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As other costs climb, manufacturers push for stable taxes

Manufacturing in Mississippi isn’t seeing the worst of the declines being experienced elsewhere in the country. But the current economic climate with high energy prices and concerns about a recession mean manufacturers are doing everything they can to remain competitive.

One of those efforts is to assure that Mississippi has a tax climate that is fair to manufacturers, says Jay Moon, CEcD, president and CEO, Mississippi Manufacturers Association (MMA). In November, MMA surveyed manufacturers from across the state about the business tax climate in Mississippi and related issues impacting the manufacturing community.

Moon said results of the survey will be combined with a study to evaluate the overall tax burden placed on Mississippi manufacturers compared to taxes and tax incentives in other states in order to determine what tax issues MMA will focus on in the Legislature. MMA has contracted for the study with Fluor Global Location Strategies, which worked closely with the Mississippi Development Authority to bring Nissan and other large manufacturers to Mississippi.

“The key factor of this project is that the recommended changes to the tax system will include direct input from manufacturers,” Moon said.

Gov. Haley Barbour has indicated that he would like to overhaul the state tax structure during his second term in office.

“In looking at the system as a whole, the goal will be significant tax reduction,” Barbour said. “But we may see some things in there that need to be adjusted up, which would allow us to reduce other taxes even more.”

Moon has been appointed by the governor to a public-private tax study commission headed by Leland Speed that will evaluate Mississippi’s tax system on a comprehensive basis. The commission is expected to report its findings August 31 — after completion of fiscal 2008.

Where are we?

“Basically, the governor’s tax commission will be looking at the taxes to see what the big revenue-generators are, and what kind of situation we are in with our taxes versus the other states,” Moon said. “Taxes are obviously a cost of doing business. Business doesn’t have a problem in terms of paying for services they get such as roads they can drive trucks on, water and sewer.

“What we have to look at is what taxes they may be paying in one location that they may not be paying in another location. If they don’t pay the same tax in another location, it could make Mississippi less competitive. We want to make sure there are things you can do to offset those taxes with exemptions or tax credits.”

Statewide consistency

One issue that is important to manufacturers is a consistent application of taxes from one area of the state to another. It is also important that taxes are stable. Manufacturers need to be able to project out the cost of doing business, and they can’t do that if taxes are volatile.

“There are a number of costs manufacturers have they can’t control,” Moon said. “They can’t control utility costs. They can’t control the cost of commodities. Healthcare costs for employees continue to go up. So, if there is a cost that can be managed or kept constant such as taxes, that is going to be beneficial because it gives them the opportunity to absorb some of those other increases.”

One successful example is several years ago, the state lowered unemployment premiums over a two-year period. Moon said that was very beneficial because unemployment is a significant cost. There has also been a reduction in cost for workers’ compensation, and that is also a major benefit.

“If we can keep the state-imposed and local-imposed taxes low or constant, that gives businesses an opportunity to deal with some of these other costs that fluctuate a great deal like the cost of natural gas, copper, steel and other products used in the manufacturing process.”

One of the least popular taxes with manufacturers is the franchise tax. Mississippi is one of a handful of states with a franchise tax so that is a competitive disadvantage compared to locations in other states.

Inventory tax is also unpopular with manufacturers and other parts of the business world impacted such as retailers.

“I believe only about 16 states in the country have an inventory tax,” Moon said.

Increases in energy and commodity prices are making a reasonable tax structure more important than ever. No matter if the manufacturer has its own fleet for delivering goods or contracts out delivery, transportation costs have skyrocketed. Commodities commonly used in manufacturing like steel, copper and aluminum are escalating in cost because of increasing world demand.

Contact MBJ contributing writer Becky Gillette at 4becky@cox.net.


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