Businesses want action on Missouri’s inconsistent, hostile tax policy

During a capitol press conference today, leaders in the Missouri House and Senate pledged to make tax policy reform a priority during the second half of the legislative session. Action in this area would address a troubling area of state government that is hurting business growth and impacting Missouri’s efforts to create jobs.

According to a new Gallup survey, Missouri businesses are widely displeased with Missouri’s existing tax policy. The survey showed that only 21 percent of business leaders agree that Missouri offers consistent tax policy, with only one in five businesses agreeing that tax policy is stable enough to allow for year-to-year growth planning. In addition, only 17 percent said they were satisfied with Missouri tax policy. The results come from a survey of more than 1,000 Missouri business leaders. The survey was commissioned by the Missouri Chamber of Commerce and Industry and released in February 2015.

“Missouri businesses are clearly telling us that tax policy and the practices of the Missouri Department of Revenue are hurting their ability to grow,” said Daniel P. Mehan, Missouri Chamber President and CEO. “We don’t think it’s too much to ask for the state to provide an understandable, rational tax policy that is applied consistently. Despite the tax challenges facing businesses today, it’s heartening to see so many legislative leaders lining up to sponsor and support bills to improve our system. On behalf of the business community, I urge the General Assembly to pass these bills and help create the fair tax policy that our state deserves.”

The bills currently proposed would require the Department of Revenue to notify businesses when they have made a change to the state’s sales tax law. It also stops the state from going after businesses when their employees fail to correctly report their tipped income. Other bills would help Missouri taxpayers receive refunds for overpayments and encourage faster processing of tax refunds.

These changes would represent positive progress toward achieving the goals of the Missouri 2030 strategic plan for growth. A collaborative effort led by Missouri CEOs, a diverse group of businesses and local chambers of commerce, the Missouri Chamber released the Missouri 2030 plan earlier this year as long-range effort to enhance Missouri’s economy and bring good jobs to our state. One of the plan’s four drivers is “Competing for Jobs,” which includes a call to improve Missouri’s tax climate.

Read the full plan at www.MO2030.com.

Tax policy bills moving in House and Senate

Several proposals to improve Missouri tax law made progress in the House and Senate as lawmakers prepared to leave for their annual, week-long spring break.

The Missouri House approved House Bill 299, requiring the Missouri Department of Revenue to notify businesses when they change how they are interpreting and enforcing the state’s sales tax laws.

In recent years, the department has notably begun requiring gymnastics studios and similar businesses to collect sales tax for their services. However, the department never informed these businesses of the changes until state auditors arrived demanding payment of back taxes with penalties.

“We’ve all heard some of the horror stories going on about how some of our small businesses are being notified about sales tax changes by our of Department of Revenue,” said Rep. Denny Hoskins a Republican from Warrensburg. “Have these small businesses been notified by email? No. Have these small businesses been notified about sales tax modifications and changes by letter? No. have these changes been posted on the Department of Revenue’s website? No. Literally, these changes and notifications are being made by the Department of Revenue to our small businesses by audit.”

Rep. Hoskins is sponsoring House Bill 299, which would require the Missouri Department of Revenue to notify businesses of sales tax changes for 90 days before the modification can take effect. The bill allows the notification to happen via email or similar electronic means.

The House also approved a bill allowing businesses to absorb sales tax into their advertised price. Rep. Andrew Koenig, a Republican from Manchester, sponsored the proposal which is contained in House Bill 440. He said that absorbing the sales tax is already a widespread practice, putting businesses at risk.

“We have a number of businesses across our state breaking this,” he said. “It’s not being enforced.”

The Missouri Senate also approved an important tax bill, Senate Bill 336, to protect restaurants from being penalized when their tipped employees fail to properly report their tipped income.

Bill sponsor Sen. Will Kraus, a Republican from Lee’s Summit, said the Department of Revenue has started reviewing restaurant tip records. The department is calculating the tip percentage on credit card receipts and comparing that to the cash tip percentage restaurant employees are reporting as income. When the percentages show a discrepancy, the department is going after restaurants to make up the difference.

“We’re trying to correct an injustice with our department of revenue,” said Sen. Kraus. “The Department of Revenue is constantly going after our businesses. This time, they are going after restaurants and their owners for the underreporting of tips, which is an income tax, which is due by the employee. This bill is just simply clarifying that the employer is not responsible for the underreporting and therefore not responsible for the income tax that their employee is supposed to pay.”

In other tax-related legislative work, the Missouri House Ways and Means Committee heard testimony on Senate Bill 15, which would create a commission to study the state’s tax code and recommend improvements by the end of 2017. This bill is sponsored by Sen. Bob Dixon, a Republican from Springfield.

The Missouri Chamber of Commerce and Industry is advocating for the passage of all these bills as the chamber works to implement the recommendations made in the Missouri 2030 15-year plan for economic growth. The Missouri 2030 plan calls for improvements to Missouri’s tax climate as the state works to compete for jobs. The Missouri 2030 Gallup survey revealed that 10 percent of Missouri business leaders believe that Missouri’s tax environment is their biggest obstacle to growth—a higher rate than the nation average of 7 percent.

“The Missouri Chamber will continue to improve the state’s tax code as the General Assembly reconvenes on March 30,” said Tracy King, Missouri Chamber vice president of governmental affairs. “Missouri employers have consistently identified tax policy as a critical issue for growth. On behalf of the business community, I’d like to thank the legislature for focusing on these bills. I’d also like to encourage them to continue to make tax policy a priority through the end of the legislative session.”

For more information about tax legislation, contact King at tking@mochamber.com or by phone at 573-634-3511.

Bring Jobs Home Act passes House

Sometimes companies choose to move jobs out of Missouri, but later regret that decision.

House Bill 325, which has been passed by the Missouri House, would make it easier for those companies to reverse course and come back to the Show-Me State.

The Bring Jobs Home Act would establish a new income tax deduction for insourcing jobs back to Missouri. The deduction would cover up to 50 percent of the expenses of moving the jobs back to Missouri, with an annual $20 million cap. If fully utilized, the Bring Jobs Home Act would cost the state approximately $1.3 million a year, according to a fiscal review conducted by the House.

The proposal has received bi-partisan support.

“Let’s bring some jobs home,” said bill sponsor Rep. John McCaherty, a Republican from High Ridge, as the House prepared to vote.

The bill passed 140-14, moving to the Missouri Senate for further debate.

For more information about tax and economic development bills, contact Tracy King, Missouri Chamber vice president of governmental affairs, at tking@mochamber.com or by phone at 573-634-3511.

Right to Work moves through Senate Committee

The effort to bring Right to Work status to Missouri passed another hurdle as a Missouri Senate committee approved the bill in a split vote.

The Senate Committee on Small Business, Insurance and Industry Committee voted 5-3 in favor of the Right to Work legislation.

Voting in favor of Right to Work were Sens. Mike Parson, R-Boliver; Doug Libla, R-Poplar Bluff; Wayne Wallingford, R-Cape Girardeau; Jay Wasson, R-Nixa; and Brian Munzlinger, R-Clarence. Voting against Right to Work were Sens. Paul Wieland, R-Imperial; S. Kiki Curls, D-Kansas City; and Gina Walsh, D-Bellefontaine Neighbors.

The bill passed by the Senate committee is Senate Bill 127, sponsored by Sen. Dan Brown, a Republican from Rolla.

The same Senate committee has also received the House version of Right to Work legislation, House Bills 116 and 569, which was passed by the House in mid-February. That bill is sponsored by Rep. Eric Burlison, a Republican from Springfield.

The Senate action on Right to Work comes as Missouri is falling further behind other states in adopting this job-creating legislation. In February, Wisconsin became the 25th Right to Work state.

The Missouri Chamber is strongly advocating for the passage of Right to Work this session in order to help Missouri compete for jobs and business growth.

For more information about Right to Work, contact Jay Atkins, the Missouri Chamber’s general counsel and director of governmental affairs, at jatkins@mochamber.com or by phone at 573-634-3511.

Legislature tackles employment law with several bills in committee this week

Workplace Discrimination

The House Committee on Workforce Development and Workplace Safety and the Senate Judiciary Committee held public hearings on two bills that would change the laws regarding unlawful discriminatory employment practices as they relate to the Missouri Human Rights Act.

The proposed legislation would change the state law that indicates discrimination must be “a motivating factor” rather than “a contributing factor” in wrongful termination lawsuits, which is identical to language found in the federal Civil Rights Act. The bill would also allow for summary judgments, provide any party to demand a jury trial, limit awards for certain damages, outlined in federal law, and exclude managers and supervisors from being held liable.

Kevin Austin (R) sponsors House Bill 1019, and Sen. Gary Romine (R) sponsored identical legislation in Senate Bill 36. The Missouri Chamber supports both bills.

“It is not often that the Missouri Chamber says the feds do it better,” Jay Atkins, general counsel for the Missouri Chamber, testified. “48 other states agree that the federal standard is better. Only California is in worse shape in terms of employment law than Missouri is.. The way that disputes have been adjudicated in the courts have put employers at a significant disadvantage. This brings a fair and equitable playing field to handle these disputes.

Previously, two similar bills have passed by the General Assembly, but were vetoed by Gov. Jay Nixon.  The current bill seeks to bring the law back in line with the 1964 Civil Rights act, which is the federal standard for discrimination suits.

Minimum wage increase

The Missouri Chamber of Commerce and Industry, alongside other business advocates, voiced strong opposition to a proposal to sharply increase the state’s minimum wage.

Senate Bill 193, sponsored by Sen. Paul LeVota, (D), would raise Missouri’s minimum wage to $10 per hour. Missouri’s current minimum wage is $7.65 an hour.

The Missouri Chamber noted that as wages increase, businesses are forced to try to hold overall salary expenses in check. Often, they achieve this by actually reducing their workforce.

“The fact of the matter is this would increase the minimum wage by 30 to 31 percent and would place us in a higher wage than any of our other border states that we compete with every day not only to attract businesses but to keep them,” Brian Bunten, assistant general counsel for the Missouri Chamber testified against the bill. “We believe the business community would be at a disadvantage by increasing the cost of doing business.”

The bill was heard this week in the Senate Small Business, Industry and Insurance Committee. No vote was taken.

Unemployment Compensation Overpayments

Also heard in the Senate Small Business committee was SB 406, sponsored by Sen. Brian Munzlinger (R) which would allow for the recovery of overpaid unemployment compensation benefits, benefits obtained by reason of nondisclosure or misrepresentation of a material fact, or benefits obtained by reason of error, omission, or lack of knowledge of a material fact on the part of the Division of Employment Security through billing, setoffs against state and federal tax refunds, intercepts of lottery winnings, and collection efforts as provided under current law.

“The need for this bill was brought about by a court case,” Sen. Munzlinger testified. “This is common sense legislation that I would have thought had already happened but that hasn’t been the case. This will allow the department of employment security to recoup those funds.”

The Missouri Chamber testified on behalf of the bill.

“It is critical that the department are able to collect those overpayments and get that money back into the fund so that it actually goes to pay unemployment benefits for those that truly need and qualify for it,” Tracy King, vice president of governmental affairs for the Missouri Chamber, testified.

 

Unemployment Compensation reform

HB150, sponsored by Rep. Scott Fitzpatrick (R) which would tie the number of weeks jobless Missourians can receive unemployment benefits to the unemployment rate, has been voted out of the house and was heard in the Senate Small Business committee this week, advancing it one step closer to becoming law.

Under this bill, unemployed Missourians would be eligible for:

  • 20 weeks of benefits if the Missouri average unemployment rate is nine percent or higher;
  • 19 weeks of benefits if the Missouri average unemployment rate is between 8.5 percent and 9 percent;
  • 18 weeks of benefits if the Missouri average unemployment rate is 8 percent up to and including 8.5 percent;
  • 17 weeks if the Missouri average unemployment rate is between 7 .5 percent and 8 percent;
  • 16 weeks of benefits if the Missouri average unemployment rate is 7 percent up to and including 7.5 percent;
  • 15 weeks of benefits if the Missouri average unemployment rate is between 6.5 percent and 7 percent;
  • 14 weeks of benefits if the Missouri average unemployment rate is 6 percent up to and including 6.5 percent;
  • 13 weeks of unemployment benefits if the Missouri average unemployment rate is below 6 percent

“This is all about creating some solvency within the fund for the future,” King testified on behalf of the bill. “Had Missouri not paid off the debt by November of last year, employers would have had a $184 million tax increase on top of what they were already paying in unemployment taxes. This is a very significant issue for our employers and members.”

For more information about any of these employment issues, please feel free to contact the governmental affairs staff of the Missouri Chamber at 573-634-3511.

Partial fix for transportation funding shortfall heard in Senate committee

With Missouri lawmakers still searching for a way to fund needed improvements to the state’s transportation system, a Senate committee has taken up a fix that would simply allow Missouri to maintain its existing infrastructure.

Without legislative action, Missouri’s transportation budget will shrink to $325 million in 2017. That budget would force the Missouri Department of Transportation to maintain only 8,000 of the state’s 34,000 miles of roads in good condition. The rest of the system would only see basic maintenance, causing deteriorating, bumpy road conditions. If the low funding levels persist, dozens of Missouri bridges could eventually close.

To prevent that from happening, Sen. Doug Libla, a Republican from Poplar Bluff, has proposed Senate Bill 540. The bill would raise the state’s fuel tax from 17.3 cents per gallon to 23.3 cents per gallon over three years. Then the bill would annually raise the fuel tax for inflation.

“We’re at a critical point right now in the funding of our highways and it affects everybody,” Sen. Libla told a Senate committee during a hearing on the bill on March 18. “It effects everybody’s livelihood, it effects jobs, it effects the safety of the motoring public, and we need to move forward on this bill.”

Part of the urgency comes as Missouri stands to lose hundreds of millions of dollars in federal matching funds if it doesn’t act soon to properly fund the state’s transportation system.

Several of the state’s top fuel consumers, including a number of trucking companies, testified in support of raising the fuel tax.

“We’d be more than happy to pay more to fix our roads correctly,” said Mark Engemann, board president of the Missouri Dump Truckers Association.

The Missouri Chamber of Commerce and Industry supports Sen. Libla’s bill, with some concern over the bill’s proposal to continually raise the tax each year for inflation. The Missouri Chamber would also like to see more urgency to pass a true solution enabling Missouri to not only maintain our existing infrastructure but to also make strategic investments that would help the state’s economy grow.

“We’re looking for a more comprehensive fix,” said Brian Bunten, Missouri Chamber assistant general counsel and director of legislative affairs. “However, we can’t ignore the fact that there’s a problem right now and we feel this bill addresses that problem.”

The focus on transportation funding comes as the Missouri 2030 plan calls for a greater emphasis on infrastructure in Missouri. A Missouri 2030 Gallup survey showed that only 37 percent of Missouri business leaders are satisfied with the state’s transportation system. Learn more about Missouri 2030 at www.MO2030.com.

For more information about transportation funding, contact Bunten at bbunten@mochamber.com or by phone at 573-634-3511.

Bill to attract data center investment sent to governor

The Missouri General Assembly has passed an important bill to help attract high-tech, high-paying jobs to the Show-Me State.

Missouri is a natural location for data centers and regularly draws interest from technology companies due to the state’s low-cost power supply, protection from natural disasters, fiber internet and talented IT workers. But while Missouri is often among the top contenders to land big data center projects, other states with tax incentive packages usually end up winning the jobs and investment.

Sen. Mike Parson, a Republican from Bolivar, hopes to change that with his Senate Bill 149, which was truly agreed to and finally passed by the General Assembly on March 19. The bill would allow data centers establishing in Missouri to receive state and local sales and use tax exemptions for their machinery, equipment and computers purchased for the data center. Various data center utility expenses would also be exempt from sales and use taxes. Similar incentives would be available to existing data centers in Missouri that create new high-paying jobs.

“This is a growing industry that is creating exactly the kind of jobs we want in Missouri,” said Daniel P. Mehan, president and CEO of the Missouri Chamber of Commerce and Industry. “We thank the leadership of both the House and the Senate for making this bill a priority and moving it forward prior to spring break. Now we ask the governor to do his part and sign this bill to help bring good jobs to Missouri.”

The legislation includes a number of provisions protecting state and local revenues and ensuring that the incentives only go to companies creating good jobs.

Rep. Kevin Austin was the bill handler of SB 149 in the Missouri House of Representatives and played an important role in its final passage.

The passage of Senate Bill 149 would help Missouri achieve one of the recently-announced goals of Missouri 2030, a 15-year strategic plan for growth established by the Missouri Chamber. Competing for Jobs—including high-tech, data center jobs—is one of the plan’s four drivers that will lead to greater economic growth in Missouri. Learn more about Missouri 2030 at: www.MO2030.com.