MDN.ORG:
Missouri Digital News
MDN.ORG
Mo. Digital News
Missouri Digital News
MDN.ORG:
Mo. Digital News
MDN.ORG:
Missouri Digital News
MDN.ORG:
Missouri Digital News
MDN.ORG
Mo. Digital News
Missouri Digital News
MDN.ORG:
Mo. Digital News
MDN.ORG:
Missouri Digital News
JEFFERSON CITY - As Missouri's economy has evolved, its tax laws have not. The result: businesses that operate under the tax radar while state coffers remain dry.
Missouri's economy has shifted gradually from being based on manufacturing goods to providing services. The state tax code was last updated in the 1970s, when the state's economy was based on manufacturing industries. Since then, the economy has shifted toward services while the tax structure has languished.
"We just have not kept up with the economy," House Tax Policy Committee Chairman Shannon Cooper said. "We're way behind."
According to the Missouri Department of Economic Development, Missourians lost more than 18,000 jobs in the manufacturing and trade industries between May 2002 and May 2003. Meanwhile, job growth has been restricted to the fields of financial activities, educational and health services, and other services.
Columbia has seen the effect of the state's economic reorientation. While 3M is in the middle of laying off more than 120 employees, the city's employment bedrock is at MU, its three hospitals, and insurance agencies such as Shelter and State Farm.
Tax laws rely on manufacturers to earn revenue for the state. As these industrial firms leave, state funds leave with them. In place of these goods-based companies, services such as education, insurance and medical care have increasingly fueled Missouri's economy. Now, 80% of the state's economy is based on services, state Revenue Director Carol Fisher said.
Fisher has called for a sales tax on services. Currently, Missouri's sales tax is based on the sale of tangible personal property. However, Missourians are not buying goods as much as medical treatment and accounting services, Fisher said.
"The growth in the economy is in the service sector," Fisher said.
Many of the services going untaxed are created by technologies that move faster than tax legislation. The Internet, for example, could not have been expected to exist when Missouri's sales tax laws were written, Fisher said. Therefore, services the Internet provides, such as downloading software and music, go untaxed, Fisher said.
"Laws have not been updated to account for the changes that technology has made possible," Fisher said.
The state's Joint Committee on Tax Policy has been established in an effort to address the changing economy and investigate the government's role in it. The committee of Missouri senators and representatives studies Missouri's tax laws, listens to testimony from state officials and interest groups about the effects and shortcomings of Missouri tax policy, and examines the ways other states have reoriented their tax policy around services.
However, political differences among committee members and other legislators pose problems for updating laws that are already years behind schedule. The political climate must be considered before any changes can be made, said Sen. Ken Jacob, D-Columbia, who is a member of the tax committee.
"Right now, nothing can happen," Jacob said. "It's gridlock. Complete, ultimate; it's the worst gridlock I've ever seen."
Both Republicans and Democrats have been reluctant to acknowledge that the state needs to tax service industries, Jacob said.
"There has to be an acceptance that there is a problem before we can decide what can be done," Jacob said. "I don't think there is a general consensus that there is a problem."
Indeed, some legislators are questioning whether or not the state needs to expand its tax laws to include services.
"Before we decide who else needs to be taxed, we need to redefine the role of government," Cooper said.
It is that ambivalence that could leave the issue unresolved for now. The tax committee will see little progress in the upcoming session, Cooper said.
"It's a long term process," he said.