JEFFERSON CITY — With Missouri undergoing a decline in manufacturing, state lawmakers are debating a number of ideas to give industries a reason to stick around as long as possible while the economy becomes increasingly service-oriented.
Many of the measures would exempt manufacturers from paying sales taxes on utilities, as well as on equipment and materials used in the manufacturing process. Other proposals are designed to lure new manufacturers to the state through temporary corporate tax abatements.
One of the bills containing the utility sales tax exemption has cleared both chambers and is now headed to conference committee to draft a final compromise. Although the legislation contains a laundry list of various tax credits, Rep. Ron Richard, R-Joplin, the sponsor, said the tax break provision for manufacturers is especially important to keep industries competitive.
“All kinds of manufacturing have been on decline in the state of Missouri for years,” Richard said. “That’s the sector we’re losing all the jobs in.”
According to the National Association of Manufacturers, Missouri lost more than 65,000 manufacturing jobs between 2000 and 2006. Manufacturing makes up 15 percent of the state’s gross domestic product and uses nearly a quarter of its energy supply. The exemption on state and local energy sales taxes in Richard’s bill is estimated to total $46 million in state tax collections.
The decline of manufacturing in Missouri is part of a national trend. Since 2000, the manufacturing industry has lost more than 3 million jobs across the country, many to overseas workers. Some industry watchers say the exodus to foreign soil is also threatening the sector in Missouri.
Tracy Weddle, director of taxation and fiscal affairs for the Missouri Chamber of Commerce, said some Missouri manufacturers have indicated they are approaching bankruptcy or considering moving operations out of the state — and, in some cases, out of the country — to stay afloat.
Engine maker Briggs & Stratton announced Thursday it will close its Rolla plant and move the operation to China to the tune of 480 lost jobs. Earlier this year, 1,300 jobs were cut at the Chrysler plant in Fenton, 10 percent of the overall job cuts announced by Daimler-Chrysler
over the next three years.
Weddle said manufacturers typically provide well-paying jobs with good benefits and are also committed to the states and communities in which they operate. In Missouri, Weddle said, manufacturers pay an annual average wage of $44,000 — about $8,000 more than the average statewide wage.
“We think that they’re critical to Missouri’s economic engine, and it’s important to get them here and to keep them here,” Weddle said. She said 40 manufacturers are closely following the utilities sales tax exemptions.
Ray McCarty, a lobbyist for Taxpayers Research Institute of Missouri, a business-affiliated organization, indicated the utilities tax exemptions in Richard’s bill are critical in light of the state’s manufacturing struggles.
“This is probably the most important sales tax bill on manufacturing that we’ve ever had in the state of Missouri because of the comfort level it will give our in-state manufacturers who are struggling to maintain Missouri jobs,” McCarty said. But Rep. Jeff Roorda, D-Barnhart, argues tax cuts should be targeted elsewhere. He cast one of 13 votes against a separate bill, sponsored by Rep. Shannon Cooper, R-Clinton, that also eliminates sales taxes on utilities used for manufacturing.
“This is pretty clearly legislation that benefits corporations, and the bigger the corporation, the bigger the benefit,” Roorda said. “I think, at a time when Missouri’s economy is flagging in comparison with other states throughout the country, that we have to look out for working-class Missourians first and wealthy corporations second.”
However, one small manufacturer says it would benefit, too. Prestressed Casting Company, which makes concrete components for various structures such as parking garages and sports stadiums at plants in Springfield and Ozark, spends anywhere from $25,000 to $40,000 a month on natural gas and $6,000 to $7,000 a month in electricity. General Manager Keith Wallis Jr. said the company, which employs about 200 workers, is at a disadvantage when competing for jobs with out-of-state manufacturers who don’t have to pay sales taxes on utilities. He said eliminating the tax would be an important step in helping his company be competitive.
“It’s not a huge thing (on its own),” Wallis said, “but little things add up.”
He said that because of the cost of utilities sales taxes, Prestressed lost a state contract to an out-of-state business to make components for a prison in Charleston, Mo.
“Why, when we’re spending tax money to build something, are we giving it to someone from out of state?” Wallis asked, adding that the exemption would help manufacturers get on an even playing field. “That’s all we’re asking. Fair is fair.”
Meanwhile, Rep. Rachel Storch, D-St. Louis City, is trying to attract new manufacturers to the state with a bill that would exempt them from state corporate income tax for their first five years of operation in Missouri.
“It’s important that we make Missouri an attractive place for manufacturers to land when they’re considering location,” Storch said, “and incentives do make a difference.
“Manufacturing is under tremendous pressure both because of international competition and the cost of health care,” She said a tax abatement was not simply a handout for big corporations because companies doing well in the state of Missouri translates into jobs for working families. Storch’s bill has cleared a House committee and is currently awaiting debate in the House.