A proposal to lower the tax rate for Missouri sawmills, to the same level paid by other agricultural businesses, could help the state's struggling lumber industry.

Sawmills are regulated by the U.S. Department of Agriculture and many state agencies, including the Department of Natural Resources and Missouri Department of Economic Development, in the same way other agricultural businesses are, said Steve Jarvis, executive director of the Missouri Forest Products Association.

"This change will give a little tax break that should have been given all along. It's really to right a wrong," said Jarvis, who has been pushing for this legislation for three years.

House Speaker Rep. Steven Tilly, R-Perryville, agrees.

"It's a matter of fairness," Tilly said. "This is an industry that is unfairly taxed."

Southeast Missouri's sawmills are an important part of our local economy, Tilly said. There are nine sawmills in Bollinger County, five in Perry County and one each in Scott and Cape Girardeau counties, according to the Missouri Department of Conservation's 2010 Directory of Primary Wood Producers. Those sawmills employ about 200 people.

The USDA ranks Missouri third in the nation based on economic effects of forestry, and most of its more than 400 sawmills are in the south-central region of the state.

House Bill 112 and Senate Bill 55 would reclassify sawmills at the agriculture tax rate of 12 percent, less than half the 32 percent business tax rate they now pay.

Jarvis estimated the tax savings to sawmills in Missouri would amount to less than $4 million if the legislation is approved.

Similar legislation passed both houses in 2009 but was vetoed by the governor because it was part of a package of legislation he objected to on other issues, Tilly said. He hopes it will go to the governor's desk on its own for approval by the end of the session.

The state's sawmills have suffered as a result of the recession and sharp drop in new home construction. There are about half as many sawmills in operation post-recession, Jarvis said.

"So many forest products are directly related to the overall well-being of the economy," he said. "Several products serve housing directly. We haven't been doing as much manufacturing, so that's a lot less pallets being needed as fewer goods are being made and shipped."

The industry is off life support, but still in serious condition, he added.

Most of Missouri's sawmills are small, family-owned operations that employ fewer than 10 people, according to Jarvis.

One of the state's largest sawmills is East Perry Lumber Co. in Frohna, Mo., with 80 employees.

"The wood we are all making is not going up in value," said Tommy Petzoldt, procurement manager at East Perry Lumber. "We're not able to pass the buck like Walmart or car manufacturers. When their costs go up, they charge you more for a car or a box of Wheaties. We're not able to do that when our costs go up for transportation, health insurance, costs of electricity," .

Reducing the amount of taxes sawmills pay will free up resources for companies to reinvest by purchasing equipment and hiring employees, Petzoldt said.

The recent spike in gas prices is making things even tougher on sawmills. Trucking companies are charging higher fees to transport lumber, as well as wood byproducts like sawdust and mulch.

A 2007 study by the Missouri Economic Research and Information Center, conducted before the housing market bottomed out showed 27,762 people were employed in 1,436 businesses in Missouri's forest products industry, earning $1.25 billion in salaries annually. A worker in Missouri's forest products industry earned an average wage of $41,289, 11 percent above the state's average wage, the report showed.

mmiller@semissourian.com

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7029 Main Street, Frohna, Mo.