Saturday, April 25, 2009

Income Tax Reduction

By Dan Brown
State Representative
District 149

This session, our largest priority has been the Family Recovery Plan. This legislation plan was designed to give our citizens relief in the harsh economic climate. There are four parts of the Family Recovery Plan: Taxes, Jobs, Energy, and Healthcare. This week, the House passed House Bill 64, which seeks to reduce income tax. We believe this will aid in stimulating the economy and provide much needed tax relief to Missouri families and small businesses.

At the federal level, reducing an individual’s income tax has proven to be very successful. In the 1920’s, presidents Harding and Coolidge slashed tax rates by more than 50 percent and the gross domestic product - the measure of national wealth - rose at an annual rate of almost 1.5 times the previous rate. In the 1960’s, presidents Kennedy and Johnson also proved lower taxes meant higher growth by cutting top tax rates from 91 percent to 70 percent. When these cuts were enacted in 1965, growth and private investments increased dramatically. Then, in the 1980’s, President Reagan once again proved this correlation by cutting taxes. During Reagan's two terms he cut taxes across the board and the gross domestic product growth averaged 3.2 percent compared with 2.8 percent in the eight years preceding his election.

We are looking forward to a similar achievement at the state level. HB64, sponsored by Representative Lipke, has two main provisions that will reduce taxes. The first provision will provide savings for all Missouri taxpayers by increasing the amount of federal tax an individual can deduct from their state taxes. We increased this deduction from $5,000 to $7,500 for an individual and $10,000 to $15,000 for a married couple. This will also help small businesses across the state, seeing that approximately 50 percent of small businesses pay their taxes as individuals. On the surface, this change may look like a loss of revenue to the state, but a reduction in income taxes is normally followed by an increase in collection of capital gains taxes. The second part of the bill will allow income to flow back into family budgets. The bill raises dependent exemption to $1,600 -- which has not changed since 1998 when it was increased from $400 to $1,200. By increasing the exemption by $400 per child, Missouri families will be able to keep more of their income to pay for necessities.

As I have promised since we started this session, my top priority is to pass legislation that will help you, my constituents, weather these rough times. There is no question that by cutting taxes, we can stimulate the economy. That is why I supported this tax reform legislation.

Saving money on our tax bill allows more disposal income and frees up money to buy goods and services. If allowed to keep more money, we the people will spend and stimulate the economy.

This week I had the pleasure of visiting with the 4 graders from Mark Twain Elementary and Saint Patrick’s Catholic School. As always, thanks for giving me the opportunity to serve you in the House of Representatives. Please feel free to contact me with any concerns and interests at either 573-751-5713 or at dan.brown@house.mo.gov

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