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Governor calls for tax restructuring to close corporate exemption "loopholes"

September 12, 2002

By: Amy Menefee

State Capital Bureau

JEFFERSON CITY - Gov. Bob Holden said Thursday that closing corporate tax "loopholes" will be a priority in planning next year's budget. He also urged state departments not to request funding increases.

At a budget summit with state legislators and cabinet members, Holden said reducing business tax exemptions would increase "state savings." He called for an end to exemptions for Missouri businesses on certain types of out-of-state income.

House Republican leader Catherine Hanaway from St. Louis County said Holden was sending negative signals to businesses with his suggestion of exemption cuts.

"If we send out a message that we think all companies are WorldCom and Enron and our state legislature acts that way, then that doesn't make us the kind of state that people say, 'Gee, let's come to Missouri,'" Hanaway said.

The chairman of the Senate Appropriations Committee, John Russell, R-Lebanon, said business tax matters must be handled carefully.

"For some time I've said we need to control tax credits in some way, even though they have economic value," Russell said. "Sometimes those exemptions are important to stay competitive with other states."

Sen. Steve Stoll, D-Festus, said he wanted to have a "clearer picture" of the situation before launching into specifics.

"I would have to see some figures to back this up," said Stoll, a member of the appropriations committee. "Is it because we've given too many exemptions? Our costs are definitely outpacing our revenue."

Russell agreed.

"Let's don't call it a loophole until we really know the facts about it," Russell said. He said penalizing any particular type of corporation would make it "look like we're against all business."

Senate President Pro Tem Peter Kinder, R-Cape Girardeau, said he interpreted Holden's remarks as a "codeword for a massive new tax increase."

"Our governor should be looking to attract more businesses and more jobs to our state rather than focusing on raising taxes and driving more employers and businesses to other states," Kinder said.

Although Holden said he is not ordering withholding or tax increases "at this time," his spokeswoman Chris Kelly said "we can't rule anything out at this point."

Arriving 25 minutes late to his own budget summit, Holden did not take questions from legislators or cabinet members in attendance and left after his 20-minute statement.

Hanaway said she was displeased with the governor's approach to the meeting.

"I think it's interesting that the governor's definition of a dialogue is a speech where he doesn't take questions, and where he leaves before the other presenters are completed," Hanaway said.

Russell said he thought Thursday's meeting was a useful way to "make advocacy groups aware that we still have a problem" before they make budget requests.

But in fact, cabinet members were already aware of next year's budgeting restrictions.

In a secret cabinet meeting last week, the governor advised department heads to nix new budget items in their Oct. 1 proposals, Kelly said.

State budget director Linda Luebbering said the 2004 budget would have to be planned with $435 million less than what was available for 2003.

Luebbering said withholdings are a possibility, and the governor can choose to draw from any department at any time.

"It's too early to make that call," Luebbering said. "But revenues are below forecast." She said there has been no further discussion of higher education, which was cut by more than $80 million in May, though that is also "a possibility."

When departments submit budget requests Oct. 1, their totals "may not exceed the 2003 appropriations level," Luebbering said.

Holden's mantras included plans to "increase government efficiency," "make everyone pay their fair share," and to "protect Missouri's most vulnerable citizens."

The governor said he will unveil his "fair share budget plan" in detail in January.