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Missouri governor signs tax incentives bill for automakers

By   /   July 15, 2010  /   8 Comments

Missouri Gov. Jay Nixon signed a bill Thursday, passed after a four-week special legislative session he called last month, designed to support the state’s automotive industry and manufacturing jobs.

The governor signed the Missouri Automotive Manufacturing Jobs Act at a union hall outside of Kansas City, located near the Ford manufacturing plant in Claycomo, which employs about 3,700 workers.

Missouri Gov. Jay Nixon

“I am pleased that legislators on both sides of the aisle and in both chambers of the legislature worked together to put this bill on my desk,” Nixon said in a statement.

“This legislation will help us keep thousands of Missourians living and working right here in our state.”

The tax incentives will allow automakers to retain withholding taxes only after a company makes a firm commitment to make capital investments in production capacity and keeps workers on the job. If commitments are not upheld, the company would be required to repay the incentives, which are capped at $15 million a year.

The governor, a Democrat, also pointed out that the Ford facility in Claycomo also supports a network of more than 40 suppliers across Missouri. Those suppliers, he said, employ thousands of additional workers producing items such as seats, wheels, steering wheels, and other components.

More Accolades

More praise from politicians backing the tax incentives continued on Thursday. Even before the governor signed the bill, Kansas City Mayor Mark Funkhouser said it sends a signal to Detroit, and specifically Ford, that the region will be good partners. “Today’s signing is one more win for our residents,” he said in a statement.

Funkhouser told Missouri Watchdog earlier this month he is usually opposed to tax incentives because it forces cities to fight against one another for businesses and debases the tax base for communities in the process.

These tax incentives for automakers are different, Funkhouser said. “I have been critical of reckless spending in the past. But this is a responsible bill. I’m for a very careful, very targeted use of tax incentives.”

After the bill’s passage in the legislature Wednesday, the Missouri Chamber of Commerce and Industry also praised the legislation. “We are pleased that lawmakers are allowing Missouri to put its best effort forward to save critical jobs connected to the auto industry,” said Daniel Mehan, president and CEO in a statement.

Disapproval

Highlighted by the 20-hour filibuster lead by state Sen. Chuck Purgason, a Caufield Republican who is running against U.S. Rep. Roy Blunt in the Republican primary to replace retiring U.S. Sen. Kit Bond, not everyone likes the bill. Caufield, who held up the bill until Wednesday morning, often called it a “giveaway” or “bailout.”

Another vocal opponent was the Show-Me Institute, a free-market think tank based in St. Louis, pointing out that tax incentives have not worked in other states — and even here in Missouri the state was not able to keep Ford or Chrysler in the St. Louis region. “These programs defeat their ostensible intended purposes: encouraging employment and helping states compete,” writes Christine Harbin, a research analyst.

“Government should focus on providing the basic institutions that foster reliable market exchange, instead of favoring losers in the marketplace in the name of economic development.”

Pension Reform

To offset the cost of the tax incentives for automakers, the governor asked legislators during the special session to reform the state employee pension system. Legislators complied and passed a reform bill on Wednesday that will modify the retirement system for anyone who becomes a state employee starting in 2011.

Members of the new retirement system will be required to contribute 4 percent of their pay to the pension system and work for the state at least 10 years before gaining ownership of their benefits.

The bill, which the governor is also expected to sign, is anticipated to save $660 million over the next 10 years.

By Brian R. Hook, brhook@missouriwatchdog.org, (314) 482-7944

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