Governor: Tax-cut bills could hurt region

Thursday, June 12, 2014

Although the Missouri General Assembly is no longer in session, the debate between the Republican-led Legislature and the Democratic governor over tax-cutting measures continues with no less energy.

Recently, Gov. Jay Nixon released figures that estimate the two dozen tax breaks approved in the final days of the legislative session could cost state and local governments millions of dollars.

"This eleventh-hour free-for-all on the final day of session will make it harder for local governments to provide the services Missourians count on," Gov. Nixon said. "We're talking about firefighters and cops, libraries and ambulance services, snow plows and health inspectors, public transit and road repair. Missourians deserve an explanation for why legislators rushed through $776 million in special breaks and exemptions on the last day of session, without accounting for even a penny of these costs in the budget they sent to my desk."

He estimates the annual loss to cities, counties and other taxing districts will be $351 million annually. Based on information released from the governor's office, Portageville's sales tax revenue would be reduced by $62,657 or a 2-percent decrease annually. For New Madrid County, annual sales tax revenue would be reduced by $376,678.00, 11-percent decrease.

Other projected losses in sales tax to cities in the county were: Gideon, $5,102; Lilbourn, $8,407; Marston, $23,249; Matthews, $64,787; New Madrid, $68,361; Parma, $5549; and Risco, $1,262.

Nearby cities would lose: Caruthersville, $102, 668; Kennett, $497,142; Malden, $134, 184; Sikeston, $934,464; and Dexter, $386,381.

In Cape Girardeau and other cities across the state, the governor said the revenue loss would affect budgets for firefighters, police, libraries and public transit.

The state would lose $425 million a year, according to the governor's estimates. This doesn't include gradual reductions that will take effect in 2017 -- if state revenue continues to grow -- when the general income tax reduction bill takes effect. That measure is expected to reduce state revenue by $620 annually when it's fully phased in.

Nixon previously has expressed his intent to veto some of the tax-cutting bills, which he said cater to special interest groups. The range of groups that stand to benefit from the tax cuts reach from fast food restaurants and power companies to dry cleaners and country clubs.

But proponents of the bills argue they provide clarification for certain tax laws and policies that could help prevent overreaching by government agencies. For example, a bill sponsored by Sen. Will Kraus, R-Lee's Summit, would require the Department of Revenue to provide notification to businesses when a change is made in the interpretation of sales tax laws. Groups that support the legislation, including the Missouri Chamber of Commerce, have said it would ensure businesses are made aware of changes and given an opportunity to comply with them.

Supporters also have criticized Nixon's projections as extravagant, and Missouri House Speaker Tim Jones, R-Eureka, said in a statement two weeks ago that Nixon's projections did not consider the economic benefit the tax cuts might have.

"The governor fails to understand the positive impact substantive tax relief will have on our economy when businesses can reinvest earnings into infrastructure development and more jobs with higher pay instead of using tax dollars to expand government and increase spending," said Jones.

Nixon stood by his projections and his concerns in a conference call with reporters today when he pointed out the Legislature did not follow its normal process when members passed many of the bills. They also passed them after approving the budget, he added, so it does not reflect the possible affect of any of the approved tax cuts.

"Many of these [bills] didn't have fiscal notes, didn't have public hearings ..." he said.

He also said the bills will be taken into consideration as he reviews the state budget if a veto override is mounted for any of the bills when the Legislature reconvenes later this year. The budget must be completed by July 1, and Nixon said he will "seriously consider using ... line item veto power in the budget."

The legislature passed eight bills on the last day of session that will significantly impact state and local funds: House Bills 1296 and 1865, and Senate Bills 584, 612, 662, 693, 727 and 860.

* These bills contain more than a dozen provisions that would reduce state and local revenue beginning on August 28, including new sales tax exemptions for recreation venues, data storage and processing, used vehicles, supplies and equipment used in electricity generation, and laundries.

* The budget plan passed by the legislature each year is expected to account for any legislation that could impact state revenue, but the budget passed by the General Assembly on May 9 did not account for any of these provisions.

* Most of these provisions impact sales tax collections, and therefore they have a large impact on local tax collections. Existing statute (section 32.087) requires that the base for local sales taxes be the same as the base for state sales taxes and that sales tax exemptions be the same for both.

* In addition to an annual state revenue reduction of $425 million, these provisions would reduce local revenue by an estimated $351 million on an annual basis.

* These reductions would impact cities and counties as well as other taxing jurisdictions including fire protection districts, ambulance districts, and community improvement districts.

(Some information from the Southeast Missourian, Cape Girardeau, MO

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