STIMULUS PACKAGE A SURPRISE BUST FOR 36 STATES

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KANSAS CITY STAR - The federal economic stimulus package may please
taxpayers who get $600 checks, but it isn't going over well in many
state capitols, including Kansas and Missouri. The legislation could
cost Missouri $100 million and Kansas $87 million.

The Center on Budget and Policy Priorities, a Washington think tank,
estimates that two business tax cuts in the package will cost 36 states
a total of $2.9 billion in lost tax revenue. While some of that loss
will occur this year, most will occur during the fiscal year beginning
July 1 for most states.

Missouri House Budget Chairman Allen Icet, a St. Louis County
Republican, said a $100 million hit would wipe out nearly 30 percent of
the annual growth in state revenue.

Officials with the Center on Budget and Policy Priorities said the
reduction in states' spending would partly offset any economic boost
from the additional business tax breaks. . .

Two provisions in the stimulus package cause the problem:

- Companies will be able to depreciate 50 percent of the cost of new
equipment and machinery in the first year rather than over several
years.

- Companies can reduce their federal income tax liability by $250,000
if they expand, compared to $125,000 now.

The accelerated write-offs also will apply in the 36 states that link
their tax codes to the federal government's tax structure, among them
Missouri and Kansas. The center's report stated that 28 states already
were projecting budget deficits as a result of the nation's economic
downturn.

http://www.kansascity.com/105/story/485593.html

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