The people trying to figure out how much money the state will be able to spent on services and programs in the next budget year are trying to figure out what can happen if Congress does something about the Bush tax cuts.
The lame duck Congress can do nothing and the Bush tax cuts will expire in a little more than a month. Some members are talking of some repeals, such as the cuts for the upper income people, and some retentions, such as the tax cut for the middle class. State government budget planners are watching carefully. State budget director Linda Luebbering and her staff are running scenarios of various combinations of extensions and expirations. “The messiness of this is that different things impact our taxes differently,” she observes.
If Congress allows individual income tax rates to go up, Missourians would pay more federal taxes which would mean they’d have a bigger deduction from their state tax liability—lowering state income from that source.
But if all of the cuts expire, Missouri would neither gain nor lose much because of the way the state’s tax structure is linked to the federal tax system.