Missouri Senate plan would cap tax breaks, create new ones

JEFFERSON CITY, Mo. -- After weeks of negotiation, senators unveiled a plan Wednesday that would rein in Missouri's tax credits while simultaneously creating new incentives for businesses.

The plan is an overhaul of the job-creation bill backed by Gov. Jay Nixon and passed by the House.

At its core, the legislation still would expand the state's Quality Jobs program, which offers tax breaks to businesses that add jobs with above-average wages and health insurance.

But senators concerned that Missouri's tax breaks have grown out of control introduced a 250-page bill Wednesday placing a dollar cap on the amount of tax credits that can be authorized annually for each program.

Tax credit authorizations for the renovation of historic buildings, for example, would be limited at $50 million annually. They currently are an unlimited entitlement for developers who meet the eligibility criteria.

The legislation also would impose other restrictions on state tax breaks, including:

• For the first time, making the total amount allocated annually for each tax credit subject to legislative approval as part of the state budget.
• Prohibiting tax credit recipients from receiving benefits from multiple tax incentive programs for the same project.
• Imposing an automatic expiration date on each tax credit programs, which would require future legislative approval to extend.
• Adding the approval of the House and Senate budget chairmen to that of three executive branch officials as a necessary step for the Missouri Development Finance Board to exceed its annual cap on tax credits for projects.

The coalition of senators seeking restraints on state tax credits was spearheaded by Sen. Brad Lager, R-Savannah, who introduced their proposal as a substitute for the economic development bill that had been pending in the chamber.

"The days of entitlements in government must come to an end," Lager said. "We don't do that in our personal checkbooks (or) in our business checkbooks, and there's no way we can continue to do that in the government's checkbook."

Missouri forwent nearly $505 million of revenues during the 2008 fiscal year because of tax credits -- a more than 40 percent increase from five years ago. But supporters claim targeted tax credits can help create new tax revenues by allowing businesses to employ more people, who in turn pay income and sales taxes.

In his State of the State speech in January, Nixon challenged lawmakers to pass and send him a job-creation bill before they depart for their spring break, which begins Friday.

Nixon repeated the challenge last weekend at a Democratic event in Hannibal, asserting that he could think of no reason why senators couldn't pass a bill focused on business tax incentives and job training, then handle tax credits reforms later in a separate bill.

But Senate President Pro Tem Charlie Shields said Wednesday that senators are committed to pairing tax credit expansions with restrictions and that it would be a mistake for them to rush a bill to passage.

Shields said the annual legislative spring break should provide valuable time for community leaders, businesses and developers to review the plan that senators rolled out Wednesday. More changes are likely, he said.

While the economic development incentives are important to Missouri's economy, Shields said there are not a large number of projects lined up to immediately begin upon passage of a bill.

"There is clearly an advantage when you're doing a major piece of legislation to take your time and get it right," said Shields, R-St. Joseph.

Sen. Matt Bartle, one of the advocates for tax credit restrictions, warned colleagues that the latest plan would meet resistance from lobbyists for developers who claim it would cripple their projects and cost the state jobs.

"What this process is going to be doing is moving the tall hog off the trough, and tall hogs don't like getting moved off the trough," said Bartle, R-Lee's Summit. "So it is predictable that we are going to hear a chorus of, `It can't be done, it can't be done, it can't be done."'