Budget, tobacco tax likely to be biggest sticking points starting the session for … 2009

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Published: January 5,2009

The 2009 legislative session gets underway Jan. 6, and the prevailing theme is likely to be the state’s budget – specifically, making ends meet when money is tight.

If a handful of pre-session hearings are any indication, funding the state’s $90-million obligation will take center stage once serious budget crafting begins.

Like last year, two proposals – one that would increase the fees paid by providers, the other an increase in cigarette taxes – have already been floated by the same groups that pushed them in 2008.

Mississippi’s current budget has already been cut once, and it is likely it will be further reduced before fiscal year 2010 starts July 1. Gov. Haley Barbour and state economists have already warned legislators that money for FY10 will be scarcer than it is now.

Against that backdrop, several Mississippi business associations are preparing their legislative agendas.

Mississippi’s manufacturing sector has been perhaps the hardest hit by the downturn in the national economy. Nearly every region of the state has lost plants, jobs and the tax revenue that goes along with it. Northeast Mississippi lost 2,000 jobs in 2008.

Reduced demand for products is the main culprit for the closings.

At the top of the Mississippi Manufacturers Association’s legislative agenda is plugging the job drain. Business retention legislation is the first step, said MMA President and CEO Jay Moon.

“We don’t know where all this is going. We don’t think there’s going to be a whole lot of new business coming along, but we certainly don’t want to lose the business we have,” Moon said. “You want to do anything you can do to help these businesses keep the doors open.”

One of the recommendations Barbour’s Tax Study Commission made was the revisiting of Mississippi’s inventory tax. Businesses pay the tax at the end of every calendar year, with the amount based on the amount of inventory on Dec. 31.

Mississippi is one of about a dozen states with the tax still on the books.

“We would like to see consideration by the legislature to eliminate the inventory tax,” Moon said.

The inventory tax is a local one, so it benefits municipalities, most of which will not be keen on the idea of cutting revenue in this economy.

“We’re looking at ways to try to make local communities whole in terms of the revenue situation,” Moon said, adding that specifics of such a plan are still being pulled together.

A good example of how the inventory tax put Mississippi behind the economic eight ball, Moon said, came late last year when the Whirlpool plant in Oxford closed. Whirlpool had just bought Maytag and was restructuring its manufacturing network.

“It had nothing to do with the quality of work or the location or anything else,” Moon said. “With a merged company like that, you had too much production. That kind of thing happens when you have these kind of economic constrictions. We think that is a tax whose time has come.”

Business-related legislation that got a lot of attention last session is the e-Verify system, a database employers use to ensure their employees are legal residents of the U.S.

Barbour signed the requirement into law last march.

The Mississippi Association of General Contractors told the Mississippi Business Journal last summer that some of its members were having trouble with the system, citing problems with the statute itself and difficulty with registering workers within the required three-day window. Tweaking the system and removing some of its cumbersome language will be among the AGC’s legislative priorities, the AGC’s Rachel Rutland told the MBJ in the summer 2008 Construction Mississippi edition.

The AGC has hired Jackson attorney Jeremy McNinch. McNinch said in the summer 2008 Construction Mississippi edition of the MBJ that the law in too vague in several critical areas, including: the definition of employer, employee, contractor subcontractor; who the law applies to; and assurance that employers are required only to verify the status of their employees.

Contact MBJ staff writer Clay Chandler at clay.chandler@ msbusiness.com .

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