Missouri tax credits panel proposes $220 million in savings

Proposal would eliminate 28 programs

Missouri government eventually can save $220 million in the next five years, if lawmakers will eliminate 28 tax credit programs and make 30 others operate more efficiently.

Those are the recommendations from a 27-member commission that Gov. Jay Nixon formed last summer to review the state’s tax credit programs and make recommendations for both greater efficiency and better returns on the state’s investment.

As a result, the commission’s recommendations include cutting back on some tax credits and eliminating others that commissioners found provided little or no benefits to the state.

Missouri now has 61 tax credit programs. Last year, they reduced Missouri’s revenues by about $521 million in state income taxes.

Former state Sen. Chuck Gross, R-St. Charles, co-chaired the commission.

He said commissioners are giving lawmakers “a chance to look at recommendations that were made by a very, very diverse group — including people with a vested interest in some of these programs not being altered ... folks who really had to search their soul and say, ‘What should we do for the greater good?’”

The panel also made numerous recommendations for changes and improvements to the existing programs it said the state should keep.

The proposals do not target existing credits, following Nixon’s request to “avoid disturbing projects that are already under way, and tax credits that have already been awarded,” Gross said.

“The commission took this direction very seriously, adopting a ‘do no harm’ principle — so that any recommended improvement would be solely on a prospective basis, in order to protect settled expectations, business certainty and the state’s AAA bond rating.”

The commissioners formed 10 internal committees, “charged with performing a detailed analysis of the tax credits assigned to them,” Gross said, “and with providing specific recommendations on each program.”

There was plenty of discussion, he said, but most of the commission’s final votes really were not close.

“I would say that, on most things, it was unanimous,” he said. “There were some issues that were tough, and that were split (but) there weren’t many votes that were close.”

Gross, now St. Charles County’s administration director, is a former Senate Appropriations Committee chairman, and wishes he’d had a similar report when he helped craft the state’s budget.

“(This is) a good starting point,” he said. “Hopefully some senators and representatives will want to take up the issue. ...

“(They) have to believe, first of all, that the commission’s work and the report was as independent as it can be.”

But adopting the changes in the Legislature could be difficult.

Developers quickly pledged to fight proposed cuts to tax credits for low-income housing projects and the renovation of historic buildings, which they said have provided an economic boon to Missouri.

And state Sen. Jason Crowell, R-Cape Girardeau, told The Associated Press on Tuesday that the commission’s report came up short because it refused to embrace his suggestion to make tax credits subject to the same annual legislative budgeting process used for schools, prisons and social programs.

“We had extensive debate about that issue,” Gross told reporters during a telephone conference call. “We know that it’s been proposed in the General Assembly, and we know that it will be brought up again.”

But commissioners determined that placing caps on the existing programs and requiring them to sunset, with a legislative review required to keep them going, provided more stability than the annual budget review Crowell advocates.

Nixon reminded the commissioners in September that state revenues in the 2011-12 business year may fall more than $400 million short of what’s needed to fund all programs at their current levels — while spending on tax credit programs has continued to grow.

While much of that money went to businesses or developers, some tax credits promote social causes, such as adoptions or donations to food pantries and domestic violence shelters.

Commissioners said lawmakers should review each of those to determine if tax credits are the best way to provide the benefit — or if the state even should be involved in providing that benefit.

Gross expects lawmakers to have a healthy debate on the issues.

Commissioners took testimony “from nearly 100 witnesses” at five hearings in different Missouri cities, Gross noted.

The commission’s 54-page report, transcripts of the public comments and copies of letters written to the commission all can be seen on the commission’s website, tcrc.mo.gov.

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