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House Ways & Means
Correct Governors Mistake
On
Wednesday, January 14th the House Ways and Means
Committee unanimously approved House Study Bill 500 (now House
File 2038), which reinstated the phase-out of the sales tax on
residential gas and electric utility bills.
During
the Extraordinary Session of 2003, the House and Senate approved
HF 692 and HF 683, which contained a delay in the tax cut, to
offset the income tax cut in those bills. When the Governor item-vetoed the income tax reduction, he
also item-vetoed the sales tax delay.
The Governor’s action resulted in increasing the sales
tax on utility bills to 5%, beginning in July of this year.
House
File 2038 corrects the Governor’s mistake by setting the sales
tax rate on utility bills at 2% for July-December 2004, 1% for
2005 and 0% for 2006 and subsequent years.
This schedule reinstates the phase-out of the sales tax
that was approved by the Legislature and signed by the Governor
during the 2001 Legislative Session.
Governor’s
Budget: $400 million in Tax Increases, $300 million in bonding,
5.8 percent spending increase
On
Friday, January 16, the Governor released his budget
recommendations for FY 2005.
As he hinted during his State of the State speech, his
budget included massive tax increases, $300 million in bonding for
infrastructure projects and a whopping 5.8 percent increase in
spending.
Here
are the highlights (or lowlights, depending on your perspective)
of the Governor’s budget:
The
Governor has proposed nearly $400 million in tax increases, easily
the largest tax increase in the history of the state.
The Governor claims that he is only raising taxes by $283
million, but that doesn’t count the property tax increases, the
effect of raising the cigarette tax on March 1, and counts the $63
million for the utility tax as a tax cut rather than the
prevention of a tax increase.
(The second biggest tax increase of all-time is the 25
percent sales tax increase in ‘92, which raised $250 million in
new revenue.)
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Here
is the breakdown of the $392 million in tax increases:
-The 60 cent per pack cigarette tax increase would be effective
March 1 instead of July 1 and that will bring $36 million in revenue
in FY 04 and $108 million in FY 05. For FY 04, he proposes
that $20 million of the cigarette tax increase go to repay the
Senior Living Trust Fund and the remaining $16 million go into the
Cash Reserve Fund.
-Combined
corporate reporting (which he calls closing a loophole) would
increase corporate taxes by $25 million in FY 05. (However,
the Governor's staff last year said it would bring in up to $40
million.)
-Increases
property taxes by $14.6 million by eliminating the Ag land tax
credit (which is currently $24.6 million) and increases the family
farm tax credit by $10 million.
-Expands
the sales tax by $208.3 million. Services which would be taxed
include the following (in millions): Engineering Services -- $33.3,
Accounting/Auditing -- $29.5, Public Relations Services, --$ 23.8,
Computer Programming -- $20.7, Consulting Services -- $19.6,
Computer Integrated Systems Design -- $19.0, Management Services --
$17.6, Architectural Services -- $9.2, Computer Facilities
Management -- $8.2, Services Allied to Motion Picture -- $6.8,
Information Retrieval Services -- $4.3, Adjustments &
Collections -- $3.5, Surveying Services -- $3.4, Computer
Rental & Leasing -- $3.1, Business Consulting Services --$ 2.6, Credit
Reporting Services -- $2.5, Tax Return Preparation Services -- $1.2
(Note:
These are the figures provided to us by the Governor's office.
It is possible that these figures are on the low end of the
estimates for these tax increases.)
Ways
& Means Update
Bills
introduced to and passed out of committee this week:
No
bills were introduced in committee this week.
Bills passed out of committee
this week:
No bills passed committee this week.
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