Gov. Jay Nixon on Wednesday vetoed more than a dozen special tax breaks passed by lawmakers, arguing they would blow a massive hole in state and local budgets.
The tax breaks in question were included in 10 bills that Nixon vetoed, nine of which were passed on the legislative session’s final day. Nixon estimated that the various tax law changes could reduce state revenues by $425 million annually and local revenues by an additional $351 million.
“The special tax breaks in these bills are not fiscally responsible,” Nixon, a Democrat, said in a letter to members of the Republican-dominated General Assembly. “Not a penny of them was taken into account in the fiscal year 2015 budget you passed.”
Republicans and business groups questioned Nixon’s cost projections and defended the tax breaks, describing many of them as mere clarifications of existing tax policies that have been misinterpreted by the state’s Department of Revenue or the courts.
“I am disappointed but not surprised that the governor has once again stood in the way of providing tax relief to Missouri families and businesses,” said House Speaker Tim Jones, a Eureka Republican.
Among the tax changes vetoed Wednesday were:
Restaurants, bakeries and grocery stores would pay no sales taxes on the electricity used to process food they sell.
Commercial laundries and dry cleaners would pay no sales taxes on material, machinery and energy used.
Graphing calculators would be added to the list of items included in the back-to-school sales tax holiday.
Data processing and storage centers would pay no sales tax on electricity and equipment purchases.
Farm products sold at farmers markets would not be subject to sales taxes.
No sales taxes would be paid on the purchase of used manufactured homes.
The Missouri Department of Revenue would be required to notify businesses when it makes a change in its interpretation of the state’s sales tax laws.
The vetoes will set up yet another showdown with lawmakers, who will return in September to consider whether to override any of the governor’s vetoes. By that time, the GOP will hold two-thirds majorities in both the House and Senate needed for an override.
Because of the possibility of lawmakers overriding his vetoes, Nixon said he will still have to take steps to ensure the state’s budget is balanced. That likely means withholding millions of dollars in funding for various state functions.
“You can’t bet on legislators coming back and doing something different,” Nixon said.
Last year, after vetoing a Republican-backed income tax cut, the governor withheld more than $400 million in spending from the state’s budget.
After lawmakers were unable to override his veto, he released most of the funds.
Nixon also warned that local governments, who rely on dedicated sales taxes to fund various services, could still be forced to reduce their budgets as well.
Dan Mehan, president of the Missouri Chamber of Commerce and Industry, said the governor’s vetoes were “built on flawed calculations and philosophically hollow assumptions.” The tax changes would create a better business climate in Missouri, he said, and Nixon is standing in the way of economic progress.
“We need to get beyond the governor’s intimidation tactics and fulfill our vision of economic growth for our state.”
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