After months of study, Missourians now have the opportunity to see for themselves the real impact of a series of bills passed by the Missouri General Assembly near the end of its 2014 legislative session.
Associated Industries of Missouri and the Taxpayers Research Institute of Missouri have performed a “reality check” on the true cost and benefit of seven bills vetoed by Governor Nixon less than a month after the end of the regular legislative session.
At the time of his veto, Nixon estimated that the bills would take more than $425 million out of the state budget, and more than $351 million dollars away from local tax collections. He then embarked on a series of trips around the state to share his views of the “damage” these tax bills would do to local government services. He also withheld hundreds of millions of dollars in state support for local school districts and other state programs in anticipation of an override of his vetoes of these bills by legislators.
Now, after a thorough review of case law and the actual language in the tax bills, our findings confirm what supporters of the legislation have known all along: The cost to state and local budgets due to the package of seven bills will be less than $20 million dollars and may in fact result in protection from tax losses from refund claims by providing needed clarification of existing statutes. The components of this legislation will also help Missouri attract employee intensive data center operations, and enhance revenues by keeping dance instruction and gymnastic center employers in business.
“In most cases, these bills simply clarify for the Missouri Department of Revenue (DOR) what taxpayers should already be receiving, which does not cause a loss to state or local funds,” said Associated Industries of Missouri president Ray McCarty. “The Office of Administration has exaggerated the impact of these pieces of legislation. The amounts were not calculated based on facts and reasonable assumptions at all.”
For example, the Office of Administration claimed more than $152 million loss to state funds and an additional $152 million loss in local funds resulting from the exemption of items purchased for use in data processing that was included in SB 584. In fact, the Missouri Supreme Court has ruled in three cases that data processing is “manufacturing” for the purposes of the sales tax law. Following these decisions, an even broader exemption was placed in the law in 2007 and all companies that perform data processing activities should be taking advantage of the exemption that is available under current law. By clarifying the law in SB 584, the law would be clear for taxpayers and the DOR and the exemption would begin from this point going forward. But if the veto is allowed to stand, taxpayers could seek refunds under the existing law and the state and local governments could be required to refund taxes previously collected on purchases used in processing data. “It makes much more sense to clarify this exemption prospectively, rather than requiring taxpayers to litigate, potentially exposing the state and local governments to large refunds,” said McCarty.
“These studies break down the language of each bill, explain the differences between the administration’s interpretation and the true language of the legislation, and calculate the cost and benefit of each bill,” said McCarty. “They provide a true picture of each vetoed piece of legislation, and it is our hope that legislators, local officials and citizens alike will read the studies and back our call for legislators to override all of the vetoes in September.”
AIM/TRIM is releasing its studies of the seven bills on its website. Links to each of the studies are provided below.