Blunt's plans for revenue
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Blunt's plans for revenue

Date: January 24, 2007
By: Cliff Ainsworth
State Capitol Bureau
Links: The governor's budget proposals

JEFFERSON CITY - For the first time in recent years, a Missouri governor is reporting the state's economy is so healthy that he proposes to leave a couple hundred million dollars unspent.

"We do have a surplus," Gov. Matt Blunt proclaimed in his State of the State address.  "But it is the people's surplus, and we must use it wisely."

Blunt's administration announced Wednesday night they expect the state will finish the current fiscal year on July 1 with a surplus of $516 million.  And even with his package of tax cuts and increased spending for education and health care in the next budget year, Blunt told a joint session of the legislature his budget package would leave $200 million unspent.

"The budget I submit to you provides a 200 million dollar ending balance to fund key priorities including education and health care in future fiscal years.

The largest spending increases Blunt proposes for the next fiscal year are for Medicaid and elementary and secondary education, while the tax cuts center on cutting social security taxes.

The governor asked for a 4.4 percent increase in education funding with higher education at a 6.2 percent increase under the governor's plans.  Medicaid received the largest boost among Blunt's state-revenue spending items, with more than $152 million.  The largest portion of the new Medicaid spending under Blunt's plan would go to modernizing the program's payment system.

The centerpiece of Blunt's proposed tax cuts would exempt $100 million in Social Security benefits from state income tax, a measure that has been pushed by a number of legislators.  Blunt's individual tax relief would also allow Missourians to deduct 100 percent of long-term care insurance premiums. Currently, the deduction is limited to 50 percent of premiums.

Blunt also asked for $30 million in business tax cuts.  "We cannot create new ongoing costs by expanding government," Blunt said, a position supported by Dick Fleming, President and CEO of the St. Louis Regional Chamber and Growth Association.  Fleming met with the governor and other state legislators last week to highlight RCGA's legislative priorities that included tax breaks for business.

"Our suggestion was to take a strategic budgeting approach to any surplus and to consider investing those dollars in high impact capital improvements that have economic benefit, or economic development programs that actually return dollars to the state," Fleming said.  His organization pushed to increase the funding cap on the Quality Jobs Program, which Blunt asked to double to $12 million in his speech Wednesday, calling the program "the most important economic development tool that we have ever had." 

Another business lobbying group is calling for certain forms of energy used by manufacturers, including natural gas and coal, to be exempt from local sales taxes.

"We hope if there's tax reform it means tax reduction and helps stimulate the economy," said Ray McCarty, Executive Director of the Taxpayers Research Institute of Missouri, a division of the Associated Industries of Missouri. 

But Blunt's budget does not include a tax exemption for energy forms used in manufacturing. It instead proposes a change to Missouri sales tax law that would add an estimated $30 million in state revenue by tightening the restrictions on what manufacturing equipment can escape the sales tax.  The budget cited Missouri Supreme Court decisions that have allowed telephone calls and financial information to be exempted from taxation as the reason for the proposal.

Manufacturers contribute the largest percentage of Missouri's state gross product, the broadest indicator of the state's economic output, according to the state's economic development department.