Legislature opens with tort, tax talk

JEFFERSON CITY, Mo. -- Republican legislative leaders have softened their stance on closing certain corporate tax loopholes but remain firmly opposed to any broad tax increases likely to be proposed by Missouri's Democratic governor.

While the first day of the 2004 legislative session began Wednesday with the usual calls for bipartisanship, the political battle lines were drawn on contentious issues such as tort reform and the state budget.

Gov. Bob Holden will outline his proposed budget and legislative agenda during the State of the State address on Jan. 21. In addition to renewing calls for increased taxes on smokers and gamblers, he is expected to again ask lawmakers to shut loopholes in the tax code.

Republicans, who hold a 20-14 Senate advantage and a 90-72 majority in the House of Representatives, made minor adjustments to the tax code last year but were cool to many of Holden's other suggestions.

Senate President Pro Tem Peter Kinder, R-Cape Girardeau, said the time has come to fix loopholes that give out-of-state corporations an advantage over Missouri businesses.

In particular, lawmakers will look at the "Geoffrey loophole," so-named after the giraffe mascot of Toys "R" Us. The loophole allows companies to avoid paying state corporate income taxes by shifting profits earned in Missouri to shell corporations based in tax haven states.

"I think we're going to be ready to move forward in a few days," Kinder said.

House Speaker Catherine Hanaway, R-Warson Woods, said this year's loophole bill would be more targeted than Holden's previous proposal to ensure that it doesn't harm Missouri businesses.

Although willing to budge on loopholes, GOP leaders warned Holden against submitting a budget that relies on major tax increases. Since any sizable tax increase would be subject to a statewide vote, Kinder said it wouldn't be financially wise to base state spending on funds voters may not endorse.

"We did not pay for programs in the current fiscal budget with imaginary revenue," Kinder said. "We cannot pay for programs in the new budget with imaginary revenue."

A key issue within the budget is funding for elementary and secondary education. All sides have pledged to improve the state's financial commitment to education, but a detailed plan for doing so hasn't yet emerged.

A top House GOP priority last year to take gambling revenue out of the formula for distributing state aid to local schools and create a Classroom Trust Fund to divide the money equally among all schools on a per pupil basis appears to be on the back burner this year. Passage of the bill was main campaign promise of House Republicans in the 2002 elections.

"The Classroom Trust Fund continues to be important, but at this point it doesn't seem to have support in the Senate," Hanaway said.

The Republican legislative agenda includes a number of pro-business initiatives that Holden vetoed last year. In addition to tort reform, those include changes to the unemployment compensation system and reduced regulations for small businesses.

Senate Minority Floor Leader Ken Jacob, D-Columbia, said his party would continue to fight the tort legislation if it remains similar to the expansive version vetoed last year, which Jacob didn't consider reform.

"You characterize it as tort reform," Jacob said. "I characterize it as a dismantling of our civil justice system."

Doctors provided a public relations face for tort reform last year. They claimed frivolous lawsuits have dramatically increased medical malpractice insurance rates, which is forcing many physicians to abandon their practices. Businesses would have enjoyed protections from lawsuits as well under the reform effort.

Hanaway said she is willing to consider narrower legislation that focuses on the medical malpractice issue. But she stressed than any proposal must, in all civil cases, halt venue shopping and the practice of holding deep-pocketed defendants fully liable for financial damages even when they are found only partially responsible for an injury.

"If you don't do that, it will not reduce the cost of medical malpractice insurance," Hanaway said.

House and Senate Democrats intend to unveil their legislative agendas in the coming days. Both minority caucuses say they will focus on education, job creation and health care.

mpowers@semissourian.com

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