PERSPECTIVE: Tax credit reform easier said than done

As old man winter finally arrives with colder temperatures, the 2011 session is quickly approaching and the climate inside the Missouri Capitol will surely heat up with legislative rhetoric.

A topic of annual debate has been the pros and cons of Missouri’s tax credits and their success or failure. There is reason why this topic will be front and center come Jan. 5.

During the interim, Gov. Nixon appointed a Bi-Partisan Tax Credit Review Commission comprised of 27 members from various backgrounds and expertise.

The co-chairmen were Chuck Gross from St. Charles and Steven Stogel from St. Louis. Gross is a former senator who served as Senate Appropriations chair and Stogel is a well-known real estate developer who uses many of the current programs.

The committee held numerous hearings and listened to public testimony offering solutions and suggestions to the task at hand.

Missouri currently makes available 61 types of tax credits with redemptions exceeding $520 million for fiscal year 2010 ending June 30.

According to Senate Appropriations, from Fiscal Year 1998 to 2010, tax credit redemptions have grown from $102.7 million to $521.5 million, representing a growth rate of 407.9 percent.

These redemptions have also increased as a percentage of net general revenue from 1.7 percent to 7.7 percent during the same time frame.

The scope of the different types of credits range from the popular and widely used historic preservation program to a seldom used charcoal producer’s tax credit intended to reduce harmful pollutants from the charcoal production industry.

The commission’s recommendations propose to eliminate or not reauthorize 28 of the existing programs and improve the efficiency of 30 programs to provide a greater return on investment for taxpayers.

These changes are estimated to provide annual savings of $220 million when fully implemented. In my opinion, this is much easier said than done.

The debate begins in earnest when someone attempts to reduce or eliminate your tax credit, while leaving their tax credit unchanged.

There are some who propose every tax credit issued be subject to the appropriations process while others want caps on current credits where there have been none in the past.

To further complicate the issue, many of the credits may be bought or sold to other users, and there is no single accounting measurement in place to track total credits issued and redeemed.

The confidentiality of your Missouri tax return adds to the problem and federal tax law changes exacerbates an already challenging situation facing the General Assembly.

One thing for certain, the lobbying effort will be in full force preparing for the debate when this contentious topic makes it to the top of the calendar. Some suggest total elimination which could reduce the anticipated shortfall for the next budget cycle.

As usual, I can be reached at State Senate, State Capitol, Jefferson City, MO 65101, or 573-751-2076, or carl_vogel@senate.mo.gov for your questions, comments, or advice.

State Sen. Carl Vogel, R-Jefferson City, represents Missouri’s 6th District.

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