A bill that would exempt Missourians from paying taxes on recently received federal stimulus checks passed out of the Missouri General Assembly and is now headed to Gov. Mike Parson’s desk.
The measure was added as an amendment to a previous tax-related bill sponsored by Platte County Republican Sen. Tony Luetkemeyer. The bill, Senate Bill 676, received bipartisan support and was voted out of the Senate unanimously, something you don’t always see, said Luetkemeyer.
“People are hurting right now,” he said. “There’s a lot of economic uncertainty and this is something the state can do to help people financially during this time.”
The total amount of revenue that the state could collect from the stimulus checks is estimated to be roughly $36 million. But even at a time where the state’s budget could use an extra boost, Luetkemeyer said it shouldn’t come from federal dollars meant for struggling taxpayers.
“The state would never have been entitled to that money if COVID-19 never happened,” he said.
“If we have a position of allowing the state to get a windfall off of those stimulus checks or making sure that money stays in the hands of working families, my view is that it should stay in the hands of working families,” said Luetkemeyer.
The way the tax system is structured is if your federal tax liability goes down, your state liability rises, and vice versa.
Missouri is one of six states with a federal deductibility provision that could result in the relief payments being subject to state income tax. Missouri’s deduction applies to those with $125,000 or less in state gross income and is capped at $5,000, or $10,000 for joint filers. If the relief checks reduce a qualifying taxpayer’s federal liability below those thresholds, the taxpayer’s state tax liability could increase, according to Law 360 and the Tax Foundation.
“This is going to be treated as a credit on the federal side, which means that your tax liability will go down on the federal side, meaning that your Missouri liability is going to go up,” said Luetkemeyer, a practicing attorney. “So in terms of how much it would cost each individual who receives these stimulus checks, that’s going to be dependent on their individual income levels.”
“While it has not yet been determined how the IRS will instruct the states to treat federal stimulus money for individual income tax purposes, the measure proposed in the amendment is a safeguard that will protect Missouri taxpayers from the possibility of being penalized for receiving federal stimulus dollars,” Anne Marie Moy, the communications director for the Missouri Department of Revenue, told News-Press NOW last month. “The amendment ensures Missourians benefit from federal economic relief, as it was intended.”
As previously reported by News-Press NOW, the potential tax Missourians would have to pay on their 2020 state taxes would be $64.80 on a single $1,200 stimulus check, according to figures from the Department of Revenue and a research attorney for the Missouri Senate.Gov. Parson signaled he was in support of the measure when News-Press NOW asked him about it last month. “In this time of great economic uncertainty, Missouri citizens should not have to worry about their stimulus checks being taxed by the government,” Parson said. “I appreciate Sen. Luetkemeyer’s leadership on this issue and for looking out for Missouri taxpayers.
”Luetkemeyer projected that Parson would sign the measure, along with other fully passed pieces of legislation, sometime in June or July.