Mo. House passes revised tax break

Thursday, May 3, 2007

A proposal to give manufacturers a sales tax break on their utility costs won't take away any local revenue, Sen. Jason Crowell said Wednesday.

A compromise version of a bill loaded with economic development incentives exempts electricity, gas, water and other utility purchases by manufacturers from the state-imposed portion of the sales tax but keeps the local portion intact.

The bill won House approval Wednesday morning, but became bogged down in the Senate in the afternoon as legislative leaders sought to send it to Gov. Matt Blunt for his approval.

Crowell, a member of the conference committee that wrote the final version, worked to provide the state sales tax exemption but keep the local tax portion in response to worries from Cape Girardeau County and area cities that it would bite too deep into their treasuries.

"This bill is meant to strengthen Missouri's already growing economy, not harm local revenues," Crowell said in a prepared statement. "The bill as it was could have hurt Cape Girardeau, which is why I fought so hard to get the change made."

At one point, Cape Girardeau County Presiding Commissioner Gerald Jones wrote to Crowell and other lawmakers that the loss of revenue -- $365,000 a year from the utilities purchased by Procter & Gamble alone -- was enough to consider a lawsuit to challenge legislative power to reduce local tax revenue.

The compromise version preserves the local revenue and eliminates the need for legal action. "It is marvelous," Jones said. "Jason Crowell did a marvelous job for us."

The measure will save Procter & Gamble about $1.9 million annually in state sales taxes, according to figures the paper products maker provided to the county. Jones said Procter & Gamble managers had favored allowing the local taxation to continue, but needed the state exemption to help the local plant on Highway 177 compete effectively for work.

"They know we have been very good supporters of their industry," Jones said. "All the time, we are in competition over who gets the next expansion."

The tax doesn't affect only Procter & Gamble. Cape Girar-deau and Jackson had joined county officials in their opposition to the local portion of the exemption, with Cape Girardeau officials estimating that the city would lose about $100,000 a year.

Crowell began pushing for the exemption last year, limiting it to the Procter & Gamble plant. The issue was pushed as a statewide initiative this year by the Associated Industries of Missouri, Crowell said.

"We didn't know this was such a good idea," he said. "They said it could apply to everybody and that made it a much broader sales tax exemption. And once they made it statewide, more of the impact was looked at."

Manufacturers would now have a sales tax on their utility purchases that is similar to the exemption for food sales. Grocers charge local sales taxes and a small portion of the statewide sales tax, but do not collect the 3 percent tax for general revenue.

The measure contains several other major economic development initiatives, including:

* Increasing the cap on annual tax credits under the Quality Jobs Program to $50 million from $12 million. The program gives credits to businesses that pay high wages and offer good benefits.

* Increase the film production tax credit to $10.5 million from $1.5 million. Crowell said the benefits of the increase became clear during the filming of "Killshot" in Cape Girardeau in early 2006.

* An 11-county Southeast Missouri study of vocational and trade school needs. High unemployment and job losses in Southeast Missouri underscore the need for a feasibility study for a post-secondary technical school, Crowell said.

* A provision to make all tax credits transferrable so that recipients who have credits that exceed their tax bills can benefit from their sale.

Manufacturers didn't like allowing local taxation to continue on the utility purchases, said Ray McCarty, who represents the Associated Industries of Missouri and its affiliate, the Taxpayer Research Institute of Missouri.

"It was unfortunate it had to be that way," McCarty said. "The only local governments that objected to it were in Cape Girar-deau County, but I understand it was a significant problem for them. I understood that getting something was better than getting nothing."

McCarty had issued an estimate of the tax loss in Cape Girardeau County that was far smaller than the numbers Procter & Gamble gave commissioners. He explained the difference by saying that he based his figures on information he obtained through the U.S. Census Bureau's survey of manufacturers.

A legislative fiscal note estimated that the revenue loss for state and local governments could be as much as $46 million; McCarty estimated that the total cost would be about $11.5 million.

"I am hopeful that statewide it will be enough to save some manufacturing jobs and keep some lines open that otherwise we would lose," he said.

For Jones, the issue was whether lawmakers should make changes in local revenue sources. "I don't want the legislature being involved in our income," he said. "That is what the people voted on and that is what we live on."

335-6611, extension 126

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