BUSINESS UNITS OPPOSE TAX PLANS; FUNDING BILLS TOO COSTLY, SOME CONTEND

THE FUNDING DILEMMA IN HIGHER EDUCATION

For years Missouri business representatives have stressed the correlation between the state's quality of education and economic development climate.

Last year a number of business groups drafted reports urging a tax increase to fund critical primary and secondary and higher-education needs.

Associated Industries of Missouri and the state Chamber of Commerce joined business and education leaders in groups such as Missourians for Higher Education, the Missouri Business and Education Partnership, and Confluence St. Louis-Kansas City Consensus in recommending that a tax measure be put before voters that would add to the state's education coffers.

But now some of the business representatives have voiced vigorous opposition to the tax measures being debated in the Missouri General Assembly. They say the bills would impose too great a burden on Missouri's taxpayers and businesses.

Although there is some disagreement among the business leaders as to whether higher education or primary and elementary education should be the state's top priority, all the groups agree that a tax proposal of about $300 million is needed. But the legislature is considering two bills that have proposed $456 million to $750 million in new taxes for education and social programs.

Senate Bill 353, proposed by Sen. James Mathewson, D-Sedalia, calls for about $500 million in new taxes earmarked primarily for higher education. A House substitute to SB-353, proposed by Rep. Bob Griffin, D-Cameron, seeks about $600 million in new taxes for higher education and primary and secondary education.

The full General Assembly is expected to vote on a final, amended bill sometime prior to the May 17 end of the legislative session.

Bob Knuth, executive director of the Taxpayers Research Institute, a division of AIM, said Associated Industries is opposed to both bills. He said the education package's high price tag likely will discourage voter support.

AIM President C.M. Long said either proposal would take a "staggering chunk" out of AIM member companies' profits.

SB-353 calls for a reduction in the amount of federal income tax corporations can deduct from state returns and would make permanent the current graduated corporate income tax rates.

Long has urged that any additional tax burden be shared proportionately by all Missouri taxpayers, not just business and industry.

Bob Hendrix, president of the Cape Girardeau Chamber of Commerce, also said he thought either tax proposal would have a "very severe" effect on local business.

"I understand the need for more money for education, and business is glad to pay its fair share, but it doesn't want to pay the full price," he said.

"At this point, we're just trying to get straight what exactly they're going to come up with," said Hendrix.

Hendrix said Mathewson's initial proposal was "stacked pretty heavily" against business, with corporations paying nearly 60 percent of the expected tax revenue.

He said the General Assembly likely will send a package to the voters in November that more closely resembles Griffin's final proposal.

"I think they've come around to spreading the tax burden more equitably between individuals and corporations and it seems to be more of a compromise than Mathewson's initial proposal," Hendrix said.

Jo Frappier, president of the Missouri Chamber of Commerce, said he doubts Missouri voters will be receptive to a $400 to $600 million tax proposal.

"The attitude of the voters now is: `I don't want any more taxes. I don't want any more government,'" Frappier said. "The problem is, there are a lot of needs out there: health care, roads, primary and secondary education and higher education."

Frappier said the $250 million to $300 million recommended last year by business and education groups had "ballooned" to nearly $800 million in Griffin's House substitute bill.

"It kept growing and growing," he said. "We would hope they would hold it to $300 million and do something for education and education only. I'm not very optimistic that's going to happen."

Sheila Mosley, executive director of Confluence St. Louis, said business representatives shouldn't assume that voters will reject a tax proposal simply because of an inflated price tag.

"How voters will respond is so complicated that just a knee-jerk response, that the more money the tax is for the less voters will respond, is reactionary," Mosley said.

She said Confluence St. Louis-Kansas City Consensus supports both Mathewson's and Griffin's tax bills.

"We favor (the tax measures) because, in both cases, they're moving in the direction of our recommendations," she said.

Those recommendations, made last year, urged that an additional $300 million be raised annually for higher education, and that a one-time investment of $311 million be made for equipment purchases to allay deferred maintenance at Missouri colleges and universities.

Mosley said Griffin's proposal essentially accomplishes the recommendation but also brings "other issues on the table," such as funding for primary and secondary education. "We don't object to that," she said.

"Our report dealt with higher education. What we did as an organization is cut the pie as to what we would look at.

"We said we would look at the needs for higher education and focus on that without making any value judgments as to which was more important.

"As a matter of fact, I think we all know that primary and secondary education needs more money."

But Frappier said both proposals place an unfair tax burden on business. He said SB-353 initially proposed an 80 percent increase in the corporate tax rate with no increase in the individual income tax rate except for residents with annual income of $75,000 or more.

He called the tax measure "pure Robin Hood."

Long has said the tax increase would have a "serious, negative impact on an already sluggish economy.

"The amounts attached to these bills would be too much for many firms to realistically handle," Long said. "Business and industry would be willing to support an increase of $250-$300 million if the proposal met certain requirements."

Long said the cost for improving the state's education system should be shared proportionately by all Missourians, and that any increase in funding should be contingent upon significant education reforms.

"The House committee substitute and SB-353 are woefully lacking in this key area," he said.

Knuth said AIM is concerned about using tax deductibility as a vehicle for increasing taxes. He called a reduction in the amount of federal taxes paid by corporations that can be deducted from state returns a "tax on a tax."