The Nixon administration has been hard at work contacting various constituencies to let them know they believe the taxpayer protection bills passed by the legislature will cost the state and local government enormous amounts of money. Sound familiar? It should.
After the legislature passed House Bill 253 last year, a responsible tax cut measure that included some items requested by the administration, the Nixon administration took to podium and announced the bill would decimate state revenues, costing the state $1.2 billion in a single year. They vowed to protect the state budget and withheld money from education as a protective measure, in case the legislature overrode the governor’s veto. Why education? Good question, but back to the story. The legislature tried but failed to override the governor’s veto, mainly because of pressure from local school officials.
The legislature then passed Senate Bill 509, another responsible tax cut bill. This time, the bill was simply a tax cut bill with safeguards requiring enough extra state revenue to pay for each step of the tax cut. The bill requires a gain of at least $750 million in new state revenue before the state cuts approximately $620 million in taxes. Again, the Nixon administration claimed there was a flaw in the bill that would allow taxpayers to pay no income tax on income above $8,000. A ridiculous claim that was disputed by a former Missouri Supreme Court Justice and many others. And a position that would likely be disputed by the Governor himself if he were governor when the provision actually takes effect. Regardless, the Governor claimed the bill would cost even more: $4.8 billion per year. The legislature overrode the governor’s veto and the tax cut will become law. State revenues are protected, and there will be no loss of revenue. No $4.8 billion hole in the state budget.
Less than two weeks later, the legislature passed several bills aimed at reigning in a state agency that many legislators believe has not treated taxpayers fairly: the Missouri Department of Revenue (DOR). Taxpayers have disliked tax collectors since biblical times, so it is not a new issue. But every so often, it becomes necessary for the legislature to address common themes that have surfaced in taxpayer mistreatment. This year, the case was made by taxpayers that the DOR was misinterpreting statutes regarding the handling of refund claims and sales taxes on gym memberships, dance lessons and private trainers. Taxpayers made the case that although they thought existing sales tax exemptions should apply to transmission of electricity to homes and businesses, data centers, cancer treatment drugs and devices, utilities used to process food, etc., the DOR had disagreed. The legislature addressed many of these concerns in bills that passed, as most bills do, in the final days of the legislative session.
So what was the reaction from the Nixon administration?
A press release, issued during a fly-around press conference on Tuesday of this week, claiming these corrections of the Department of Revenue’s mistakes would cost a total of $776.3 million. $351.2 million of that cost would be borne by local governments, according to the Nixon administration. The governor’s staff contacted local government officials and power companies to let them know the “cost” of these taxpayer friendly bills. Remember, the theme of these bills is to force the Department of Revenue to be fairer with taxpayers and, in some cases, to recognize exemptions to which taxpayers are probably already entitled, if they challenge the DOR in court.
Even the spreadsheet supplied by the administration points out the reason for the bills. The state says one provision requiring the DOR to notify affected businesses of changes in the sales tax law would cost the state and local governments $200 million! Really? That means the state is tricking retailers now by not telling them about changes in the tax law, waiting until they have not collected the sales tax from their customers, then auditing them and collecting $200 million in back taxes? Either this estimate is really inflated, or it points out the need for the legislation. I would think the Department of Revenue should have some explaining to do about the way they treat taxpayers, assuming this estimate is true.
The administration also claims the data center sales tax exemption in the bill will cost state and local governments $304 million, meaning the state would have to be currently collecting sales taxes on $3.6 billion on purchases of computers, utilities and the like by data centers. One of the largest data centers in Missouri only spends $11 million per year on such purchases and there are, unfortunately, very few of these large data centers in Missouri. The administration estimate is simply outrageous. Also not considered is the fact that data centers are probably already entitled to a sales tax exemption on these items under existing law.
So how will the Governor address this claimed “shortfall?” While he has not said exactly, Governor Nixon said in a statement, “By going on a $776 million special interest spending spree, members of the legislature have broken their own budget, and I’m prepared to fix it.” Guess we will have to wait and see.
Until then, Associated Industries of Missouri will continue to bring you the truth about the bills we have been successful in passing and we will continue to work to enact these taxpayer friendly bills into law.