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Senate narrowly rejects sales, corporate tax increases

April 30, 2003
By: Jason McLure and Melissa Maynard
State Capital Bureau

JEFFERSON CITY - By a single vote, Missouri's Senate defeated a proposal to bring a temporary sales tax increase before voters as a means to balance the state budget.

Three Republicans joined 13 Democrats in voting for the measure, while the remaining 17 Republican senators voted against it.

The Senate also rejected raising taxes on out-of-state corporations before agreeing to a package to raise $122 million in new revenue, largely through one-time sources.

The sponsor of the half-cent increase, Sen. Doyle Childers, R-Reeds Spring, said that because of the magnitude of the budget crisis, the voters should have the opportunity to choose an increased sales tax instead of dramatic reductions in vital services such as education and health care.

"I think every family and every individual in this state will know or be acquainted with either a family member or a friend or a neighbor who will be impacted by these reductions," he said. "I believe the citizens of this state should make the final decision."

But Senate Floor Leader Mike Gibbons, R-St. Louis County, said that a sales tax increase of that magnitude would be more burdensome for the people of the state than program cuts. Gibbons cited the defeat of ballot issues in November and August to raise taxes on tobacco and gasoline as evidence that Missourians were in no mood to approve tax increases until state government reformed itself.

"This session is nothing if it isn't drudgery," Gibbons said. "It is not fun. It is difficult, and there is pain that is going to be felt across the state in various sectors, but I think it is necessary for us to take care of our own financial house."

In an unexpected turn of events following the defeat of Childers' half-cent increase, by voice-vote the Senate, without a sound in opposition, approved a much larger sales tax increase proposed by Sen. Ken Jacob, D-Columbia, that would have raised $600 million for the state.

While Jacob slapped high fives with Childers and pecked fellow Democrats on the cheek, several embarrassed Republicans quickly admitted that they were confused on what exactly they were voting on when they approved the Jacob's one-cent sales tax hike.

While Democrats and Republicans alike chuckled, a red-faced Senate President Pro Tem Peter Kinder, R-Cape Girardeau, called the sales tax's approval "an errant voice vote" and hastily passed a measure demanding a revote. When that measure passed, Jacob, acknowledging that his larger tax increase faced certain defeat in a revote, withdrew his proposal.

But as debate continued, some senators couldn't resist a dig at the unusual turn of events.

"For about seven minutes, we had a balanced budget," said Sen. Pat Dougherty, D-St. Louis City.

The Senate also rejected a measure to close what Democrats refer to as "loopholes" in the state's tax law that allow companies to shift profits among out-of-state subsidiaries in order to avoid taxes. While Jacob decried the current law as corporate welfare, Gibbons said changing it would drive some of Missouri's largest employers out of state.

Eventually, the Senate passed a bill that raised $122 million in new revenue to help balance the spending plan for next year they approved last week. Much of that money comes from temporarily disallowing businesses to depreciate assets on their Missouri tax returns as quickly as is permitted on their federal returns.

However, the Senate is still nearly $80 million short of balancing their budget, and Democrats said that it was unfortunate more money wasn't included in the new bill to help avoid cuts to Missouri's schools, colleges, and mental health agencies.

"It brings in very little ongoing money," said Jacob. It's just a bandaid for a head that's about to be amputated,"

In January, Gov. Bob Holden proposed a $19.3 billion state budget that depended on the passage of two-thirds of a billion dollars in tax increases. The Republican-controlled House responded by passing a budget $700 million smaller than Holden's. Last week, the Senate approved its own version of next year's budget, totaling $18.8 billion, but that depended on finding $200 million in new revenue.

The Senate's plan will now go before the House, which earlier passed a much smaller revenue package. The two bodies must then agree on how to close their differences before sending a budget on to the governor. Holden has already vowed to veto the Senate plan, which is closer to his own than the House's plan. This has led several lawmakers to speculate that the legislature will be back for a special session well into June to hammer out the coming year's budget.