Democratic Gov. Jay Nixon vetoed a package of special sales tax breaks Wednesday for Missouri power companies, restaurants, computer data centers and others, setting up another showdown with a Republican-led Legislature that already has triumphed over him on a historic income tax cut.

Democratic Gov. Jay Nixon vetoed a package of special sales tax breaks Wednesday for Missouri power companies, restaurants, computer data centers and others, setting up another showdown with a Republican-led Legislature that already has triumphed over him on a historic income tax cut.

Nixon denounced the tax break measures as a "grab bag of generous giveaways" providing "secret sweetheart deals" and "special interest favors" that could bust a $425 million hole in the state budget while also jeopardizing hundreds of millions of dollars of local tax revenues.

While vetoing 10 bills, Nixon also said he would make "dramatic spending reductions" in the coming weeks to guard against the potential for lawmakers to enact the tax breaks by overriding his objections during their September session.

"My vetoes today are the first step toward restoring fiscal sanity to a budget process that has gone off the rails," Nixon said at a Capitol news conference.

Some Republican lawmakers and business groups immediately vowed to pursue veto overrides. They disputed Nixon's cost projections and defended the bills as a mixture of important business incentives and mere clarifications of existing tax policies that they contend have been misinterpreted by the courts and Nixon's administration.

"By vetoing these bills, he has reemphasized the fact that the focus of his tax and spend administration is on growing the size of government rather than growing our economy," said House Speaker Tim Jones, R-Eureka.

Republicans hold a two-thirds majority required for veto overrides in the Senate and are one seat short of that threshold in the House. But the GOP is likely to gain seats when special elections are held in August for four vacant House districts.

In May, Republicans got the support of a lone House Democrat to override Nixon's veto of legislation cutting the state's income tax rate for the first time in nearly a century.

Last year, the Legislature overrode 10 Nixon vetoes — the greatest single-year total in Missouri since 1833, when a different constitution only required a simple majority vote.

The newly vetoed bills include several passed in May during the Legislature's final day of its regular session that would exempt various categories of businesses from paying sales taxes on the equipment or electricity they use.

One bill would grant those tax breaks to computer data centers, which store or process electronic information. Business groups have pursued incentives for data centers for years while arguing that Missouri is missing out on some high-tech businesses. But the bill that passed was more far-reaching than one that Nixon had previously supported during a 2011 special session. Nixon's budget office estimates it could waive $152 million annually in state sales tax revenues and an equal amount in local revenues.

Business groups contend the actual cost is likely a small fraction of that.

"What we are seeing is a roadblock mentality" from Nixon, said chamber President and CEO Dan Mehan.

Other vetoed provisions would grant similar sales tax breaks for the electrical lines, poles and transformers purchased by power companies; the electricity used to produce food sold by restaurants, bakeries and grocery stores; and the soap and chemicals used by commercial laundries. Another vetoed provision would extend sales tax breaks for dues to fitness centers and memberships that give people first-crack at tickets for events held at facilities such as the Sprint Center in Kansas City.

Sales taxes also would be waived for people buying old vehicles, food from farmers' markets, experimental drugs that could treat terminal illnesses and graphing calculators that are increasingly required for school mathematics courses.

Nixon focused much of his criticism on the way the tax breaks were passed — on the last day of the session, without being accounted for in the state budget and in some cases without a public hearing on the final version of the wording.

House Majority Leader John Diehl rejected Nixon's assertion that the tax breaks amount to special-interest favors. He said many provisions are mere corrections and clarifications.

"What some of these bills did was close loopholes where his Department of Revenue put hidden tax increases on businesses, often not informing those businesses that they were changing tax policy on their own," said Diehl, R-Town and Country.

One of the provisions Nixon vetoed would require the Revenue Department to notify businesses of sales tax policy changes before businesses are required to pay the tax. Legislative researchers estimated only a minimal cost related to postage. Nixon's administration estimated it could result in the loss of $100 million annually of state revenues and an equal amount in local revenues, because businesses would gain greater leeway to challenge taxes.


A look at tax breaks vetoed by Missouri Gov. Nixon
The Associated Press

Missouri Gov. Jay Nixon on Wednesday vetoed a package of state tax breaks that he contends would harm state and local budgets. A look at some of the bills that were vetoed:

DATA CENTERS: Electricity and equipment used by computer data centers that store or process electronic information would be exempt from sales tax. Senate Bill 584.

Cost: Nixon's administration says more than $152 million annually each for local and state governments.

TAX NOTICES: The Department of Revenue would be required to notify businesses of changes in sales tax policies before they would be required to pay the tax. SB612 and SB662.

Cost: Nixon's administration estimates it would cost $100 million each for state and local governments because businesses could gain greater ability to challenge taxes. Legislative researchers estimate minimal costs for sending notices.

MAKING FOOD: Restaurants, bakeries and grocery stores would be exempt from paying sales taxes for electricity used to prepare food. The provision sought to overturn a Missouri Supreme Court ruling earlier this year denying a sales tax exemption for baked goods prepared at numerous Schnucks grocery stores. House Bill 1865.

Cost: Nixon's administration says $51.2 million annually for state government.

FITNESS CENTERS: State law levies a tax on admission and fees to places of amusement, entertainment and recreation. The Missouri Supreme Court has ruled that athletic, exercise and fitness clubs count as places of recreation. Lawmakers sought to narrow that so sales tax is charged when people watch an activity but not when they participate. SB584.

Cost: Nixon's administration says $35.8 million per year each for state and local governments.

USED CARS: Sales taxes would not be collected for vehicles that are at least 10 years old for purchases up to $15,000. SB693.

Cost: Nixon's administration says it would reduce state revenues each year by $33.5 million and local government revenue by $26 million annually.

ELECTRICITY: The provision would establish a sales tax exemption for such things as poles, wires and transformers used by power companies for transmitting electricity. SB584.

Cost: Nixon's administration says $30 million each for state and local governments.

LAUNDRIES: Dry cleaners and other commercial laundries would not be required to pay sales taxes on energy, soap and chemicals that they use. The state Supreme Court denied a "processing" tax break for a laundry in a case earlier this year. SB612.

Cost: Nixon's administration says $2 million per year each for state government and local officials.

FARMERS MARKETS: Farm products such as eggs, fruits, vegetables, milk and meat purchased at farmers' markets would be exempt from sales tax.

Cost: Nixon's administration estimates $300,000 per year each for state and local governments.

CALUCLATORS: Graphing calculators worth $150 or less would be eligible for Missouri's annual sales tax holiday for school supplies. HB1296 and SB680.

Cost: Nixon's administration says $200,000 each year for the state.