Growth of Missouri's tax credits puts entire system under scrutiny

During the fiscal year that ended June 30, Missouri taxpayers claimed $507.6 million in tax credits under programs as varied as job creation, historic preservation and property tax relief. That represents a 22 percent increase in just two years.

That growth, which far outstrips state revenue growth as the economy falters, has thrown the state's entire system of tax credit under scrutiny. Lawmakers are debating the effectiveness of many credits at the same time they are looking at ways to expand some credits to spur economic growth.

Critics contend tax credits allow politicians to spend money without competing against programs such as education or health care. When credits are redeemed, revenue shrinks but the state budget does not recognize credits as spending.

Promoters of tax credits view them as tools to promote growth or relieve burdens on particular populations. Some of the biggest credits support low-income housing construction, with $98.3 million redeemed in the last fiscal year, the senior resident property tax credit, at $100 million, and historic preservation, with $140.1 million.

On Thursday evening, Old Town Cape sponsored a workshop on the historic tax credit program. Karen Bode Baxter, a consultant from St. Louis, described the program and presented figures she said supports arguments that the credits have a strong economic return of up to $2.50 for every dollar invested.

There are no caps on the amount of tax credits under the historic preservation program. If a project meets the rules, it qualifies for the credits. Baxter said changes such as a limit would destroy Missouri's ranking of No. 1 nationally for investments in historic buildings.

"If they cap the program, it is a whole new ballgame," Baxter said to a group of about 30 gathered at Buckner Brewing Co. on Main Street. "Would you start a project if you were unsure whether it would be accepted?"

But the growing bite of credits generally has even supporters concerned. A bill pending in the Missouri Senate would impose caps on most economic development credits. The bill would require annual budgeted amounts for each program and impose a sunset on many credits.

The proposal is overkill, said Sen. Jason Crowell, R-Cape Girardeau. Some credits such as historic preservation have clear benefits and proven value, he said. Others, however, are subject to political manipulation, and Crowell specifically targeted the work of the Missouri Development Finance Board as an example of a program that is out of control.

In December, while under the chairmanship of Lt. Gov. Peter Kinder, also a Cape Girardeau Republican, the board authorized $25 million in credits for projects by the Jackson County Sports Authority. The credits, which represent 50 percent of the amount spent by contributors to the authority, will help construct a new practice facility for use of the Kansas City Chiefs at Missouri Western State University in St. Joseph.

"It is a travesty, a travesty, what Peter Kinder and Charlie Shields have done as it relates to taxpayer dollars via the Missouri Development Finance Board," Crowell said. "Hundreds of millions of taxpayer dollars have been appropriated by the MDFB, and it is time to stop."

Shields, the Senate president pro tem, represents St. Joseph.

Crowell said a simple bill making all credits subject to annual appropriation and restraining or eliminating the power of the development board to approve big projects without legislative authorization is all that is needed to gain more control over an important chunk of tax credit policy. Since its creation 20 years ago, the board has authorized $400 million in tax credits, with 43 percent issued in the past five years.

A spokesman for Kinder, Gary McElyea, said Crowell is seeking to score political points rather than engage in a serious debate. He noted that Crowell has never brought his concerns about the finance board directly to Kinder.

"There is a valid conversation we can have about tax credit reform," McElyea said. "We are open to talking about those."

rkeller@semissourian.com

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Pertinent addresses:

132 N. Main St., Cape Girardeau, MO

Missouri State Capitol Building, Jefferson City, MO

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