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Senate, House set for showdown on tax credits

The stage is set for another Capitol showdown over Missouri’s tax credit programs after senators endorsed legislation Wednesday that creates incentives for high-tech businesses while dramatically cutting existing tax breaks for historic buildings and low-income homes.

Senators gave the legislation initial approval after a lengthy overnight debate that wrapped up about 3:30 a.m. Wednesday. But before the day was over, the top House official doused the plan, declaring that some senators “over-reached” in their zeal to trim tax credits for the state’s two largest development programs.

The Senate bill, which needs another vote to go to the House, essentially marks a starting point for negotiations between the chambers on what Gov. Jay Nixon and some legislative leaders have identified as a priority. A similar plan ended in a stalemate during a fall 2011 special session.

The Senate legislation would authorize up to $60 million in tax credits over eight years for air cargo exports intended primarily to benefit Lambert-St. Louis International Airport and would allow $36 million of tax credits over six years for so-called angel investors in startup technology businesses. It also creates new state and local tax breaks for computer data centers.

To offset those costs, the legislation dramatically lowers the amount of tax credits available to develop low-income housing and renovate historic buildings and eliminates some lower profile tax breaks. Missouri ranks near the top among states in the amount of tax credits authorized under the housing and historic development programs.

The legislation would set a $50 million annual cap on historic preservation credits — down from the current $140 million annual limit — and a $55 million annual cap on low-income housing tax credits, which is a cut from the roughly $190 million current limit. Both of those limits are far lower than what the House has previously been willing to support.

House Speaker Tim Jones told The Associated Press on Wednesday he prefers caps on the two development programs of between $100 million and $150 million — double or triple what the Senate endorsed. He defended the housing incentives, first authorized under President Ronald Reagan’s administration, as an effective way of spurring private-sector development of affordable housing. Jones said the historic renovation tax credit has “revitalized many downtowns across our entire state and has been very successful in creating new businesses and jobs.”

Sen. Brad Lager, R-Savannah, argued in favor of setting low limits on the programs as a starting point for negotiations with the House.

“It’s time to prioritize. It’s time to understand we can’t spend hundreds of millions of dollars investing in old buildings” when other states are enacting new job-creation initiatives, Lager said.

Jones said he hopes that a compromise can be reached with the Senate on the development programs. But he praised the portions of the Senate bill that would create new incentives for air cargo exports, data centers and startup technology businesses.

Sponsoring Sen. Eric Schmitt, R-Glendale, particularly touted the importance of the air export incentives, which he said could attract flights that might otherwise land and depart in Chicago. He compared the future economic potential of air cargo with that of the river travel that helped build St. Louis into one the nation’s leading cities in the 1800s and early 1900s.

“What made St. Louis great before — being at the center of trade — will make us great again,” Schmitt said.

But some lawmakers remain skeptical. Sen. John Lamping, R-St. Louis County, said the air cargo tax credits would need to generate $1.34 billion in economic activity for the state to recoup its investment through increased tax revenues. He compared the proposal to the federal government’s incentives to develop alternative energy, which Lamping said have resulted in some costly flops.

The air cargo incentives essentially spend “$60 million to create a spark — a hope,” Lamping said.

Even with the new tax credits, Schmitt estimated the legislation could save Missouri $800 million over 15 years, due largely to the cumulative effect of the lower annual limits on the housing and historic development programs.

Missouri has more than 60 tax credit programs that last year waived $629 million in revenues to encourage businesses expansion, charitable contributions and community improvements, among other things. Concerns have grown about the cost of Missouri’s tax credits as the state cut funding to education and other services during several consecutive lean budgets.

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