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Pushing back against activist courts is vital to Missouri’s economy

by Sen. Will Kraus

Activist courts are causing major problems for Missouri businesses as they raise taxes by reinterpreting tax laws. During my four years as chairman of the Senate Ways and Means Committee, I’ve seen many instances of the courts imposing tax increases, often hurting Missouri’s important job creators.

Sen. Will Kraus, Chairman
Sen. Will Kraus

In many cases a judge will reinterpret a law, sometimes despite contrary past precedents, requiring businesses to collect additional sales tax. In a single judgement an activist court can impose a tax on businesses which are then passed onto consumers, harming Missouri’s economy as a whole.

A recent example of a court-imposed tax increase came from an April Missouri Supreme Court decision, in which the court reinterpreted a sales tax law exempting materials used in the manufacturing of a product from state sales tax. Up to this point, there have been multiple Supreme Court cases qualifying technology companies for the exemption, even though they are manufacturing non-tangible, electronic products. The Supreme Court reversed these precedents, holding the law does not apply to the hardware and software technology companies use to produce their electronic goods.

This complete reversal by the courts would impose a nearly $1 billion tax increase for Missouri’s technology industry. The monumental tax increase has not been vetted by the Legislature, and it would hurt some of the state’s leading job creators, companies such as Cerner and MasterCard. It would also discourage future investments in Missouri’s economy by national companies.

In an attempt to gain more tax revenue, the activist Supreme Court is endangering thousands of Missourians’ jobs and the state’s future economic prospects. Fortunately, the General Assembly passed Senate Bill 823 during this year’s legislative session, prohibiting the Department of Revenue from collecting any taxes from this changed interpretation until after the 2017 session.

I sponsored this bill to allow the Legislature time to fix the Supreme Court’s changes next year, while putting the fix through an open and public discussion. This bill will ensure Missouri’s technology industry is not decimated by a tax increase in the meantime.

The Legislature was able to pass a fix to another court-imposed tax increase this year in Senate Bill 1025, which I also sponsored. A similar circumstance occurred when the Supreme Court decided fitness classes would no longer be considered ‘educational’ under a state law exempting educational classes from sales tax. Gym owners and dance studios across the state were not notified of this change until the Department of Revenue began auditing them and claiming huge sums for uncollected sales tax. The reinterpretation has put several small businesses in dire financial straits. Senate Bill 1025 returns these fitness classes to their original educational classification, overturning the court-imposed tax increase.

Our state government should be helping businesses thrive, not trying to gain as much tax revenue as possible through reinterpreting tax law. I was proud to fight for the job creators and small business owners of our state during this year’s session. Pushing back against government overreach into taxpayers’ pockets is best for Missouri’s economy and, ultimately, its families and citizens.