Missouri Gov. Jay Nixon spent a good portion of this week blasting Republican legislators for passing a “grab bag” of special interest tax cuts in the final hours of the session.
The tax exemptions, contained in eight different bills, include tax breaks for country club memberships, personal seat licenses for fans of sports teams, dry cleaners and fast food restaurants.
Nixon claims the tax breaks could cost the state $776 million in reduced general revenues which would result in deep budget cuts to vital programs. That figure includes a projected $351 million loss from local governmental budgets.
Critics are calling those numbers way overblown and based on faulty projections and assumptions. They say the Democratic governor is engaging in fear-mongering. They argue that tax cuts will stimulate our state’s economy and that Nixon is failing to take into account the positive economic impact that will occur if businesses are allowed to keep more of their own hard-earned money,
It is a familiar debate and one that was front and center much of this past session as Republicans also passed the first income tax reduction in nearly a century.
Republican leaders, including State Sen. Brad Lager, say that one of the great achievements of the Republican-controlled General Assembly has been to change the debate in the state Capitol over the past decade from how to spend more money to how to return more of it to taxpayers.
No doubt that is a good thing for individuals and businesses who are recipients of the tax breaks. It’s not such a good thing for those who are responsible for crafting local governmental budgets. Reduced revenue often means tough choices including cutting services and jobs.
And there is no doubt local elected officials are nervous about the potential impact these cuts could have to their budgets.
That is because the tax exemptions passed on the final day of the session are largely related to sales taxes and local governmental entities are very reliant on sales tax revenues.
Franklin County officials were briefed by the governor’s office that these exemptions could have a possible $2.4 million negative impact on Franklin County’s sales tax. That would be a significant hole in the county budget.
According to the governor’s estimates, cities would also be impacted. Washington could lose $976,587 in revenue. Union is facing a potential loss of $443,301 and St. Clair another $133,818 in reduced revenue at least if you believe the governor’s office estimates released this past week.
State Budget Director Linda Luebbering, who is highly respected by members of both political parties, made it clear that the figures are estimates — not exact projections. But she warned that local entities need to be prepared for the potential that they are going to have less revenue beginning Aug. 28 if the tax cuts become law.
Even that isn’t certain. The governor could veto all or some of the bills that contain the tax exemptions and lawmakers could then attempt to override the vetoes.
The tax cuts set up another potential showdown between the Democratic governor and the Republican-led Legislature over taxes and trickle-down economics.
It is a confrontation that many local elected officials including Republicans, hope the governor wins.