Gov. Nixon says tax breaks could cost local governments

ST. LOUIS -- Missouri Gov. Jay Nixon amplified his opposition Wednesday to a series of tax breaks passed by lawmakers, asserting they could cost local governments more than $350 million annually on top of an even larger revenue reduction for the state.

Nixon already has vowed to veto the tax break measures or cut the state budget to account for the anticipated loss in revenue, which he previously warned could reach hundreds of millions of dollars. The Democratic governor traveled to St. Louis and Kansas City to emphasize his newly updated figures about the additional hit to local tax revenue.

Missouri lawmakers "abandoned all fiscal restraint, broke their own budget blueprint and went on a special-interest spending spree on an unprecedented scale," Nixon said at a news conference in St. Louis.

The Republican-led Legislature passed about two dozen tax breaks tailored for particular industries, organizations and consumers during their annual session.

Those are in addition to a general income tax rate reduction that will gradually take effect starting in 2017, if state revenue continues to grow. That income tax cut is projected by legislative research staff to reduce state revenue by $620 million annually when fully phased in.

The figures Nixon released Wednesday project that the separate bills containing special tax breaks could result in an additional annual loss of $425 million in state revenue and $351 million in local revenue.

Some Republican legislators have questioned Nixon's cost projections. Business groups also have defended the tax breaks, describing many of them as mere clarifications of existing tax policies that they believe have been misinterpreted by the courts or the state Department of Revenue.

"As a legislative body, we came together to stand in defense of the taxpayers and to provide a shield against the glaring overreaches made by the executive branch," House Speaker Tim Jones, R-Eureka, said in a written statement. "The governor fails to understand that these dollars do not belong to him, they were earned by Missouri businesses of all sizes that are the lifeblood of our economy and the providers of jobs."

The largest tax hit, according to Nixon's projections, is a $152 million loss each for state and local governments as a result of a sales tax exemption for electricity and equipment used by data processing and storage centers.

Business groups have pursued a data center tax incentive for years, and at one point, they backed a version targeted only for new or expanding facilities that create a certain number of jobs. But the measure that passed in the final hour of this year's session applies to all data centers regardless of whether they are expanding payroll or facilities.

Nixon also projected that state and local governments each would lose $100 million annually from a provision requiring Missouri to notify businesses about changes in the way sales taxes are applied before they can be held liable for paying the taxes. Nixon's budget director, Linda Luebbering, said the legislation could allow taxpayers to seek refunds of properly paid taxes if they had not been notified by the Revenue Department that the taxes were due.

A cost estimate developed by legislative staff didn't assume any loss in state revenue as a result of the notification requirement.