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House panel backs end to newspaper tax breaks

House panel backs end to newspaper tax breaks

March 21st, 2012 in News

Newspaper publishers in Missouri could have to pay more to buy paper, ink and other supplies under a measure endorsed Wednesday by a House panel.

On a 7-5 vote, the House Tax Reform Committee backed a proposal to eliminate sales tax exemptions on newspaper equipment in order to help fund state medical subsidies for people who are blind. The measure now goes to the full House.

The result is that newspaper companies would have to pay sales tax both on the supplies used to produce their paper and on the retail sale of the paper - a double hit not applied to most manufacturers.

The House is debating a budget this week that would eliminate a $30 million program that provides medical care to about 2,800 blind people and instead set aside $6 million for a slimmed-down aid program. Some House members want to use the money saved from those program cuts to reduce cuts to the state's public colleges and universities.

A financial estimate included with the newspaper legislation approved Wednesday projects that bill could generate up to $4.2 million of additional money for state aid to the blind.

House Budget Committee Chairman Ryan Silvey, who sponsored the measure, said newspapers should give up their tax exemptions because some editorial boards have called on lawmakers to eliminate tax breaks as a way of balancing the budget.

"The fact that they receive this corporate welfare while advocating for the end of it for others is a bit hypocritical," said Silvey, R-Kansas City.

Silvey also said he does not think eliminating the tax exemptions would interfere with a newspaper's right to press freedom.

"To say your medium is so unique that it needs a tax subsidy or it's infringement on First Amendment rights, I think is just illogical," he said. "It's not their right to have a sustainable business model."

To calculate how much tax revenue the legislation could generate for aid to the blind, legislative analysts estimated the total annual revenue of the newspaper industry and estimated how much of the revenue is spent on newspaper supplies. The fiscal estimate projects that revenue for newspapers sold in the state totals between about $120 million $208 million each year. The estimate cites an annual report filed by the New York Times Co. for 2011 that said costs for "raw materials" and "other costs" are equal to 17 percent to 50 percent of the newspaper's revenue.

Missouri lawmakers codified the sales tax exemption for newspaper supplies in 1998, two years after the state Supreme Court ruled that computers used for newspaper pagination could not be taxed because pagination is part of the manufacturing a newspaper.

Other provisions of the Missouri law allow for tax emptions for materials used in manufacturing processes. Doug Crews, the executive director of the Missouri Press Association, took issue with Silvey's characterization of newspaper tax breaks as "corporate welfare," saying the newspaper industry is a type of manufacturing business.