill will be ready for debate by early next week.

In expressing his support for the tax cut, Richard said recent spending proposals were growing out of control with regard to earmarks based on the federal dollars Missouri expects to receive.

Earlier this week, members of the House Budget Committee approved using more than $1 billion in stimulus funds on projects that ranged from public-transit improvements in St. Louis and Kansas City to maintenance and repairs to Missouri universities.

"Spending expanded to the point that we were uncomfortable with it," said Rep. Steven Tilley, R-Perryville. "We didn't feel like we had the votes to pass it, so we decided to go a different route."

Republicans in the Senate, however, some of whom just learned of the proposal yesterday, were reluctant to embrace the idea until they had more information.

Sen. John Griesheimer, R-Washington, said the proposal would face an uphill battle.

"We've got to look at the budget and how much we've got left, but I think we've got to put some money back for next year," said Griesheimer. "Here we're going to put a billion dollars out for everybody? I don't know where we're going to get all this money."

For Missouri, the more than $4 billion expected in federal stimulus dollars are divided into two broad categories: approximately $2 billion to help stabilize the state budget and the remainder to stimulate the economy.

The tax-cut plan would come from stabilization money, which currently consists largely of state education and medical assistance programs, said state budget director Linda Luebbering. Those funds often allow for greater flexibility in how dollars are spent.

Sen. Joan Bray, D-St. Louis, said she wondered if it was even legal to use those monies for a tax reduction.

"Stimulus money is coming to the state with lots of strings attached," said Bray. " ... The stimulus money does not come into the state budget as general revenue money to be spent however we want it. It is, again, very specific use of federal money."

She added, "I don't see how they can do what they're proposing to do here."

Budget Committee Chairman Allen Icet, R-Wildwood, disagreed. He said a tax cut could indeed be treated as general revenue funds and would not slash existing programs.

Regardless, Luebbering said using stimulus dollars for a tax reduction wasn't in line with the federal government's intent.

"I can't say whether or not it's legal, but the intended portion of the funds is to stabilize state programs so that we wouldn't have to make deep cuts. (The tax reduction) clearly doesn't seem to be in line with the thought that those funds would be used to stabilize core services," said Luebbering.

For the tax cut to take effect, it would have to pass the state Senate and be approved by Democratic Gov. Jay Nixon.

Nixon's office, however, dismissed the effort Thursday.

"The House Republicans' budget plans are kind of like Missouri weather," said spokesman Scott Holste. "There's no use getting too worried about it, because it's likely change within an hour or two."