Galloway: State lacks tracking of tax breaks

JEFFERSON CITY, Mo. -- Missouri Auditor Nicole Galloway on Wednesday said the state doesn't do a good job of tracking the impact of tax breaks that sometimes are pitched as a way to spur the economy.

Legislative estimates of the financial costs and benefits of proposed tax breaks are sometimes inaccurate, according to a report released by Galloway's office. The Democratic auditor added that after lawmakers pass new tax exemptions, the state rarely monitors the actual fiscal impact. Of the 209 sales and use tax exemptions in place as of June 2016, Galloway's office says the Department of Revenue tracks only three.

"I'm not saying that exemptions are bad. I'm not saying that incentives are bad. They can be useful tools," Galloway told reporters in her Capitol office. "But as a taxpayer, we want to know that each one works as it should and as taxpayers we're getting a return on investment."

Galloway recommended follow-ups to legislative estimates and suggested the Department of Revenue start tracking exemptions.

The Revenue Department in a response included in the audit said it's a good goal to track and report exemptions. But the agency argued doing so would put a burden on businesses and reporting errors by businesses would likely mean flawed data. The department also said that would require a substantial increase in staffing not currently affordable.

Galloway's report comes amid lower-than-expected revenue growth in Missouri that's contributed to a strained state budget. Republican Gov. Eric Greitens also has expressed interest in revamping the state's tax code and tax credits, an issue that could come up when lawmakers return to the Capitol next year.

The audit report also notes that compared to other states, Missouri gives the second-most-generous discount rate to retailers that pay sales taxes on time and is the only state that offers a discount for paying employee withholding taxes on time.

Former Democratic Gov. Jay Nixon appointed Galloway to the auditor's office in 2015 after former Republican Auditor Tom Schweich fatally shot himself. Galloway is running for another term in 2018.