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Missouri lawmakers call for closer look at tax credits
By Jason Noble/The Kansas City Star, Mo. (MCT)
JEFFERSON CITY -- With revenues shrinking and budget cuts looming, some Missouri lawmakers say they're going to give serious scrutiny in coming months to tax credits.
One state senator's proposal in particular could kick off a fresh round of debate over how nearly $500 million annually is diverted from the state treasury and allocated outside the traditional budget process.
"Is the tax-credit review process going to continue? Absolutely," said state Sen. Brad Lager, a Savannah Republican.
Tax credits are widely used by the state's Department of Economic Development as incentives for business expansion and housing development.
They work by giving applicants -- such as a real estate developer or business looking to locate in Missouri -- a break on state taxes in exchange for undertaking a beneficial project, such as building low-income housing or expanding a manufacturing plant.
Last year, $438.6 million that would have been collected as state revenue was instead redeemed in tax credits. In the first three months of the current budget year, $200.9 million in credits were issued; about $552.9 million in credits have now been issued but not yet redeemed by taxpayers.
The volume of credits siphoning revenue away from state coffers has made them a target for criticism. Opponents maintain tax-credit programs too often don't deliver a return on the state's investment and divert revenues from more critical state priorities.
That last complaint is getting louder, as declining tax revenues from the recession force lawmakers to consider cuts to core services.
In October, state Sen. Jason Crowell, a Cape Girardeau Republican, circulated a letter calling for tax credits to be made "subject to appropriation" -- that is, part of the budget process by which nearly all other state expenses are allocated.
"A tax credit is an expenditure of tax dollars," Crowell said in an interview. "Whether we spend money on a tax credit or a nursing home or a prison or a school, they should all go through the appropriations process, because at its core the appropriations process is where priorities are determined."
Under the current process, credits are allocated by state bureaucrats according to various program guidelines -- outside the legislative budget process and without regard for the state's overall financial health.
"It's all about priorities," said House Budget Chairman Allen Icet, a St. Louis County Republican. "You fund your priorities, and the things that aren't as important don't get funded. I think it's reasonable to say a review of tax credit programs should be part of that mix."
Other reforms could come up as well. Lager fought hard for restrictions on tax credits in the last legislative session and achieved modest results. This year, he wants to go further.
"We have 60-plus tax-credit programs," Lager said. "We have to go back and look at every one of those."
Not everyone agrees, however, that sweeping reform is possible or even necessary.
Rooting out abuses is important, but the system as a whole works, said state Rep. Tim Flook, a Liberty Republican and chairman of the House Job Creation and Economic Development Committee.
Cutting back or eliminating economic-development credits -- or even subjecting them to the traditional budget process -- will put the state at a competitive disadvantage, Flook said.
Proposals such as Crowell's have "great populist appeal," he said, but don't work out in practice.
The legislative session opens Jan. 6.
To reach Jason Noble, call 573-634-3565 or send e-mail to jnoble@kcstar.com.
To see more of The Kansas City Star, or to subscribe to the newspaper, go to http://www.kansascity.com.
Copyright (c) 2009, The Kansas City Star, Mo.
Distributed by McClatchy-Tribune Information Services.
Subscribe To Lake AlertsOne state senator's proposal in particular could kick off a fresh round of debate over how nearly $500 million annually is diverted from the state treasury and allocated outside the traditional budget process.
"Is the tax-credit review process going to continue? Absolutely," said state Sen. Brad Lager, a Savannah Republican.
Tax credits are widely used by the state's Department of Economic Development as incentives for business expansion and housing development.
They work by giving applicants -- such as a real estate developer or business looking to locate in Missouri -- a break on state taxes in exchange for undertaking a beneficial project, such as building low-income housing or expanding a manufacturing plant.
Last year, $438.6 million that would have been collected as state revenue was instead redeemed in tax credits. In the first three months of the current budget year, $200.9 million in credits were issued; about $552.9 million in credits have now been issued but not yet redeemed by taxpayers.
The volume of credits siphoning revenue away from state coffers has made them a target for criticism. Opponents maintain tax-credit programs too often don't deliver a return on the state's investment and divert revenues from more critical state priorities.
That last complaint is getting louder, as declining tax revenues from the recession force lawmakers to consider cuts to core services.
In October, state Sen. Jason Crowell, a Cape Girardeau Republican, circulated a letter calling for tax credits to be made "subject to appropriation" -- that is, part of the budget process by which nearly all other state expenses are allocated.
"A tax credit is an expenditure of tax dollars," Crowell said in an interview. "Whether we spend money on a tax credit or a nursing home or a prison or a school, they should all go through the appropriations process, because at its core the appropriations process is where priorities are determined."
Under the current process, credits are allocated by state bureaucrats according to various program guidelines -- outside the legislative budget process and without regard for the state's overall financial health.
"It's all about priorities," said House Budget Chairman Allen Icet, a St. Louis County Republican. "You fund your priorities, and the things that aren't as important don't get funded. I think it's reasonable to say a review of tax credit programs should be part of that mix."
Other reforms could come up as well. Lager fought hard for restrictions on tax credits in the last legislative session and achieved modest results. This year, he wants to go further.
"We have 60-plus tax-credit programs," Lager said. "We have to go back and look at every one of those."
Not everyone agrees, however, that sweeping reform is possible or even necessary.
Rooting out abuses is important, but the system as a whole works, said state Rep. Tim Flook, a Liberty Republican and chairman of the House Job Creation and Economic Development Committee.
Cutting back or eliminating economic-development credits -- or even subjecting them to the traditional budget process -- will put the state at a competitive disadvantage, Flook said.
Proposals such as Crowell's have "great populist appeal," he said, but don't work out in practice.
The legislative session opens Jan. 6.
To reach Jason Noble, call 573-634-3565 or send e-mail to jnoble@kcstar.com.
To see more of The Kansas City Star, or to subscribe to the newspaper, go to http://www.kansascity.com.
Copyright (c) 2009, The Kansas City Star, Mo.
Distributed by McClatchy-Tribune Information Services.
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