“…The bills I am vetoing today appear to be part of an ongoing effort by the general Assembly to enact special exemptions and credits that pick winners and losers through the tax code and shift a greater tax burden to the majority of taxpayers who are unable to utilize such loopholes…”
“…The unabated growth of these special carve-outs and the fiscal irresponsibility of failing to budget for them are all the more troubling when the general Assembly is simultaneously seeking to raise taxes on all Missourians with what could be the largest tax hike in Missouri history…”
Governor Jay Nixon vetoed a number of bills today:
June 11, 2014
Fiscally irresponsible carve-outs were not accounted for in the budget passed by the General Assembly or in the budgets of local jurisdictions they would impact
Jefferson City, MO – Gov. Jay Nixon today vetoed legislation containing more than a dozen special breaks and exemptions passed in the final hours of the legislative session. These special interest carve-outs would reduce state and local revenues by up to $776 million annually and were not accounted for in the Fiscal Year 2015 budget passed by the legislature or in the budgets of the local jurisdictions they would impact. In a letter addressed to members of the General Assembly, the Governor faulted the legislature for ignoring the legislative process and adding new loopholes to the tax code that will shift a greater tax burden to the majority of taxpayers.
“Rushed through with little debate in the final hours of the legislative session, these special breaks and exemptions for a handful of special interests are the result of a deeply flawed process and a fundamentally misguided approach to tax policy,” Gov. Nixon said. “Many of the most costly provisions were slipped into bills without a public hearing or even a fiscal note, and none of these giveaways were accounted for in the budget the legislature sent to my desk or in the local budgets of the jurisdictions they would impact.”
The provisions include special breaks for fast food restaurants, personal seat licenses, commercial dry cleaners and laundries, data storage and processing, certain used vehicles, farmers’ markets and fitness centers. The fiscal impact of these provisions, which would reduce state and local revenues by as much as $776 million annually starting in the fiscal year that will begin on July 1, was not accounted for in the budget passed by the General Assembly or in the budgets of local jurisdictions. This includes a $425 million annual reduction in state tax and a $351 million reduction in local taxes.
Most of these provisions would impact sales tax collections, and therefore would reduce local tax revenues that support police, fire, ambulance, emergency services, parks, children’s services and other public services provided at the local level. The loss of local revenue from these provisions could also impact repayment of voter-approved bonds issued to finance capital improvements such as county jails, county hospitals, fire stations, emergency management centers, road projects and other critical public infrastructure.
“These special carve outs and loopholes would undermine local public services and flout the will of voters by eroding revenues that support services like firefighters and cops, libraries and ambulance services, snow plows and health inspectors, public transit and road repair,” Gov. Nixon said. “From storm water management in West Plains to fire protection in Webster Groves, voters in communities across Missouri have come together to pass local sales taxes to support local public services and capital improvements . These special breaks passed by the General Assembly would siphon these voter-approved resources away from their intended purpose, and into the pockets of the well-connected.”
The reduced state sales tax revenue would also reduce funding from dedicated sales taxes for K-12 schools (also called the Proposition C sales tax), Highways, Conservation, State Parks, and Soil and Water Conservation Programs.
“Perhaps most troubling is the way the General Assembly is carving out special sales tax breaks for a select few, while pushing a $6.1 billion sales tax hike on all Missourians,” Gov. Nixon said. “Passing secret, sweetheart deals so that the well-connected can pay less, while asking all Missourians to pay more, reflects priorities that are dangerously out of whack.”
Senate Bill 693, which would reduce state and local highway funding by more than $30 million annually, was passed just two days after legislators sent to the ballot a $6.1 billion sales tax increase to fund roads.
“Instead of engaging in an open and honest debate about the overall tax policy of our state, the legislature has once again opted for an undisciplined, scattershot approach by adding more loopholes to the already dizzying array of carve-outs that riddle our tax code,” Gov. Nixon said. “My vetoes today are a first step toward restoring fiscal sanity to a budget process that has gone off the rails. That being said, I have the responsibility to maintain fiscal discipline regardless of whether my vetoes are sustained. Moving forward, I will take the actions necessary to account for the reduced state revenues resulting from these giveaways and keep our state on a fiscally sustainable path.”
The Governor vetoed the following bills:
Senate Bill 693, which would exempt from state and local sales tax certain used vehicles and rights of first refusal for tickets sold at the Sprint Center in Kansas City, and would expand the Wine and Grape Production Tax Credit;
Senate Bill 584, which would, among other provisions, exempt from state and local sales tax items used in the storage or processing of data in any form, items used in the generation, transmission, distribution, sale or furnishing of electricity by power companies, and certain fees paid to places of recreation.
House Bill 1865, which would create new exemptions from state sales taxes for the cost of utilities used by restaurants, grocery stores, convenience stores, fast food restaurants and other facilities engaged in food preparation;
Senate Bill 612, which would exempt commercial laundries and dry cleaners from state and local sales taxes on various purchases, and would waive tax liability for certain business.
Senate Bill 860, which would enable a purchaser to obtain a sales or use tax refund, even when they have current tax delinquencies;
House Bill 1296, which would authorize certain corporations to utilize an alternative method of determining the amount of their income that is derived in Missouri and would add graphing calculators to the back to school sales tax holiday.
Senate Bill 727, which would exempt certain items purchased from some, but not all, farmers’ market vendors from state and local sales and use taxes;
Senate Bill 662, which would waive tax liability for certain businesses and would exempt from sales tax rights of first refusal for tickets sold at the Sprint Center in Kansas City;
House Bill 1455, which would allow a business to claim a sales tax exemption without requiring it to prove eligibility for the exemption;
Senate Bill 829, which would enact duplicate legislation to House Bill 1455.
[emphasis in original]
Governor Nixon’s letter [pdf] to the General Assembly:
Governor of Missouri
June 11, 2014
Members of the General Assembly:
I am writing to inform you of my veto today of a number of bills passed during the final hours of the legislative session that put the Fiscal Year 2015 budget you passed significantly out of balance. These measures would also negatively impact the budgets of local jurisdictions around the state, in addition to reducing sales tax revenues that provide dedicated funding to education, highways, conservation, parks and soil and water programs.
The bills I am vetoing today include House Bill No. 1296, House Bill No. 1455, House Bill No. 1865, Senate Bill No. 584, Senate Bill No. 612, Senate Bill No. 662, Senate Bill No. 693, Senate Bill No. 727, Senate Bill No. 829, and Senate Bill No. 860. Contained within these bills are loopholes and special breaks that a thorough fiscal analysis projects will permanently and immediately begin reducing state revenue by up to $425 million annually and local revenue by up to $351 million annually. Unlike the fiscal impact of Senate Bill Nos. 509 & 496, which was conveniently foisted off on future budgets, there are no delays, triggers, or other gimmicks that can be touted as shielding education, public safety, and other vital public services from the projected $776 million in state and local revenue legislators voted to to send to narrow special interests on the last day of the session.
The special tax breaks in these bills are not fiscally responsible. Indeed, not a penny of them was taken into account in the Fiscal Year 2015 budget you passed. Although legislators may have abdicated their fiscal responsibilities in failing to account for this budgetary impact, the resulting imbalance cannot be ignored and will have to be corrected through dramatic spending reductions by state and local governments. In addition to disregarding the budget process, legislators ignored the normal legislative process in rushing these bills to passage, slipping in costly provisions without public hearings and without fiscal notes reflecting the impact on state and local budgets.
Just as these measures were not accounted for in the state budget, neither has their impact been accounted for by the local jurisdictions that rely on local sales tax revenue to support police, fire, ambulance, emergency services, parks children’s services and many other vital public services. Indeed, the eduction in local revenue resulting from these special breaks could impact repayment of voter-approved bonds issued to finance capital improvements such as county jails, county hospitals, fire stations, emergency management centers, road projects and other critical infrastructure.
The new exemptions and loopholes in the bills that I am vetoing today are not the mere clarifications their supporters claim. Instead, they seek to overrule no fewer than twenty Missouri Supreme Court decisions going back to 1977 that have been followed by the Department of revenue over the course of previous and current administrations. The court cases sought to be abrogated by this legislation ruled that the laws enacted by the General Assembly required a tax to be collected, notwithstanding that a particular business had hoped to be excused from the legal obligations we all share. While it is well within the rights of a losing litigant to petition their elected representatives, it is wholly disingenuous to call doing so here anything than what it is – seeking a special exemption from the law, as currently written and confirmed by the courts.
The bills I am vetoing today appear to be part of an ongoing effort by the general Assembly to enact special exemptions and credits that pick winners and losers through the tax code and shift a greater tax burden to the majority of taxpayers who are unable to utilize such loopholes. With more than 260 current sales tax exemptions and tax credits, the continued erosion of the tax base through additional individualized exemptions and credits violates well-established principles of sound tax policy that call for a broad tax base so that tax rates can remain low. Indeed, legislative leadership has recently called for a comprehensive review of this dizzying array of tax exemptions. But rather than heeding calls to reduce costly and inefficient carve-outs, legislators have instead rushed through many more, leaving Missouri families to pick up the tab for education,law enforcement, and other vital public services.
The unabated growth of these special carve-outs and the fiscal irresponsibility of failing to budget for them are all the more troubling when the general Assembly is simultaneously seeking to raise taxes on all Missourians with what could be the largest tax hike in Missouri history. While the benefits of the more than one billion dollars in annual tax breaks legislators have passed over the last two months will go disproportionately to the wealthy, the burden of this multi-billion dollar tax increase for transportation would fall disproportionately on Missouri’s working families and seniors.
Throughout my time as Governor, I have worked with legislators on fiscally responsible ways to improve our tax code while protecting our state’s fiscal health and balancing the budget, including four tax cuts that I have signed into law. Even during this legislative session, I worked directly with legislators to put forward a specific, concrete proposal that would have lowered taxes for Missourians and reined in costly and inefficient tax credits for special interests, broadened the overall tax base and reduced tax rates, while protecting our ability to invest in education and other vital services. Unfortunately, legislators refused to enact this broad tax relief in favor of narrow giveaways. That is an endeavor I cannot support.
Jeremiah W. (Jay) Nixon
That’s gonna be one heck of a veto session.