Better competition

By Daniel P. Mehan

It has been a long time since lawmakers have had the opportunity to provide tax relief for Missourians, but strong fiscal management over recent years has put our state back in the black and in the position to reinvest state revenue in the people who generated those funds: taxpayers. How will lawmakers decide to use that power?

Currently under review by the Missouri Legislature is legislation that could save Missouri manufacturers thousands of dollars annually and put money back into revenue coffers through increased economic activity this tax relief would stimulate. Strongly advocated by the Missouri Chamber of Commerce and Industry, House Bill 131 would exempt manufacturers from paying taxes on utilities used in the manufacturing process. This legislation, sponsored by state Rep. Shannon Cooper, has been passed by the House Committee on Tax Reform and is slated for floor debate in upcoming weeks.

Every neighboring state but one, Illinois, exempts utilities used in the manufacturing process. The Missouri chamber believes this legislation is a critical step to level the playing field for our state's manufacturers. It could be one of the most important economic development measures the legislature considers this legislative session.

Specifically under the legislation, beginning in 2008, manufacturers would be allowed to exempt the sales tax paid on the energy use (electricity and natural gas) related to industrial production. Employers would still be liable for sales tax on the non-manufacturing energy used at a facility, which is typically lighting, heating and cooling and office equipment.

House Bill 131 also would exempt manufacturers from paying sales taxes on equipment and machinery used for research and development. This provision reverses the consequences of a recent Missouri Supreme Court decision in Emerson Electric Co. v. Director of Revenue. In that case, the court ruled that machinery used for research and development purposes did not fall into a category of tax-exempt materials for manufacturers.

HB 131 would provide about $10 million in tax relief to Missouri manufacturers, it has been reported. The Missouri chamber believes much of the fiscal impact to the state through the exemption would be offset by increased economic activity in the manufacturing sector.

Lawmakers need to consider moves, such as HB 131, to preserve the jobs and economic impact manufacturing provides for our state. Here are a few reasons why:

According to the National Association of Manufacturers, from 2000 to 2006 more than 65,000 manufacturing jobs were lost in the Missouri manufacturing sector. Yet Missouri manufacturers still employ almost 300,000 Missourians, and these workers make up an important percentage of our workforce.

Missouri manufacturers pay an average annual wage of $43,905, compared to average annual statewide wages of $36,205. Manufacturing benefits, such as health-care insurance and retirement benefits are typically better than many other industry sectors.

Missouri manufacturers exported $9.7 billion of the $10.5 billion, or 93 percent, of the total goods exported to other countries. Manufacturers are a critical driver of Missouri's economic engine.

Missouri manufacturers provide good-paying jobs with good benefits. They are a cornerstone of our economy. Most are strongly committed to the state and the community in which they operate. We urge lawmakers to use their power to help our manufacturers be more competitive in Missouri by voting yes when HB 131 comes up for debate.

Daniel P. Mehan is the president of the Missouri Chamber of Commerce and Industry in Jefferson City, Mo.