It is “poor fiscal policy” to seek an increase in the state sales tax to fund transportation projects while at the same time passing an exemption that would “drain” transportation funding, Gov. Jay Nixon declared.
“I cannot support a new sales tax exemption that would drain funding for transportation at the very same time the General Assembly is asking Missourians to foot the bill on a $6 billion sales tax increase to fund transportation needs,” Nixon recently wrote in a veto letter of a bill that included a sales tax exemption for certain used car sales.
That exemption and more than 10 other “special breaks for a variety of industries” would reduce state and local revenue by up to $776 million annually, said Nixon, who vetoed all of the measures.
The used car sales tax exemption alone would reduce state and local revenues by as much as $60 million annually, according to the Legislature’s own estimate, the governor said.
“Not only would this revenue reduction impact the amount of state and local highway maintenance and construction that can be undertaken, it could also jeopardize matching federal highway funds and make it more difficult to cover debt service on previously issued bonds to finance state and local road and bridge projects,” Nixon stated in his veto letter.
The used car sales tax exemption would apply to vehicles that are more than 10 years old and priced less than $15,000, the governor noted. Those criteria are arbitrary, he added.
“For example, there is no sound economic or policy reason for why a 9-year-old vehicle that costs $14,999 or an 11-year-old vehicle that costs $15,001 is any more or less deserving of a tax exemption than the vehicles covered by this bill,” Nixon asserted. “With the average age of vehicles on America’s roads increasing to 11.4 years, the number of vehicles subject to this exemption and the corresponding impact to state and local revenue is likely to increase over time.”
Nixon also said it is “puzzling” that the Legislature would pass a bill in the previous session to reinstate a sales tax on out-of-state vehicle sales and then this year pass legislation to make vehicles exempt from sales tax.
Presiding County Commissioner John Griesheimer agreed with Nixon’s assessment. Griesheimer said he hopes the Legislature does not override the governor’s veto of the sales tax exemption for the used cars, saying it would mean a loss of revenue for the county.
Meanwhile, Missouri voters will go to the polls Aug. 5 to decide whether they want to approve a three-quarter-cent transportation sales tax.
The governor said the benefits of tax breaks passed by the Legislature this year will “go disproportionately to the wealthy” while the burden of the multibillion transportation sales tax would “fall disproportionately on Missouri’s working families and seniors.”
Nixon and the Legislature are entrenched in a budget battle that has even had repercussions in Franklin County.
The governor has frozen or vetoed $786 million in spending for the fiscal year that started Tuesday, and some of that money was designated to come to Franklin County.
The governor blamed the Legislature’s passage of the special breaks for various industries as one of the primary reasons that he had to veto and restrict spending to bring the budget into balance.
The Legislature could still override his vetoes in September.
Meanwhile, the budget battle between the governor and the Legislature has trickled down to the local level.
Some of the funding that was frozen by the governor’s office included money that was intended to go to county assessors’ offices across the state to help them operate.
Since the state money for assessors is not coming through at this time, the Franklin County Commission last week approved $215,220 to cover the assessor’s office in the meantime. The alternative would have been layoffs in the assessor’s office, officials said.
County officials don’t expect to know whether the state funding for the assessor’s office will be restored until after the September veto session.