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Missourians Paying Higher Taxes

State Capital Bureau

April 11, 1995

JEFFERSON CITY _ If you've filled out your state tax form that's due by mid-April, you may have seen a sign of the price you're paying for that education package passed by Missouri lawmakers two years ago.

This year, your income tax forms included a new formula to implement the income tax increases included in the 1993 Outstanding Schools Act.

Among the changes that have caught some taxpayers by surprise, according to the state Revenue Department, was a cap on the amount of federal taxes you can deduct from your Missouri taxable income.

A sponsor of the original bill, Rep. Annette Morgan, D-Kansas City, said the money generated by the act has already helped to equalize schools across the state.

The new tax was expected to contribute $215 million to education when it became a law. The average impact on a one-earner household making about $75,000 would be $16, according to Missouri's Revenue Department.

Missouri's income tax is based on the taxable income calculated from your federal tax return.

The tax is applied to that taxable income _ minus special Missouri deductions from the income.

In the past, one of those items that you could deduct from your taxable income was the total amount of federal income taxes you had paid.

But now, that federal-tax deduction is limited to a maximum of $10,000 for a joint return or $5,000 single return. Whatever amount above that limit you paid in federal taxes will be taxed by the state.

For example, under the old system, if you paid $6,000 on a single return to the federal government, your taxable income would have been your total income minus $6,000.

Now, if you pay any amount over $5,000 in federal taxes, your taxable income will be calculated by subtracting $5,000 from your total income. If you paid less than $5,000 to the federal government, your taxes will still be calculated the old way.

Even though several newspapers across the state have printed editorial letters about the changes, the Revenue Department has received few inquiries, said spokeswoman Kay Dinolf.

Some legislators say they have heard more about it, including Sen. Franc Flotron, R-St. Louis, one of the most vocal opponents to the Outstanding Schools Act and the Senate's Republican Floor Leader.

"I've gotten a lot of complaints from constituents," Flotron said. "A lot didn't know about the tax increase. It's definitely gotten people's attention."

But Morgan said the tax increase was highly publicized in 1993 while she was soliciting public commentary. She said Flotron and other opponents to the legislation are exaggerating the reaction.

"I think they're lying," Morgan said. "I've only received one inquiry about it. I know I would have heard more complaints because I was the sponsor."

Flotron related the public's lack of awareness to their interest in state government.

"People's willingness to find out and learn what happens here is low," he said. "There's a lower interest level about what happens in state government than in federal government. Maybe this will change that."

Flotron said the tax increase might be remembered by voters in the 1996 election. He said Gov. Mel Carnahan had broken his campaign promise to put a any tax increase in his education-reform proposal to a vote of the people.

"It's a question of basic integrity," Flotron said. "It's no different than 'Read my lips.'"

Flotron warned that some self-employed Missourians could face penalties because of their lack of awareness. But the Revenue Department plans to work with business people who unknowingly miscalculated their quarterly withholdings.

"They are being reviewed on a case-by-case basis," Dinolfo said.

Individuals are not the only group affected by the 1993 education tax legislation. It also raised corporate taxes.

"The corporate community has been very glad to pay their extra taxes, which they lobbied for," Morgan said.

Although the increase in taxable income is the only major change in this year's form, a check-off box for nonresident entertainers has also been included. The box is merely for statistical reasons this year, Dinolfo said. The entertainment taxes will not go into effect until 1996.

Also, this is the first year citizens could electronically file their state returns. The Revenue Department has received 41,000 electronic returns so far, Dinolfo said.