Missouri Senate rejects taxes on tobacco, corporations

JEFFERSON CITY, Mo. -- State senators rejected a proposal Friday to raise taxes on tobacco products, corporations and wealthier Missourians as a way to avoid cuts in the state's next budget.

All three tax proposals were backed by Democratic Gov. Bob Holden and rolled into a bill sponsored by Senate Democratic Leader Ken Jacob of Columbia.

The Republican-controlled Senate rejected the proposal on a straight party-line vote.

Republican leaders are proposing their own revenue-raising package which avoids placing large tax increases on the ballot but would tax such things as pornography, illegal drugs and the Missouri gambling winnings of out-of-state residents.

The Republican plan also includes several one-time, non-tax methods to raise money for the budget, such as sweeping $60 million of interest from various special state funds.

The GOP proposal also incorporates an idea by Democratic State Treasurer Nancy Farmer to shorten the time that insurance companies would have to turn over to the state any unclaimed proceeds when the company switches from a policyholder to an investor-owned company.

That is projected to generate about $30 million.

All told, the Republican plan outlined Friday would generate about $182 million, said sponsoring Sen. Charlie Shields, R-St. Joseph.

Earlier this week, the Senate passed a proposed budget for the fiscal year starting July 1 that includes a contingency to avoid about $200 million in spending cuts if the legislature comes up with new revenue.

The budget -- estimated at $18.8 billion or $19 billion, depending on the potential new revenue -- is expected to go to negotiations next week with members of the House and Senate budget committees.

Holden has threatened to veto the budget as it stands, saying it relies to heavily on cuts and does not give voters the option of raising taxes.