Scrutiny of Missouri tax credits is needed
While allotments to education, health care, and social services have shrunk in Missouri the last few years, one form of state aid is booming.
That would be tax credits — the ability for recipients to subtract the amount of taxes they return to the state in return for creating jobs or contributing in some way to Missouri’s overall prosperity.
The amount that tax credits have carved out of general revenue has grown from about 2 percent in 1999 to almost 8 percent today. In the 2009 fiscal year, Missouri granted about $585 million of tax credits.
A commission appears ready to send Gov. Jay Nixon some stringent recommendations for reining in the 61 programs.
The recommendations already are under fire from developers and have the potential to set off a firestorm in the Missouri legislature next session.
As a starting point, however, it is gratifying to see the commission take a hard-line approach. While some of Missouri’s tax credits are uniformly good for the state and its citizens, the biggest programs benefit developers, financers, lawyers and lobbyists while delivering questionable returns to the state.
Overall, Missouri’s tax credit policy cries out for more scrutiny and tighter controls. A commission appointed by Nixon appears to recognize that reality. Its members have recommended sunsets and/or caps on nearly all programs, even those that benefit senior citizens and domestic violence shelters.
Those are good policies. The legislature spends extensive time weighing every dollar it appropriates. It should be as diligent in evaluating the dollars it forfeits through credits against future tax bills.
The commission’s most controversial recommendation is likely to be a further limit on tax credits to developers who renovate historic properties. Though already capped at $140 million, the commission voted narrowly to lower the limit to $75 million.
Developers and civic boosters in St. Louis, where the historic tax credits are widely used, are furious about the recommendation. They say estimates that the state gets back only 20 cents on each dollar it awards in historic property credits fail to account for jobs created and neighborhoods transformed.
Indeed, one of the many problems with Missouri’s tax credit policy is a lack of good data about the effectiveness of the programs, or even a consensus on what factors should be included in the data.
What’s known, though, is that no other state comes close to spending as much as Missouri does on historic tax credits. The closest contender is Virginia, which spends half as much. The commission also wisely recommended more controls on tax credits for low-income housing. That program has been riddled with allegations of favoritism and waste over the years.
A commission appointed by a Democratic governor may not hold undue sway with a Republican legislature. But with fiscal austerity as the watchword of the year, lawmakers will be remiss if they don’t give the upcoming report a close look.
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