Business leaders lay out priorities for tax reform

Business leaders, specifically the National Association of Manufacturers, have sent a letter supporting the tax reform bills that have recently passed the U.S. House and U.S. Senate. Included with that support were a few suggestions for consideration as the conferees deliberate the final bill.

The first, and most major of these suggestions is maintaining the corporate tax rate cut to 20 percent. Both the House and the Senate bills have a 20 percent corporate tax rate. However, there is talk that it may increase in the final version of the bill. Even a small increase would greatly reduce the competitiveness of America’s tax rates. The NAM has spoken out, tax cutasking lawmakers to either keep the 20 percent rate or reduce the rate to 15 percent. In addition, the Senate’s plan to wait until 2019 for the tax cuts to begin would be detrimental to manufacturers and other businesses.

The second suggestion is the need for reduced tax rates on pass-through business income. The House bill provides for a top rate of 25 percent on pass-through business income, but this rate comes with a great deal of complexity that is detrimental to small business owners. The Senate bill does not have a reduction, but comes with increased deductions for pass through income, which is less complex than the House bill.

The third suggestion is related to capital investment. Both the House and the Senate bills add new limitations on the ability to deduct investment expenses, including disallowing a current deduction for interest on debt. The NAM would prefer such limitations be eliminated or, at the very least, that such limitations not be applied to existing debt.

“Companies of all kinds have entered into loan agreements expecting to be able to deduct the interest from their taxable income when computing their income taxes,” said Ray McCarty, president of Associated Industries of Missouri, the official designated partner of the NAM in Missouri. “Congress should not change the rules and now require businesses to pay tax on interest payments, especially for debt that has already been incurred. Businesses weigh debt options carefully and consider all costs and benefits when making a debt decision. Changing the deductibility of interest could have an impact on these decisions. If not removed entirely, this limitation on the deductibility of interest should only be applied to new debt incurred after the effective date of the limitation,” said McCarty. McCarty said he had been in touch with U.S. Senator Roy Blunt regarding the interest provisions and his office was very helpful in exploring options.

A major concern for manufacturers is maintaining the research and development credit. The House bill had originally eliminated the Alternative Minimum Tax (AMT), however the Senate bill restored it. Under the Senate plan, the AMT rate would be the same as the regular rate, but with less deductions. Many businesses would be forced to pay the AMT, excluding them from realizing any benefit from the research and development credit.

“Research and development is the lifeblood of manufacturing,” said Chris Netram, vice president for tax and domestic economic policy at the National Association of Manufacturers. “The NAM supports pro-growth tax reform, and is working with key policymakers to ensure the final bill does not inadvertently harm manufacturing.”

“We have been advocating re-establishing a state level research and development tax credit in Missouri to help draw that investment into our state,” said McCarty. “At the very least, we need to maintain the existing federal research and development credit to encourage that investment within the United States.”


“Fake news” or unfair reporting?

By Ray McCarty, President and CEO, Associated Industries of Missouri

We received a call Tuesday, August 1, from a CBS Evening News producer wanting to do a story on Senate Bill 43, the employment law reform bill we helped pass in the last legislative session. Specifically, the producer said the story was on the NAACP’s travel advisory.

We agreed to be interviewed by them and they brought a very professional crew into our offices. Ms. Jericka Duncan, an Emmy-nominated CBS News correspondent from New York interviewed me about the bill. She could not have been more professional in her questions and we answered all her questions during the interview.

I emphasized throughout the interview that SB 43 had nothing to do with travel through Missouri and we were curious as to why the NAACP had issued the travel ban. The bill affects only the relationship between employers and their employees and institutes the same standards used in Missouri prior to a 2007 Missouri Supreme Court decision. The bill also uses the same standard used in federal discrimination cases in Missouri and in state courts in many other states. We also explained the caps on damages contained in the bill were very similar to caps on damages in discrimination cases brought under federal law. And the fact the sponsor had filed this bill years before any discrimination charges were ever levied against his business.

Throughout the interview, we gave a reasonable assessment of the bill and its true impact: to reduce frivolous discrimination lawsuits against employers by requiring the plaintiff prove discrimination motivated whatever action was at issue. The bill was necessary because of the Missouri Supreme Court’s previous interpretations that a plaintiff show discrimination was only a “contributing factor” in the employer’s action, shifting the burden of proof to the employer to prove themselves innocent. We explained this bill restores the “innocent until proven guilty” protection for innocent employers and continues to allow those that are truly discriminating against employees to be punished.

We watched as the interview was properly uploaded to New York and was acknowledged as received. The producer explained the story may run later that same day on the CBS Evening News, or perhaps the following morning. Altogether, we spent a couple of hours with the correspondent and crew.

I watched the story on the CBS Evening News that evening, which you may also watch here.  I was surprised that despite our lengthy interview explaining why travelers through Missouri were not affected by the bill, only the NAACP’s views were carried in the two taped interviews they ran in the program: Nimrod Chapel, Jr., president of the Missouri NAACP (and a plaintiff’s attorney that sues businesses); and Pat Rowe Kerr, who recently won a discrimination lawsuit against the state of Missouri. Only one sentence at the end of the article carried our point of view, a brief mention that Governor Greitens said the bill would implement the same standard used by the EEOC in evaluating federal discrimination claims.

Later Tuesday, I received a message from the producer that the story had been bumped for the following morning so they would not be using the footage they shot at our location.

Of course, we have been interviewed by many in the news media before and I am very aware that only a minute or less of the footage is usually used out of an hour long interview. I have resisted writing about this for fear it may look self-serving, so let me be very clear: I don’t care whether they used the footage or not, but it would have been a fair, balanced story if they had at least used the points I made in our lengthy interview. But that did not happen.

No wonder people cannot believe the media version of events. Good journalism should provide balance in a story. We provided the facts, and they were ignored. This is another example of how viewers’ attitudes about subjects are often affected by the news media – and why it is important for all of us as viewers to ask ourselves if what we are viewing is the whole story.

For the record, SB 43 does nothing to impact travel in the State of Missouri. If you would like to read the new law, you may click here for the full text and read it for yourself. The bold language is new language that is added to the law in the bill and language in brackets is deleted by the bill. The law revision is effective August 28, 2017.

Without Missouri Senate action, minimum wage is going to $10 per hour right away – $11 per hour in January

Associated Industries of Missouri (AIM) joined several other business groups in filing suit against an ordinance passed by the City of St. Louis that would have increased the minimum wage that must be paid by employers located in St. Louis City. Although we prevailed at the lower court level, the Missouri Supreme Court invalidated a statute preventing local governments from enacting local minimum wages that had been on the books for nearly 20 years and, in effect, validated the St. Louis City ordinance. Yesterday, the Missouri Supreme Court overruled our motion for rehearing.

The City of St. Louis released a statement that minimum wage will increase as soon as the Circuit Court lifts its injunction, which could happen as soon as next week
. It will be effective immediately thereafter, according to this press release by the City of St. Louis.
While the Missouri House took quick action to pass a bill a month ago that would have averted this crisis, the Missouri Senate has not passed the bill.  Unless the Missouri Senate passes HB 1194 and 1193 in the next few days and that measure is signed into law by Governor Eric Greitens, employers in the City of St. Louis will pay the price through increased wages, or low-income workers will lose their jobs, because of the City’s ordinance to increase the minimum wage to $10 per hour. It will get worse in January when the minimum wage rises to $11 per hour.

“This decision by St. Louis City leaders, and now the Missouri Supreme Court, will lead to job losses for many minimum wage workers in the City of St. Louis,” said Ray McCarty, president and CEO of Associated Industries of Missouri. “The notion that money grows on trees and employers will just pay workers more without impacting other parts of their business is simply ridiculous.”

If employers must pay higher wages to some, they must raise prices, lower other costs, or reduce the total number of minimum wage workers. Also, a cascade effect will happen as workers that are currently paid above minimum wage expect higher wages as the minimum wage increases. The higher local minimum wage, combined with the earnings tax imposed in the City of St. Louis, will encourage more businesses to locate outside the City, making it more difficult to attract and retain employees in businesses in St. Louis City.

“The City has traded short-term gain for some workers for longer term job loss for some of the very workers they have sought to help,” said McCarty. “The Missouri Senate may still enact a bill to prevent this action and we hope they are able to pass HB 1194 and 1193,” said McCarty.

Governor Greitens signs Corlew’s expert witness bill

Governor Eric Greitens has signed HB 153, sponsored by Rep. Kevin CorlewGov Greitens signs expert witness bill, that will allow Missouri to join most other states and federal courts in the way they evaluate whether a person testifying in court is an expert or not. The governor signed the bill earlier today at Midland Transport in Jefferson City, MO.

Similar legislation was passed last year and vetoed by Governor Jay Nixon. This bill is different because it will not apply in work comp cases or other cases that do not involve a jury. In reality, the new standard really would have little or no impact in these cases anyway because the judge decides whether the testimony is credible under existing law and the new law expected to be signed today.

Associated Industries of Missouri has long supported correcting the standard in Missouri.

“Missouri’s low standard of evaluating experts in state court is why plaintiffs’ attorneys try to move cases into Missouri state courts,” said Ray McCarty, president and CEO of Associated Industries of Missouri. “The proposed standard works in most other states and is used in federal courts in Missouri. This is a commonsense bill and we applaud the sponsor, Rep. Kevin Corlew, the House and Senate leadership that made this a priority, and Governor Eric Greitens for making this a priority and signing the legislation,” said McCarty.

Click here for the AP story.

The U.S. Chamber Institute for Legal Reform issued a statement supporting signature of the bill. Associated Industries of Missouri is a proud member of the U.S. Chamber of Commerce. You may read the statement here.

AIM supports closing the tobacco settlement loophole

Associated Industries of Missouri began running television ads today supporting closing the tobacco settlement loophole that has resulted in unfair competition between cigarette makers and caused a shortfall in state revenues, with more shortfalls on the horizon.

AIM is working hard to pass SB 1096, sponsored by Sen. Bob Dixon. The bill would fix the tobacco settlement loophole, making Missouri the last state to adopt the language.

“Missouri taxpayers may lose out on the tax cut that we worked so hard to pass in 2014,” said Ray McCarty. “We had to pass this bill after Governor Jay Nixon vetoed it, and now we could lose the benefits of the tax cut if we do not fix this loophole – one that allows some cigarette manufacturers to sell their cigarettes cheaper than those that are paying for the costs of the harm done by cigarettes,” said McCarty. “We have stalled long enough in Missouri and this needs to get done this session.”

Here is a sample of television ads that will be running across Missouri on the subject:

Veto of unemployment bill may be addressed in the Veto Session

You may have heard some news reports that the governor does not believe the unemployment reform bill, HB 150, may be taken up in the Senate for the purpose of overriding Governor Nixon’s veto of this commonsense legislation.

Some, including Governor Nixon, claim the Veto Session is only for bills vetoed during the last week of session. But that’s not how the Missouri Constitution reads.

They appear to be taking the position that the second sentence of Article III, Section 32, somehow limits the types of vetoed bills that may be considered in a veto session. The plain language of the sentence indicates conditions that decide whether or not there will be a veto session, not the bills that may be considered.

Here is the sentence:

“If the governor returns any bill with his objections on or after the fifth day before the last day upon which a session of the general assembly may consider bills, the general assembly shall automatically reconvene on the first Wednesday following the second Monday in September for a period not to exceed ten calendar days for the sole purpose of considering bills returned by the governor.”

This constitutional provision does not limit the scope of the vetoed bills that may be considered during veto session. If this statement were a limitation, the word “such” could have been inserted before the words “bills returned by the governor,” but that word does not appear.  This section simply determines whether or not there will be a veto session in September. If the governor vetoes any bill in the last five days of session, the veto session is held in September. It does not limit the consideration of vetoed bills by the general assembly in that veto session.

The Nixon Administration wants to read the Constitution as if there were additional words that simply do not appear in the Constitution.

At Associated Industries of Missouri, we support overriding the Governor’s veto. An important change to modernize the state’s unemployment system is contained in the bill: a provision that does not allow a separated employee with a golden parachute or severance package to collect unemployment while still being paid at full rate. Currently, Missouri is behind in making this change to prevent “double dipping” by such employees. Even New York has made the change and no longer allows this practice.

The basis for the bill, tying the number of weeks of unemployment to the unemployment rate is simple common sense. If the unemployment rate is lower, more jobs are available for those that want to find jobs, so the number of weeks of assistance should be less than in times of extremely high unemployment.

Associated Industries of Missouri supports the efforts of Senator Mike Kehoe to override the veto of House Bill 150 in the Veto Session today.

AIM testifies at House tax hearing on tips, refunds, spending limits, and withholding paperwork reduction

AIM president Ray McCarty testified at Tuesday’s regular hearing of the House Ways and Means Committee this week on several issues of importance to businesses across Missouri.

The Committee first voted on several bills that had previously been heard by the Committee:

HB 299 (Hoskins) Requires DOR to put notices of changes in sales tax interpretations on website, amended and approved by a vote of 10-1;

HB 132 (Brattin) Motor fuel tax exemption for fuel sold to marinas, amended and approved by a vote of 10-0;

HB 410 (Kelley) Adds graphing calculators to the list of exempt items during a sales tax holiday, approved by a vote of 11-0; and,

HB 440 (Koenig) Allows retailers to advertise sales tax will be absorbed, approved by a vote of 11-0.

All approved bills were advanced to the Select Committee on Finance and Taxation.

Public hearings were then held on several bills.

The first, HB 268, sponsored by Rep. Rocky Miller (R-124), allows a taxpayer to claim a credit or refund of tax overpayment when the Department of Revenue audits the taxpayer, even if the statute of limitations has expired.  AIM president McCarty testified that taxpayers should always be able to receive refunds of money that has been incorrectly paid to the government and also stated there was additional language that he would provide to the committee to help in other situations in which the DOR was denying refunds to taxpayers that had overpaid taxes to the state.  The committee also heard support from a private citizen and the MSCPA. There was no opposition to the bill.

The committee then heard testimony on HJR 34, a joint resolution by Rep. Eric Burlison (R-133) that would place a limit on appropriations. Revenues in excess of appropriations would be used to bolster state savings accounts to be used in times of revenue shortfall. After sufficient reserves are established, excess revenues would be used to lower income tax rates under the plan. The entire bill must be approved by voters at a statewide election.  AIM was the only statewide business group to testify in support of the bill, noting that it makes sense for the state to limit spending in good times and save money for bad times so they don’t have to cut programs or raise taxes in economic hard times.  Americans for Prosperity also testified in support.  In opposition were the Civic Council of Greater Kansas City, Missouri Coalition of Mental Health Centers, the Missouri Budget Project, and the Missouri NEA.

Next, the committee heard two bills regarding tips at restaurants.

The first was HB 754, sponsored by Rep. Ron Hicks (R-107), that would limit the amount of withholding tax on cash tips that must be reported by an employer to the amount of cash tips that is reported to the employer by the employee.  Witnesses from several restaurants testified they had been audited and heard of other restaurants that had been audited by the DOR and the auditors had attempted to assess them withholding tax that were not based on facts – just estimates extrapolated from credit card tip data. The Missouri Restaurant Association, AIM, NFIB, hotel association, MSCPA and several restaurant owners testified in favor of the bill. There was no testimony in opposition.  The DOR was questioned by the Committee for informational purposes.

HB 517, sponsored by Rep. Galen Higdon (R-11), would exempt from sales tax mandatory gratuities that are charged at restaurants. Virtually the same witnesses testified in favor of this bill also and there was no testimony in opposition.

The Committee also heard HB 502, sponsored by Rep. Mike Kelley (R-127), that would raise filing threshold for withholding tax allowing many more small businesses to file on an annual basis rather than quarterly. The bill was supported by AIM, NFIB and others.

Gov. Nixon calls special session to pay for Ferguson damage as questions linger about failure to defend businesses

Governor Jay Nixon announced today he plans to call a special legislative session to ask for “critical funding for the ongoing operations of the Missouri National Guard and the Missouri State Highway Patrol in Ferguson and the St. Louis region.” Click here for the press release.  Details regarding dates of the special session will follow, according to the release, “in the coming days.”

But questions from Ferguson Mayor James Knowles, as reported in this article that appeared in the St. Louis Post Dispatch, and carried widely in the national media, still have not been answered: why was the National Guard deployed only in defense of the police station and the central command center areas of Ferguson on the night the violence was the worst? 

That question was echoed by Dellwood Mayor Reggie Jones in this article by St. Louis Public Radio, noting that nearly 10% of Dellwood’s business district had been gutted by the violence.

Although more than 700 National Guard soldiers were reportedly on duty in the area, none were visible defending businesses as mainstream media carried live images of lawbreakers looting and burning businesses in Ferguson and surrounding areas.  Mayor Knowles says he was told the National Guard would be deployed to help defend businesses, but the help was never deployed except in defense of the police station and law enforcement command center.  Mayor Jones echoed that sentiment.

“As an advocate for Missouri businesses, Associated Industries of Missouri(AIM) was deeply saddened by the violence directed at business owners in the community of Ferguson and surrounding areas and the apparent lack of law enforcement to help defend against the looting and arson we witnessed,” said Ray McCarty, president of AIM. “Our thoughts and prayers are with the business owners and employees of those businesses as they try to rebuild their livelihood and the community.”

Associated Industries of Missouri pleased Missouri Legislature able to override Nixon’s veto of important taxpayer protection legislation

Associated Industries of Missouri (AIM) is pleased the Missouri General Assembly was able to override Governor Jay Nixon’s veto of a bill that will shift the burden of proof to the Missouri Department of Revenue in tax cases.

The House and Senate voted to enact SB 829 over the objections of Governor Nixon by bipartisan votes in both chambers. The vote was 26-6 in the Senate and 113-48 in the House. The bill shifts the burden of proof to the Missouri Department of Revenue (DOR) when the tax agency claims additional taxes are due. It also requires the DOR to prove their case if they disagree a taxpayer is entitled to an exemption, provided the taxpayer has provided initial proof of eligibility for the exemption. The provision is similar to the burden of proof placed on the Internal Revenue Service when dealing with federal tax liabilities.

But the Senate took action on several other important bills that did not receive enough support in the House, and the House restored some job training money that was not acted upon in the Senate.

AIM was also disappointed that Governor Nixon’s veto of taxpayer protections in SB 584 – a bill that would have provided clarification of many tax issues – was allowed to stand.

“The vetoes of the many bills sent a message that the government tax collectors are happy to continue to use the current tax law to treat taxpayers unfairly,” said McCarty. “The goal of these bills was to make the law clearer for the tax collectors and fairer for taxpayers and it is unfortunate the governor did not allow them to become law.”

AIM plans to support legislation in the next session that would establish a legislative board to oversee activities at the Missouri Department of Revenue, a bipartisan idea originally proposed more than a decade ago.

“The types of examples of inconsistencies in taxpayer treatment that have recently come to light and the constant turnover of leadership in the Department of Revenue, combined with term limits in the legislature make discussion of some long term oversight board that can provide long term direction and taxpayer protection very timely,” said McCarty.

Aircraft repair sales tax exemption extension makes progress

Two bills that would extend a current sales tax exemption for replacement parts and equipment used to repair aircraft got legislative hearings this week. The current exemption is set to expire January 1, 2015. Passage of the extension is necessary to secure more than 500 jobs in the Kansas City area and numerous jobs at other airport facilities across the state. AIM supports this exemption.

The bills are SB 777 (Nieves) and HB 2029 (Cierpiot).