Tax credits show positive impact on revenue

A bill in the Missouri legislature would limit the amount of tax credits issued by the state for historic preservation -- which, as it turns out, is the largest tax-credit program the state offers but which has the lowest cost-to-benefit ratio, according to the Department of Economic Development.

But historic preservation overall, most of which doesn't rely on tax credits, is a huge boost to Missouri's economy, according the Department of Natural Resources' State Historic Preservation Office, which participated with the federal government in a study that examined the impact of historic rehabilitation in the state.

Gov. Bob Holden has targeted state tax credits for possible cuts as the state looks for ways to balance Missouri's budget. He requested that all tax-credit programs be examined for cost benefits.

State tax credits are issued for a wide range of activities that include creating new jobs, providing on-the-job training and encouraging donations to major projects like Southeast Missouri State University's proposed River Campus. The intent of the credits is to stimulate economic activity. If successful, tax credits wind up generating more revenue for the state than the cost of the credits themselves.

Indeed, the Department of Economic Development says the two dozen tax-credit programs for which it can calculate benefits all produce positive returns to the state -- but some more than others. Historic preservation tax credits, the department said, produce only a slight benefit -- about $1.10 of return for $1 of tax credit.

In the next fiscal year that begins July 1, the state expects to issue $94 million of historic preservation tax credits, which are anticipated to produce $103 million in taxes through construction activities and operations of historic buildings.

The Department of Economic Development says its analysis of the benefits of historic-preservation tax credits only looked at state revenue generated by the credits and did not take into account benefits to local governments or to the quality of life.

Last week, the State Historic Preservation Office came to Cape Girardeau for one of four public meeting being held around the state to discuss preservation issues and to learn about preservation needs and goals. One state official at that meeting, attended by 65 interested individuals, said historic preservation boosts Missouri's economy by more than $1 billion a year.

A study by Rutgers University of Missouri's historic preservation efforts showed $346 million is being spent annually on historic rehabilitation. Offsetting this investment is some $660 million in tourism spending, the study showed.

The governor was right to initiate a cost-benefit analysis of tax credits, and legislators are right to wonder if some of these programs should be capped. But great care should be taken before reducing or eliminating any credits that produce positive economic results, particularly when the state is still recovering from a national recession.