Governor Matt Blunt's Plan for Tax Reform and Economic Development in 2007

Governor Matt Blunt delivered the State of the State speech Wednesday night. The speech was carried live and by delayed broadcast by a number of stations across Missouri. If you missed the speech, you may view the video or read the text.

Regarding economic development, the Governor announced support for increasing the Missouri Quality Jobs program cap from $12 million to $24 million and an additional $4 million in increased cap for the Missouri Agricultural and Small Business Development Authority Tax Credits. He also lent his support to Speaker Rod Jetton's plan to eliminate state income taxes on social security, recommended raising the filing threshold for corporation franchise taxes from $1 million to $15 million only if the employer offered employees health insurance and paid at least 50% of the premiums, and recommended making amounts paid for long term disability insurance fully deductible.

Governor Blunt also announced measures designed to raise about $30 million in tax revenue by overturning recent sales tax decisions by the courts that taxpayers have won in recent years, including the Southwestern Bell court case that allowed telecommunications to be treated like other manufacturers for sales tax purposes and the DST case that allowed full sales tax exemption for items purchased and used at least partially for an exempt purpose. Governor Blunt also recommended a change in the treatment of rentals for sales tax purposes, but details of that proposal were not readily available.

Regarding tax reform and economic development, here is an outline of the plan:

$132.7 million tax relief (detailed below)

Minus $30 million tax increase resulting from:

• overturning the Southwestern Bell decision,
• allowing prorating of sales tax exemptions, and
• one other change regarding leases that is not fully explained in the budget summary

Equals $102.7 million net tax reduction.

The tax relief is further detailed as follows:

• $100 million to exempt social security benefits from income tax
• $ 12 million to increase the cap of the Missouri Quality Jobs program
• $ 4 million to increase the cap on Missouri Agricultural and Small Business Development Authority Tax Credits
• $ 2.7 million to increase the long-term care insurance deduction from 50% to 100%
• $14 million to increase the Corporation Franchise Tax filing threshold from $1 million to $15 million if the employer provides health insurance to employees and pays at least 50% of the premiums as provided in the Quality Jobs program.