Jackson Free Press

*verbatim via e-mail* There has been a lot of discussion over the past few days about Senate Bill 2310, which proposes to eliminate the sales tax on groceries and increase the tax on cigarettes. Despite the initial claims that this proposal is simple and revenue neutral, this bill in fact shortchanges our towns and cities which are already strapped in post-Katrina times and destroys our ability to increase needed funding for education in the future.

The bill will result in a $1.5 billion loss of revenue to the state over nine years (an average loss of nearly $170 million per year); will cut sales tax revenues to municipalities by $166 million over nine years; and inevitably lead to lower funding for education and basic services as well as to tax increases, ranging from municipal ad valorem taxes to sales taxes on products other than groceries to higher income taxes. It would be irresponsible in this period of uncertainty caused by Katrina to reduce state tax revenues. We need more funds for education and other priorities, not reductions. It is even more irresponsible to cut sales tax revenues for municipalities, because many have had their tax bases wiped out. The package was rushed through in such haste that there was not enough time for the figures given to the legislature to be properly researched, and many not only proved to be wrong but were admitted to be wrong during the process.

I plan to veto SB 2310, and I want to give you more details as to my reasons.

An Irresponsible Proposal in an Uncertain Time

At a time when the state fiscal situation is murky at best, and the state and federal governments are loaning money to local governments to keep them afloat, it is irresponsible to set up a new scheme to change how state and local governments are financed.

This is not a "revenue neutral" proposal. The new structure seeks to replace the sales tax on groceries, which would generate more revenue over time for cities and towns, with an increase in the tax on tobacco, which will generate less revenue over time. Any increased revenue from a higher tax on tobacco will not come close to offsetting the decreased revenue from reducing the grocery tax.

Since the cities and the state split the revenue from the grocery tax, this will be devastating to both the State budget and to towns which depend on those funds to maintain basic functions of government, such as fire and police protection. This Would Blow a New Hole in the State Budget Just as We Had Dug out of the Old One.

Just two years ago, the state had a more than $700 million budget hole. As the state dug out of that hole, higher education was cut, and some have argued that K-12 spending increases were not enough. Just as we had almost gotten back to a balanced budget, Katrina struck, leaving much uncertainty about its impact on tax revenues and future budget needs as South Mississippi is rebuilt. In the midst of this uncertainty, SB 2310 commits the state to a scheme which will reduce state revenue by more than $1.5 billion over the next 9 years of implementing the legislation.

Such a large reduction in general fund revenue will make it impossible to restore the cuts to higher education and give even larger increases to K-12 education.

While the revenue will go away, the appetite for spending will not. Eliminating the grocery tax will lead to calls in the future to raise other taxes.

A Tax Scheme that will Make it Harder for Cities to Provide Basic Services

The legislation takes away the anticipated and historical growth in revenue by capping the refund to cities at what they receive currently. When a historical rate of growth is applied, municipalities will lose an estimated $166 million in future revenue over nine years as the legislation is implemented. At that point, cities will be losing more than $40 million a year.

This scheme will especially hurt the smaller towns, where grocery sales are a greater portion of their total sales tax revenue.

To make up the lost revenue, cities will likely raise property taxes. Legislators did Not have All the Information about the Potential Impact of this Proposal

A greater hit on cities and the State Budget than was thought

When Legislators voted for this proposal, they were told that cities and towns were protected from a loss of revenue. However, according to the Mississippi Tax Commission, the original estimate of the amount of grocery tax collected in municipalities was incorrect, likely by 20%. Therefore, even the proposed fund set up to reimburse the municipalities is not funded at a high enough level in the legislation.

Even if that estimate were corrected, it demonstrates the lack of information on which this proposal was based. The Tax Commission does not know how much revenue is collected each year from grocery taxes. The estimate is $345 million for the current fiscal year, but that is nothing more than an educated guess. If that estimate is wrong, all the estimates on the impact on municipalities and the state General Fund are wrong, and the negative impact will likely be more than what was described to Legislators.

And not as much revenue from a higher cigarette tax than was thought

The Tax Commission estimate of potential new revenue from an increased tax on cigarettes did not take into account the reduction in smoking which is occurring both in Mississippi and across the nation. This will further reduce the new revenue from this higher tax.

Increasing the cigarette tax by 455% would give Mississippi the highest cigarette tax of all our surrounding states. This would inevitably lead to bootlegging of cigarettes across state lines and would entice more people to purchase cigarettes from the Choctaws, which are not taxable. The Tax Commission estimate on potential new revenue from an increased tax on cigarettes did not take either of these likely effects into account, and both would reduce the new revenue from the higher tax.Once you look behind the headlines and quick-hitting quotes by some of SB 2310's supporters, you begin to see the bill sends precisely the wrong message at the wrong time. I urge you to contact your local legislator and voice your opinion that SB 2310 should not become law. Urge them to sustain my veto.

Governor Haley Barbour
P.O. Box 139 - Jackson, MS - 39205
Phone: 601.359.3150 - Fax: 601.359.3741
501 N. West Street
Governor's Office - 15th Floor
Jackson, MS 39201

Previous Comments

ID

138004

Comment

Be sure to see our earlier discussion of this bill on Councilman Allen's JFP blog.

Author

DonnaLadd

Date

2006-01-18T15:50:47-06:00

ID

138005

Comment

Also, see Rep. Fleming's discussion on his amended bill: http://www.jacksonfreepress.com/comments.php?id=8295_0_54_0_C

Author

Justin

Date

2006-01-18T16:08:02-06:00

ID

138006

Comment

I can't believe he pulled out the old "bootlegging" idea. Sad.

Author

Ironghost

Date

2006-01-18T16:34:55-06:00

ID

138007

Comment

Ironghost-- I can't believe he pulled out the old "bootlegging" idea. Sad. Want to see something REALLY sad? Chaney, who voted for the sales tax reduction/cig-tax increase, now says he will vote to sustain Barbour's veto "because you cannot have the largest tax cut in state history and at the same time be a proponent of fully funding education.". Chaney is a proponent of full education funding?! Like ...since when?

Author

Rex

Date

2006-01-18T17:44:49-06:00

ID

138008

Comment

It is interesting to hear all this talk of increased education funding now. Sigh.

Author

DonnaLadd

Date

2006-01-18T23:01:07-06:00

ID

138009

Comment

Yeah, right. We're back to the same old, same old. The Citizens are the biggest losers, as usual.

Author

Ironghost

Date

2006-01-19T06:47:01-06:00

ID

138010

Comment

So does anyone else see this veto as the "final nail" in a Barbour second term?

Author

Dennis

Date

2006-01-19T09:00:30-06:00

ID

138011

Comment

So does anyone else see this veto as the "final nail" in a Barbour second term? That crossed my mind after this, but I think it depends on who plans to run against him next year. Who do you think will be going after the seat in '07?

Author

LatashaWillis

Date

2006-01-19T10:47:44-06:00

ID

138012

Comment

Oh yeah...Since Amy Tuck "broke ranks", I wouldn't be surprised if she ran against him on the Republican ticket.

Author

LatashaWillis

Date

2006-01-19T10:48:35-06:00

ID

138013

Comment

Oh, one more thought...Do you think that if Tuck runs, some folks may see her as a Republican version of a flip-flopper since she used to be a Democrat?

Author

LatashaWillis

Date

2006-01-19T10:54:12-06:00

ID

138014

Comment

so wait, are ya'll saying GUV vetoing this is bad? They way i understood it and i think Fleming said that dolar for dollar this idea would not be good for many people. We are talking about pennies on the grocery tax as it is, it would not make the difference between someone eating and someone starving. If i am repeating someones sentiments sorry. Maybe i am just not following is everyone saying that conservatives will whine? Interesting...

Author

*SuperStar*

Date

2006-01-19T10:59:39-06:00

ID

138015

Comment

"final nail?" Y'all aren't hearing the tide turn are you? Rank (i.e., smelly) and file (i.e., abrasive) Republicans have jumped fully behind Barbour's veto and rationale. According to them this morning, by vetoing this tax shift, he has saved the budgets of the municipalities and the state, underscored his fiscal responsibility, stalled future cuts in education funding, and reemphasized the need to reduce government spending in order to later apply a responsible tax cut. He also accomplished three things the papers and rank and file He saved his future campaign contributions from Tobacco, Inc. He returned Tuck to her inconsequential status from last year. He added another coat of Teflon to his huge previously exposed butt.

Author

Rex

Date

2006-01-19T11:35:38-06:00

ID

138016

Comment

That was supposed to read, "He also accomplished three things the papers and rank and file aren't saying publicly."

Author

Rex

Date

2006-01-19T11:37:18-06:00

ID

138017

Comment

so wait, are ya'll saying GUV vetoing this is bad? As for me, after learning more about the bill, I'm not against the veto because whether Barbour vetoed it or not, the bill still needs to be amended.

Author

LatashaWillis

Date

2006-01-19T11:40:45-06:00

ID

138018

Comment

Just some more food (still taxable I guess) for thought-- Everyone is worried about the cig-tax increase not offsetting the food sales tax reduction and thereby causing budget tremors through municipalities and the state? Why not do away with the OTHER *#$% exemptions to the sales tax? We do that and there would be enough to offset food sales tax. Might even be enough to level off all non-food/drug sales taxes to a level of 6% or even 5% Here are some of the exemptions (from the Mississippi tax Commission): Retail Sales exemptions-- Farm tractors……………………..………………….1% Sales to electric power associations…………………1% Certain machinery, machine parts and equipment located on and used in the operation of certain publicly-owned port facilities.1 ½% Manufacturing machinery….………………………..1 ½% Automobiles and light trucks (10,000 lbs. or less) through December 31, 1994………………………..3% Automobiles and light trucks (10,000 lbs. or less) effective January 1, 1995…………………………..5% Trucks (greater than 10,000.00 lbs.), aircraft, farm implements, semitrailers, and mobile homes……………………………………….3% Materials to railroads for use in track and track structure………………………….3% Construction Contracting: When the total contract price or gross amount received exceeds $10,000.00 (except residential construction)………………3 ½% Manufacturing machinery included in contract…………….1 ½% Public Utilities: Electricity and fuels-Residential use…………………………………0% Electricity and fuels-Industrial use…….……………………………1 ½% Transportation charges on shipments of tangible personal property between points within this state when paid directly by the consumer; same rate as property being shipped. Water-Residential consumption………………………................…..0% Admissions to amusements conducted in publicly owned enclosed coliseums and auditoriums (except admissions to athletic contests between colleges and universities)……………………………………3% There is a whole section of Industrial, Agricultural and "Other" sales tax exemptions-- 0% sales tax --including newspapers and periodicals, coffins/caskets, food/drink made through vending machines, Girl Scout cookies, planting seed, feed seed, fertilizer, livestock, veterinary pharmaceuticals, and a boat load of manufacturing materials and equipment.

Author

Rex

Date

2006-01-19T12:19:50-06:00

ID

138019

Comment

Ahhh... It's gonna be a FUN session and campiagn year! Tuck: Governor's tax figures "fictitious" I certainly hope that those who voted for the original bill will continue to support a bill that is good for the state," Tuck said today at the Capitol. "This bill will save lives and reduce taxes. Tuck said she will work hard to hold together enough votes to override the governor's veto. That includes getting senators the best possible information, she said. Don't you just love party unity? MS Republicans are looking more like MS Democrats everyday.

Author

Rex

Date

2006-01-19T14:00:51-06:00

ID

138020

Comment

We can only hope that logic prevails. Raising the tax on cigarettes makes good sense if we are to ever address decreasing use. This tax however you look at it will only effect the individuals who decide to smoke. However reducing and then eliminating the tax on groceries helps everyone. As for state, city, and whatever other budgets may be effected negatively by this transfer rest assured the difference will take care of itself in other ways as it always does. I know this argument has been stated previously, it just seems that it's not sinking in. Lets hope the legislators hold to their votes and this veto falls.

Author

floordoc

Date

2006-01-19T15:46:48-06:00

ID

138021

Comment

WAPT: Lt. Gov. Amy Tuck has charged that Gov. Haley Barbour used fictitious numbers to justify his veto of a tax bill. Barbour called the proposal to raise taxes on tobacco products and lower grocery taxes "ill-conceived, barely researched, poorly timed and passed in great haste." He said that eliminating the 7 percent grocery tax would hurt city and state budgets as Mississippi recovers from Hurricane Katrina. Tuck said that's not right and she has her staff compiling its own set of number to counter Barbour's. I look forward to seeing Ms. Tuck's numbers.

Author

DonnaLadd

Date

2006-01-19T21:08:41-06:00

ID

138022

Comment

Does anyone else read Barbour's argument against this current legislation as tacit support for a stand-alone cigarette tax increase? That's probably not his intention, but it does seem to be supported by his logic. It would be irresponsible in this period of uncertainty caused by Katrina to reduce state tax revenues. We need more funds for education and other priorities, not reductions. It is even more irresponsible to cut sales tax revenues for municipalities, because many have had their tax bases wiped out. The package was rushed through in such haste that there was not enough time for the figures given to the legislature to be properly researched, and many not only proved to be wrong but were admitted to be wrong during the process. Doesn't that argue that, perhaps in these particularly dire times, the solution might be to raise the cigarette tax and either leave the grocery tax alone and/or lower it a bit more gradually. Whatever the outcome, I think that an event like Katrina certainly exposes the weaknesses in the Grover Norquist "drown it in a bathtub" approach to governance. Maybe Tuck has caught that clue. Could a stand-alone cigarette tax be in the offing?

Author

Todd Stauffer

Date

2006-01-20T11:57:27-06:00

ID

138023

Comment

With Barbour's tobacco history and his campaign decree to oppose ANY tax hike I doubt that a stand alone cigarette tas increase will happen. "At a time when the state fiscal situation is murky at best, and the state and federal governments are loaning money to local governments to keep them afloat, it is irresponsible to set up a new scheme to change how state and local governments are financed." I trust the Governor and Legislature will remember these words when they vote on their pay raises.

Author

Dennis

Date

2006-01-20T12:34:13-06:00

ID

138024

Comment

I trust the Governor and Legislature will remember these words when they vote on their pay raises. Comical. Just comical.

Author

LatashaWillis

Date

2006-01-20T13:05:20-06:00

ID

138025

Comment

I seem to recall that haley's firm represented tobacco interests. anyone know the $$$ figure and companies? JT

Author

John Tyson

Date

2006-01-20T16:20:54-06:00

ID

138026

Comment

According to the New York Times, in 1997 Barbour began representing Philip Morris, RJR Reynolds, US Tobacco, Brown & Williamson, and the Loews Corporation, in a year when Congress first began considering a national settlement with tobacco companies. The tobacco companies already had a number of different lobbying firms working for them, but thought it prudent to bring on the former chair of the RNC as he returned to private practice. From a June 8, 1997 Times piece (from behind the Select firewall, so I can't link it): ''Haley Barbour was hired to provide strategic advice and counsel to the tobacco companies in connection with the ongoing discussions regarding a national solution to the tobacco issue,'' said Lance Morgan, a spokesman for the five tobacco companies. Mr. Morgan declined to disclose the fees paid by the companies to Mr. Barbour. Charles Lewis, director of the Center for Public Integrity, a nonprofit research group, criticized Mr. Barbour's potentially lucrative new relationship with the tobacco industry. ''It's incestuous and it's nauseating,'' Mr. Lewis said. ''Barbour has been leading his party, raising millions of dollars from these tobacco folks, and we suspect he has been quietly lobbying and doing favors for them while he was Republican Party chairman. The tobacco industry has given generously to Republicans and has known Haley for years. Who better to represent you in Congress than your pal, who has been helping you unofficially for years?'' Also working in Mr. Barbour's favor is the fact that his firm is wholly staffed by Republicans and that one of his partners, Edward M. Rogers Jr., has long been a fund-raiser for the Senate majority leader, Trent Lott, who, like Mr. Barbour, is from Mississippi. Mr. Rogers was a former White House aide in the Bush Administration who, shortly after leaving the White House, was forced in 1991 to end a $600,000 contract he had to represent a major Saudi figure in the scandal involving the Bank of Credit and Commerce International. In an unusually public rebuke, President George Bush broke with Mr. Rogers and denounced the arrangement. A subsequent ethics review by the White House and the Justice Department concluded that Mr. Rogers had not broken any laws. Mr. Barbour's other partner, Lanny Griffith, had worked as a campaign strategist for Lamar Alexander in 1996 and for Mr. Bush in 1988 and was the Southern regional director for the Republican Party in 1986. In an interview, Mr. Griffith noted the advantage his firm has with Republicans controlling both houses of Congress. ''You want to appeal to the political interests of the members you are talking to,'' Mr. Griffith said, ''and that's easier to do with people who have spent a lifetime in Republican politics when you are a Republican yourself. Generally, Republicans are better at lobbying fellow Republicans and Democrats in lobbying fellow Democrats.'' Barbour, Griffith & Rogers got $1.7 million from tobacco interests in 1997 and $860,000 in 1998 according to Public Citizen.

Author

Todd Stauffer

Date

2006-01-20T22:21:07-06:00