Lawmakers try to keep Missouri manufacturing afloat
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Lawmakers try to keep Missouri manufacturing afloat

Date: April 24, 2007
By: Cliff Ainsworth
State Capitol Bureau
Links: SB 585; SB 706; SB 30; HB 1000; HB 327; HB 131

JEFFERSON CITY - With Missouri undergoing a decline in manufacturing, state lawmakers are debating a number of ideas to give the industry a reason to stick around as long as possible while the economy becomes increasingly service-oriented.

A barrage of bills have been introduced in the legislature this year that would give manufacturers tax incentives to stay in Missouri.  Many of the measures would exempt manufacturers from paying sales taxes on utilities as well as equipment and materials used in the manufacturing process, while other proposals are designed to lure new manufacturers to the state through temporary corporate tax abatements.

One of the bills containing the utility sales tax exemption has cleared both chambers and is now headed to conference committee to draft a final compromise.  Although the legislation contains a laundry list of various tax credits, Rep. Ron Richard, R-Joplin, the sponsor, said the tax break provision for manufacturers is especially important to keep the industry competitive.

"All kinds of manufacturing have been on decline in the state of Missouri for years," Richard said.  "That's the sector we're losing all the jobs in."

According to the National Association of Manufacturers, Missouri lost more than 65,000 manufacturing jobs between 2000 and 2006.  Manufacturers make up 15% of the state's GDP and use nearly a quarter of its energy supply.  The exemption on state and local energy sales taxes in Richard's bill is estimated to total $46 million in state tax collections.

The decline of manufacturing in Missouri is part of a national trend.  Since 2000, the manufacturing industry has lost more than 3 million jobs across the country, many to overseas workers.  Some industry watchers say the exodus to foreign soil is also threatening the sector in Missouri.

Tracy Weddle, Director of Taxation and Fiscal Affairs for the Missouri Chamber of Commerce, said said some Missouri manufacturers have indicated they are approaching bankruptcy or are considering moving operations out of the state - and in some cases the country - to stay afloat. 

Most recently, engine maker Briggs & Stratton announced Thursday it will close its Rolla plant and move the operation to China to the tune of 480 lost jobs.  Earlier this year, deep job cuts were announced at the Chrysler plant in Fenton, Mo.

Weddle said manufacturers typically provide well-paying jobs with good benefits and are also committed to the states and communities in which they operate.  In Missouri, Weddle said,  manufacturers pay an annual average wage of $44,000 - about $8000 more than the average statewide wage. 

"We think that they're critical to Missouri's economic engine, and it's important to get them here and to keep them here," Weddle said.  She said 40 manufacturers are closely following the utilities sales tax exemptions.  

Ray McCarty, a lobbyist for Taxpayers Research Institute of Missouri, a business-affiliated organization, indicated the utilities tax exemptions in Richard's bill are critical in light of the state's manufacturing struggles.

"This is probably the most important sales tax bill on manufacturing that we've ever had in the state of Missouri because of the comfort level it will give our in-state manufacturers who are struggling to maintain Missouri jobs," McCarty said.  The Taxpayers Research Institute of Missouri is pushing heavily for the measure's approval.

But Rep. Jeff Roorda, D-Barnhart, argues tax cuts should be targeted elsewhere.  He cast one of 13 votes against a separate bill, sponsored by Rep. Shannon Cooper, R-Clinton, that also eliminates sales taxes on utilities used for manufacturing.

"This is pretty clearly legislation that benefits corporations, and the bigger the corporation the bigger the benefit," Roorda said.  "I think at a time when Missouri's economy is flagging in comparison with other states throughout the country that we have to look out for working-class Missourians first and wealthy corporations second."

However, one small manufacturer says it would benefit, too.

Prestressed Casting Company, which makes concrete components for various structures like parking garages and sports stadiums at plants in Springfield and Ozark, spends anywhere from $25,000-$40,000 a month on natural gas and $6,000-$7,000 a month in electricity.  General Manager Keith Wallis Jr. said the company, which employs about 200 workers, is at a disadvantage when competing for jobs with out-of-state manufacturers who don't have to pay sales taxes on utilities.  He said eliminating the tax would be an important step in helping his company be competitive. 

"It's not a huge thing (on its own)," Wallis said, "but little things add up."  He said that because of the cost of utilities sales taxes, Prestressed lost a state contract to an out-of-state business to make components for a prison in Charleston, Mo.

"Why when we're spending tax money to build something are we giving it to someone from out of state?" Wallis asked, and added that the exemption would help manufacturers get on an even playing field.  "That's all we're asking.  Fair is fair."

Meanwhile, Rep. Rachel Storch, D-St. Louis City, is trying to attract new manufacturers to the state with a bill that would exempt them from state corporate income tax for their first five years of operation in Missouri.

"It's important that we make Missouri an attractive place for manufacturers to land when they're considering location," Storch said, "and incentives do make a difference."

Storch continued, "Manufacturing is under tremendous pressure both because of international competition and the cost of health care."  She said a tax abatement was not simply a handout for big corporations, because, "companies doing well in the state of Missouri translates into jobs for working families."

Storch's bill has cleared a House committee and currently is awaiting debate in the House.