Commission criticizes tax break

A state bill giving manufacturers a sales tax break on gas and electricity goes too far by eliminating local sales taxes on those purchases, Cape Girardeau County commissioners said Monday.

The three commissioners voiced unanimous opposition to the proposal, which was given first round approval Monday in the Missouri House. Commissioners also said they would enlist the help of Cape Girardeau and Jackson city officials in opposition.

"The way this thing started was as a state sales tax exemption to benefit Procter & Gamble and Bayer in Kansas City," Presiding Commissioner Gerald Jones said. "Now it is everything in the county, and it includes local sales tax. Not that I am being tight or don't want to be a team player, but the facts are we give Procter & Gamble substantial incentives, and that is a real understatement."

Neither lawmakers, the state nor local chambers of commerce, which are pushing the bill, asked if the county would support the tax break if local revenues were included, Jones said. "Who gave them permission to do that?"

Recent incentives for Procter & Gamble include a 2003 county bond deal worth $163 million to fund expansion at the plant on Highway 177. The deal included a mechanism allowing Procter & Gamble to avoid millions of dollars in property taxes as the bonds are repaid.

Last year, state Sen. Jason Crowell, R-Cape Girardeau, blocked an economic incentives bill because it did not include a utility sales tax exemption aimed narrowly at Procter & Gamble. This year's bill is an expansion of that proposal to cover all manufacturers in the state.

The bill awaiting debate exempts electricity, coal, gas, water, chemicals, machinery, equipment and "materials used or consumed" in the process of manufacturing, mining or recycling a product from state and local sales taxes. Businesses that would qualify include the Southeast Missourian, Rubbermaid in Jackson and BioKyowa in Cape Girardeau.

During debate Monday, lawmakers approved additional exemptions for pinball machines and other amusement devices, vending machine sales, sales to defense contractors and sales to state highway contractors, among others. The official estimate of the financial impact on state and local governments that accompanies the bill lists the potential loss of revenue as "unknown."

Some manufacturers are already exempt from sales tax on electricity. To gain the exemption, electric costs must equal 10 percent of the value of the product.

Cape Girardeau officials have estimated that the city would be denied about $110,000 annually out of $19 million in sales tax revenues. County estimates aren't complete, but sales taxes collected by utilities on customer purchases total about 6 percent of county sales tax revenue, or about $360,000 to $380,000 of county general revenue. Much of that tax is paid by residential consumers; county officials are uncertain of the amount paid by manufacturing businesses.

The money is important, Commissioner Jay Purcell said, but an underlying principle of local control is also at stake. Lawmakers are increasingly taking away local discretion in decisions, he said.

Commissioner Larry Bock agreed, adding that unlike much of the state sales tax, local sales taxes have received voter approval. "I still don't see how you can take something away that the people have voted on," he said.

Purcell urged that the county develop a united effort against the bill with Jackson and Cape Girardeau. Bock said he didn't want to wait. "It doesn't matter to me what Jackson and Cape Girardeau do," he said. "I am against it."

Jackson city officials planned to discuss the tax break measure with the Board of Aldermen during a work session Monday evening, city administrator Jim Roach said. The bill hadn't received much attention from the city until a call from county officials Monday, he said.

"I don't know the impact," Roach said. "... I have to figure out what kind of impact this is, really."

While Jackson has only three or four traditional manufacturers that would benefit from the bill within city limits, Roach said, the issue of taking away local revenues via actions in Jefferson City raises concerns.

"Why don't they just run everything?" Roach said. "We can all go home and they can run the city, the counties and the state."

Cape Girardeau officials have not taken a position on the bill, but city finance director John Richburg has said it would hurt an already tight city budget.

rkeller@semissourian.com

335-6611, extension 126