Analysis: Nixon seeks to cut the same tax credits he touted

Monday, April 26, 2010

JEFFERSON CITY, Mo. -- Gov. Jay Nixon flew around Missouri last year touting a new law expanding tax credits for businesses. He said it was essential for Missouri's economy.

Last week, Nixon summoned 70 educators from across the state to the Capitol to call for legislation curtailing tax credits. He again said it was essential for Missouri's economy.

"What gives?" asked Lt. Gov. Peter Kinder, a tax-credit backer and likely gubernatorial challenger.

Developers, business lobbyists and some legislators were left wondering the same thing.

What gives is that Missouri's financial woes have worsened to the point that Nixon now views some tax credit programs as a drain on precious state revenue, instead of the seed money that creates jobs and additional tax revenue.

"Every dollar we spend on tax credits is a dollar that isn't available for K-12 schools to invest in teaching, reading, math and science ... for our community colleges to invest in training nurses, mechanics and lab techs ... for our universities to invest in educating the next generation of teachers, doctors and engineers," Nixon said last week.

"The value of tax credits must be weighed against the cost to our classrooms," Nixon added.

Individuals and businesses redeemed about $585 million in state income tax credits last year -- an 86 percent increase since 2000. That's four times the growth rate of Missouri's general revenue, which rose by 21 percent during that time.

Nixon has proposed to cap the amount of annual tax credits that can be authorized at around $314 million and merge Missouri's dozens of tax credit programs into six general categories. He also wants to give the Department of Economic Development flexibility over distributing those tax credits.

Republican House leaders, who stood alongside Nixon last year in expanding tax credits, have responded with a firm "no" to his latest proposal. They continue to tout the economic benefits of tax credits and insist that sharply limiting them could wreck havoc on the economy.

The Missouri Chamber of Commerce and Industry, another ally in past tax credit expansions, said Nixon's call to limit tax credits for the sake of education "caught some of the state's leading economic developers by surprise."

Nixon's 2008 campaign platform called for an expansion of Quality Jobs tax credits for businesses that add positions with average wages and health benefits. It proposed to create tax credits for investors in entrepreneurial startups and to expand existing income tax credits that offset the property taxes of lower-income seniors.

But Nixon's platform also described Missouri's tax credit system as "broken" and proposed that companies be required to repay tax credits with interest if they fail to live up to their promises.

The Quality Jobs expansion was the centerpiece of the legislation that Nixon enacted and promoted around the state last June.

The governor's apparent evolution on tax credits does not mean he now views them as bad -- simply as too numerous, spokesman Jack Cardetti said.

"They just have been unchecked, uncontrolled in many ways," Nixon said, "and consequently we find ourselves today in a situation where ... they are sapping in a rising number the assets of the state."

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