Tax caution

Thursday, April 5, 2007

A bill in the Missouri Legislature proposed to spur economic development by eliminating sales taxes on utilities used by manufacturers. But the proposal is a two-edged sword that should be carefully considered before it is adopted.

While state economic development officials say tax exemption would help Missouri regain some of the manufacturing jobs that have been lost in recent years, city and county officials worry about the loss of revenue.

As written, the bill says the cost of the proposed measure is unknown. The impact of the tax cut on Cape Girardeau's revenue stream, however, would be about $110,000 a year out of a total of $19 million the city gets from its sales tax. Cape Girardeau County officials are trying to determine how county revenue might be affected.

At first, a case for the legislation was made by arguing that some of the state's largest employers, such as the Procter & Gamble plant near Cape Girardeau, would be the primary beneficiaries. But "manufacturing" covers a broad list of business activities in the state. As local officials study the plan, some fear that it goes too far with too many unknowns.

Before this bill is put in its final form, everyone needs to be clearer about the specifics: How much will it reduce state and local sales-tax revenue? What are all the goods and services that would be exempt under the "manufacturing" label? How much economic development will likely occur to make up for the lost revenue?

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