Officials oppose sales tax holiday

A legislative proposal for a late June sales tax holiday is stirring opposition from city and county officials already struggling with lagging sales tax revenue from a slowing economy.

The proposal, approved in a Missouri House committee last week and expected to come up for debate when lawmakers return to Jefferson City following their annual spring break, sets aside June 27 through June 29 for Missourians who want to spend their federal tax rebate stimulus checks.

The proposal would eliminate state and local sales taxes on any item with a price tag below $600, sets no limits on purchases and, unlike the annual sales tax holiday for back-to-school purchases, includes no allowance for cities or counties to opt out.

The measure has municipal and county officials upset for two reasons -- the likely loss of sales tax revenue from a spurt of midyear purchases as well as what they view as a continuing disregard of their financial needs by lawmakers.

"I must tell you this recent news is terribly disturbing," Cape Girardeau Mayor Jay Knudtson said. "It begins to cross the line a bit. It seems to me our state government should spend a little more time worrying about what is going on in Jefferson City."

Over the past four years, Cape Girardeau has enjoyed sales tax revenue growth ranging from 1.9 to 4.6 percent. But for the first three months of 2008, general revenue receipts are down 1.3 percent. For the first eight months of the city's fiscal year, the growth is 0.1 percent.

"Receipts are down this year, and we are believing for the first time that is not an anomaly," Knudtson said.

The city is already taking steps to plan for revenue that doesn't meet budgeted growth, he added.

Cape Girardeau County is also experiencing a slowdown in revenue growth. While annual sales tax increases have ranged from 3.1 to 4.7 percent over the past four years, the first three months of 2008 has produced sales tax revenue that barely exceeds the same period last year. In each of the past three years, growth during the first three months of the year was 4.2 percent or higher.

"I don't think it is good economic planning to say I need revenue and then turn around and give it back," said Roger Hudson, Cape Girardeau County treasurer. "I don't disagree necessarily" with the tax holiday, he said, "but it needs to be a local decision."

Federal stimulus checks will start arriving in the mailboxes of taxpayers beginning in May. The checks will be $300 to $600 for most single taxpayers and $600 to $1,200 for married couples. The checks will also include $300 for each child under 17 claimed on the taxpayer's 2007 tax return.

State sales tax rates total 4.225 percent. In Cape Girardeau, buyers pay five additional sales taxes totaling 2.25 percent and two county sales taxes totaling 1 percent.

The idea for a tax holiday tied to the stimulus plan was added to a bill creating a tax holiday period every November for the purchase of energy-efficient products costing $1,500 or less. When the amendment was added, it caught observers by surprise, said Dick Burke, executive director of the Missouri Association of Counties.

The association wants all sales tax exemptions limited to state sales taxes, Burke said.

"This caught us off guard," Burke said.

The June tax holiday would come at a time when all county budgets are already in place, he noted. "There is no way to budget for it, and counties are hemorrhaging right now because of a lot of things. This is one more cut."

The counties association, spurred by concerns raised in Cape Girardeau County, helped defeat an attempt in 2007 to eliminate the local sales tax on utility purchases by manufacturers. Cape Girardeau County officials objected based on the projected $300,000 loss of tax revenue paid by the Procter & Gamble plant along Highway 177. The potential loss of sales tax revenue paid by other manufacturers was not calculated at the time.

The stimulus tax holiday proposal would allow each taxpayer to purchase far more than the amount of their stimulus check without paying sales tax. That will spur consumers to restrain their spending until the tax holiday weekend and then make a number of major purchases at once, Knudtson said.

"We can't survive without the revenue generated by these sales taxes," Knudtson said.

The stance against the tax holiday bill is likely to generate some criticism, Knudtson said. "People will say, 'Mayor, there you go being greedy.' But sales tax revenue is the engine behind our budget, and if we don't have the cash registers humming, we don't have the ability to pay our bills."

rkeller@semissourian.com

335-6611, extension 126

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