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Holden again proposes tax increases to balance budget

January 21, 2004
By: Sara Bondioli
State Capital Bureau

JEFFERSON CITY - Tax increases the legislature rejected last year were proposed again by Gov. Bob Holden in his State of the State address Wednesday.

The governor's proposed revenue increases, totaling $689 million per year, are similar to his package of last year that failed in the legislature including increases in taxes on corporations, gambling and tobacco.

The governor renewed his tax call in a speech that questioned both the morality and courage of the Republican-controlled legislature for refusing to raise taxes on tobacco and gambling.

"There is nothing moral in raising standards and expectations at a struggling school, only to deny the necessary funding," Holden said

"Where is the courage in siding with gambling and tobacco interests over the welfare of our children in public schools?" he asked a bit later in his speech.

But at a later news conference, the Republican House speaker questioned the governor's courage.

"I say, governor, where is the courage in misleading Missourians about education funding," asked Catherine Hanaway, R-St. Louis County.

"Where's the courage in using kids, where's the courage in using teachers, where's the courage in using superintendents all for a play for more taxes?"

Despite continuing Republican opposition to large tax hikes, the governor's budget director, Linda Luebbering, said the governor is hopeful legislators will approve the proposals after making tough cuts last year.

"He believes there's a greater understanding about the cuts that have already been made and the situation the state budget is in," she said.

Holden's plan would increase riverboat admission fees and taxes on riverboat gaming receipts with the revenue going to fund the school Foundation Formula. The plan would also eliminate the loss limits on Missouri's riverboats.

It would raise the tax on cigarettes by 55 cents a pack and raise the tax on other tobacco products from 10 percent to 30 percent. In addition, the plan would eliminate corporate tax breaks and increase taxes on incomes greater than $200,000.

The proposed revenue increases, except the elimination of loss limits, would require voter approval according to the Hancock Act because they exceed $75 million. Luebbering said the administration would like the proposals on an August ballot, which would allow taxes approved by the people to be in effect for nine months of fiscal year 2005.

"He knows that if the General Assembly agrees to send that to the voters and the voters turn it down, that he is responsible for balancing the budget," Luebbering said.

The governor has not looked at areas he would cut if that situation occurs, Luebbering said.

In his State of the State address, Holden urged the legislature to put the tax increases on the ballot.

"You have spoken. But the vast majority of Missourians haven't spoken," he said. "Your refusal to allow our citizens to vote on this plan robs them of their voice and of their opportunity to succeed."

The Republican leadership said the voters rejected the tobacco tax hike idea when it was on the ballot in November, 2002.

"We believe the best way to solve this [budget] problem is doing what every Missourian does in tough times -- cut waste, manage more efficiently and live within our means," said Senate President Pro Tem Peter Kinder, R-Cape Girardeau.

Holden would not say whether he would veto a budget from the legislature that doesn't include tax increases.

The governor's proposed budget would restore funding for lower and higher education to the levels appropriated in fiscal year 2003 while cutting Medicaid costs, reforming tax credits and closing the Chillicothe Correctional Center.

The budget director and governor again stressed they are not yet ready to release the remaining $200 million in withholdings from the current budget year. Luebbering said revenue numbers will be examined in February and probably March before a decision is made about releasing the withholdings.

Just a few hours after the governor's speech, Luebbering was questioned by the Senate Appropriations Committee over the administration's funding of the Missouri's office in Washington, D.C., after the legislature voted last year to cut off funds for the office and close it down.

"Why are we here if the governor has the authority to disregard the general assembly's work?" Sen. Gary Nodler, R-Joplin, asked.

Luebbering said some departments directed money to the office because they would have spent more money sending other people to Washington, D.C., to complete the work that had been done there.

Sen. Wayne Goode, D-St. Louis County, said money from the core budgets of departments is often used in ways the legislature does not anticipate, although he expressed concern that the legislature's wish to close the office was ignored.