If politics makes for strange bedfellows, then the recent debate over local vehicle sales taxes in Missouri has made some that are even stranger.
On one side is the unlikely duo of Democratic Gov. Jay Nixon and Republican Lt. Gov. Peter Kinder, who agree that lawmakers should abandon any plans to override the governor’s veto of legislation reinstating the local sales tax on vehicle purchases made out of state. They are getting support from the conservative, anti-tax organization United for Missouri, and a nonprofit funded by the national Democratic Governors Association.
On the other side are Republican legislative leaders, local governments, auto dealers, the Missouri Chamber of Commerce and liberal policy groups who contend that not overriding the veto will hurt Missouri’s economy and blow a hole in local budgets by making it cheaper to buy a vehicle in another state.
The debate comes to a head Wednesday, when legislators return to Jefferson City to decide whether to overturn any of the governor’s vetoes.
Republican leaders maintain they have the votes to reinstate the tax. Others aren’t so sure.
“I’m still hopeful the veto will be overturned,” said Richard Sheets, deputy director of the Missouri Municipal League. “But it’s an election year, and when you talk about taxes during an election year, nothing is certain.”
For decades, Missourians have paid state and local taxes for vehicle purchases when they register them. But earlier this year, the Missouri Supreme Court said local sales taxes can’t be levied when vehicle purchases are made in another state, or when an individual sells a vehicle to another Missouri resident.
The only acceptable local tax on these types of purchases, the court said, is a voter-approved “use tax.”
Forty-one of Missouri’s 114 counties and around 90 municipalities — including Kansas City — have such local use taxes in place. A use tax also has been approved in Cass, Clay, Johnson, Lafayette, Platte and Ray counties, but not in Jackson County or the other cities in the county, according to the Municipal League.
Because of the court’s ruling, that means purchasing a car in Kansas would be cheaper for a resident of Independence than it would be to buy that same car in Missouri, because they wouldn’t have to pay any local sales tax.
Kansas does not charge sales taxes on vehicles as long as the vehicle is removed from the state within 10 days and is not registered in Kansas.
Missouri auto dealers worry that could entice some buyers to go out of state for vehicle purchases.
While the initial impact could be small, over time “it could substantially impact profits, and therefore jobs, at dealerships around the state’s borders,” Sam Barbee, president of the Missouri Auto Dealers Association, said in a recent radio interview.
In addition to potential lost revenue for local auto dealers, cities and counties without a use tax could see their budgets shrink, said Jim Harlow, director of finance and administration for Independence.
Harlow said he can’t give an exact total of sales tax revenues the city would lose because of the court’s ruling, “but we believe it will have a significant impact on our budget.”Lawmakers take action
In response to the court’s ruling, lawmakers passed a bill in May designed to allow Missouri communities to continue levying sales taxes on out-of-state vehicle sales.
The sponsor of the bill, Kansas City Republican Rep. Ryan Silvey, said there already have been ads run in the St. Louis area by Illinois auto dealers trying to entice buyers out of Missouri. It won’t be long before the practice is common on the western side of the state, Silvey predicted.
Nixon, however, said the legislation amounted to a new tax without a public vote and vetoed it. He acknowledged the court’s ruling would have an impact on local governments and auto dealers, but “that is not justification for usurping the authority of the voters on matters dealing with local taxation.”
Last week, the governor ratcheted up the political pressure by releasing figures from the Department of Revenue showing no local sales taxes were paid on 122,702 vehicles bought after the March 21 effective date of the court ruling. Of those, only 14,000 were vehicles purchased from out-of-state dealerships, or roughly 11 percent. The rest were sales between individuals.
If lawmakers override his veto, Nixon said each of those Missourians will get an unexpected tax bill, thanks to a provision in the bill making it go into effect retroactively.
The General Assembly “wants to go back in time to charge people a tax the court said they didn’t have to pay when they made their purchase,” Nixon said, later adding: “That’s just plain wrong.”
To bolster that message, a nonprofit funded by the national Democratic Governors Association paid for mailers criticizing lawmakers who voted in favor of the bill, including one St. Louis Democrat who is facing a Republican challenger this fall.
Kinder, who until late last year was considered the frontrunner to be the GOP nominee to challenge Nixon, came out in support of the governor’s position in a recent radio interview.
“Well, I do not support making it retroactive, I differ with my friends there,” Kinder said. “And I also do not support an override of the governor’s veto that would effectively impose a big tax on these people who made these lawful purchases.”Override in question
The bill cleared the Missouri House 122 to 21, with 77 Republicans joining 44 Democrats in support of the measure.
How someone voted on the original legislation is not always a harbinger of how they will vote on a veto override, however. For instance, House Minority Leader Mike Talboy, a Kansas City Democrat, voted in favor of the bill in May. He said last week that he will support the governor and oppose an override.
There are currently 104 Republicans in the Missouri House, short of the 109 needed for a veto override.
In the state Senate, where the bill won unanimous support in May, St. Joseph Republican Rob Schaaf recently told the St. Louis Beacon that he was also voting against overriding the governor’s veto. Sen. Jolie Justus, a Kansas City Democrat, said she was also going to support the governor’s veto.
Schaaf added that he doesn’t think there will be enough support in either chamber for an override.
Rep. Noel Torpey, an Independence Republican who was one of the 21 to vote against the bill in the House, said his position hasn’t changed.
“I think to go back and hit people with a tax bill after they purchased something, I don’t think that’s the right approach,” he said. “We really need to look at any tax increase carefully, especially in these difficult times.”
Torpey acknowledged his opposition is particularly difficult since his district includes a cluster of auto dealerships known as the “miracle mile.” However, he said he has not been contacted by any local dealers about the legislation.
Silvey says he’s confident the votes are still there to override.
“I don’t see masses of people switching the way that they voted, because I don’t think the governor has any credibility with the legislature,” Silvey said. “His opposition is based solely on trying to paint Republicans as trying to raise taxes during an election year. That’s all it is.”
But this is not a tax increase, according to Amy Blouin, executive director of the liberal policy organization The Missouri Budget Project.
“When voters originally approved local sales taxes around the state, it was always assumed they would cover out-of-state vehicle purchases,” Blouin said. “The legislation in question simply makes that clear in state statute. This is not a tax increase, but rather a clarification in state law aimed at leveling the playing field for Missouri businesses.”
Silvey added that he has come to realize that the retroactive provision in the original bill is not necessary and is willing to sponsor legislation to repeal it when the next legislative session begins in January. In the meantime, he said there is no need to send out retroactive tax bills until the situation is remedied.
“We’ve talked to senators and House leadership, and everyone is willing to address it immediately and get it to the governor’s desk quickly in January,” Silvey said.
Blouin goes a step further, arguing that there is nothing in the original bill that makes the retroactive tax provision mandatory.
But Nixon said the only way to avoid these tax bills going out “is to allow my veto to stand.”
“Override my veto, and 122,000 people will get a tax bill,” he said.