More than 100,000 lower-income seniors and disabled residents who live in rented homes could lose an annual state tax break as a result of legislation given first-round approval Wednesday by the Missouri Senate.
The bill takes aim at an income tax credit created in 1973 that was intended to offset a portion of the local property taxes paid by low-income seniors. Over the years, the politically popular tax break was expanded to disabled residents and enlarged to provide a greater benefit to its recipients.
The Senate bill would abolish the tax credit for renters while leaving it in place for those who own their homes — a change recommended by a tax credit review commission appointed by Gov. Jay Nixon. It would redirect the $57 million of savings from the abolished tax break to fund existing state health, mental health and social services that may benefit seniors and the disabled.
The legislation needs another Senate vote to go to the House.
Nixon's commission released reports both in 2010 and 2012 asserting that there is not enough evidence that rental costs are influenced by landlords' property taxes. It also highlighted program discrepancies that deny the tax break to tenants renting from nonprofit organizations while granting it to those whose landlords are looking to make a profit.
Senate President Pro Tem Tom Dempsey described the current program as arbitrary.
"Depending on where you live, sometimes you qualify and sometimes you don't," said Dempsey, R-St. Charles, who is sponsoring the bill repealing the renters' tax break.
But others said the legislation was equivalent to a tax hike on seniors and disabled residents.
"In my opinion, the cost of the property tax is buried in the rent," said Sen. Rob Schaaf, R-St. Joseph. "It's just not socially just to divide it like that" — with homeowners getting a tax break and renters not.
At a committee hearing earlier this month, several disabled residents who receive the renters' tax break said they use it to help pay for utilities, medical bills, clothing and other daily living expenses. They urged lawmakers not to repeal it.
"For some of these seniors, it is the only time they are able to purchase some real necessities" such as a furnace or stove, said Sen. Kiki Curls, D-Kansas City.
Last year, the tax credit was awarded to more than 104,000 renters and 111,000 homeowners. Renters can get up to $750 annually and homeowners up to $1,100, with the amount decreasing as incomes rise. To qualify, individuals can earn no more than $27,500 for renters and $30,000 for homeowners. The maximum income eligibility for married couples is $29,500 for renters and $34,000 for homeowners.
Opponents of the Senate legislation noted that lawmakers who voted to repeal the tax break for low-income renters had voted just weeks earlier to create new tax breaks for businesses.
Page 2 of 2 - "This action is a shameful reflection of lawmakers' priorities," said Amy Blouin, executive director of the Missouri Budget Project, a nonprofit group that analyzes fiscal policies with an emphasis on how they affect the poor.
As proposed by Nixon, the money saved by not offering the tax credit would be split among several state agencies:
— $32.5 million would go to the Department of Health and Senior Services to fund in-home services, such as aides who help disabled people with personal grooming and chores. A portion of that also would help expand home-delivered meals for seniors.
— $12.9 million would go to the Department of Social Services to provide a 3 percent rate increase to nursing homes and facilities that provide rehabilitation services.
— $11.2 million would go to the Department of Mental Health for a 3 percent rate increase to providers of psychiatric services, developmentally disabled services and substance abuse treatment and prevention programs.