Blunt vetoes tax breaks, may call special session

JEFFERSON CITY, Mo. -- Gov. Matt Blunt vetoed a massive package of tax breaks Friday but indicated he would summon a special session if legislative leaders could agree on a slimmed-down economic development bill.

Blunt, a Republican who has proudly championed tax cuts, said the bill passed by the Republican-led legislature would have cost the state about $200 million while doling out money to questionable causes. He denounced it as "loaded down with excessive spending."

Because of a drafting error in one of its key programs, the bill also could have rewarded some businesses for low-paying jobs, instead of jobs with above-average wages and health insurance, Blunt said.

"What started as a very narrowly defined piece of legislation to expand programs we know work and have been successful grew into a very large bill with a laundry list of initiatives and projects," Blunt said in a conference call with reporters.

Blunt said he would prefer a tax incentive package costing around $50 million to $70 million.

Republican House members knew the bill had problems but passed it anyway, after failing to reach a compromise with some senators and under the assumption that it contained more good than bad.

Some lawmakers spent the final week of their session trying to reverse certain sections of the tax-cut package by passing additional legislation, but most of their efforts failed.

House Speaker Rod Jetton said Friday he would agree to a special session only if Blunt gave lawmakers leeway on what the bill should include and only if it occurred before Sept. 12, when lawmakers convene in an annual session to consider whether to override vetoes.

Otherwise, "I would vote to override that veto," said Jetton, R-Marble Hill. "We have to get an economic development bill passed."

Senate President Pro Tem Michael Gibbons, R-Kirkwood, expressed disappointment about the veto and openness toward a special session, but added: "I am not interested in overriding the governor."

Blunt's veto came just one day after he and Jetton toured the state promoting his signing of a tax cut on Social Security benefits and certain other pension plans. Those tax breaks are expected to cost the state $154 million annually once fully phased in by 2012.

Jetton had urged Blunt to similarly sign the economic development bill and then call lawmakers back for a special session if he believed any corrections were needed.

"I can see were the governor would feel there's more bad than good" in the bill, Jetton said. "At the same time, I feel there was more good than bad."

The legislation contains more than two dozen tax breaks for job creation, beef producers, filmmakers, alternative fuel vehicles and redevelopers who assemble large tracts of lands in impoverished areas, among other things. It also would have legalized ticket scalping.

For Blunt, the core of the bill was a provision to increase a $12 million annual cap on Quality Jobs tax credits to $30 million. That tax credit was created in 2005 to reward employers who add jobs with a wage at least as high as the county average and also pay for half their employees' health insurance premiums.

But because of a drafting error in the definitions for a new Quality Jobs provision granting tax credits for employee tuition reimbursement, Blunt said the bill could have been interpreted to make the entire Quality Jobs program apply to businesses that pay below average wages.

Blunt also objected to a section that would have created a program similar to Quality Jobs for small businesses, because it would have applied to companies paying just 85 percent of the county's average without offering health insurance.

Business interests that typically ally with Blunt had split over the bill, with some urging him to veto it and others to sign it and let lawmakers patch up any glitches later.

Blunt released statements from a dozen state and local officials and business interests praising his decision. But the Missouri Chamber of Commerce and Industry expressed disappointment.

"This bill would have greatly enhanced the business climate in Missouri," said chamber president Dan Mehan.

But he pledged the organization would work with Blunt if he calls a special session.