State audits question the value of two agriculture tax credits, while supporters claim they spawn significant economic activity in rural Missouri. State lawmakers now must sort through the data and decide their worth.
State auditors say the New Generation Cooperative Incentive Tax Credit, used mainly for ethanol plants, will lose $37 million and create only 12 permanent jobs. They say the Agricultural Products Utilization Contributor Tax Credit will lose $13 ½ million, creating only 5 jobs.
Auditor Jon Halwes tells the Joint Committee on Tax Policy there’s at least one bright spot; that the two credits target rural Missouri, an area in need of economic activity.
In fact, both audits acknowledge they are unable to measure the social benefits of the tax credits that are aimed at rural communities. Halwes says those benefits might be enough to lead lawmakers to renew the credits once they sunset in 2010.
The audit of the New Generation Cooperative Incentive Tax Credit Program estimates the economic activity generated by the business investment would create $2 million in net revenue. It says that would be wiped out once projected tax credit redemptions of $39.1 million are considered, turning a $2 million net into a $37.1 million loss. Employment growth from the tax credit, according to the audit, would peak at the 96 new jobs created in 2006. It projects only 57 of those jobs would remain when the credit sunsets in 2010 and that by 2020, all but 12 of those jobs would be lost.
It gives a similarly bleak assessment of the smaller Agricultural Products Utilization Contributor Tax Credit Program . The state audits conclude that neither creates enough economic activity to offset the tax credits used.
Committee members openly questioned the value of the two credits. They say more study is needed to determine whether they are worth it.
The Missouri Agricultural and Small Business Development Authority administers the tax credits. Executive Director Tony Stafford defends them, insisting that the State Auditor uses an economic model that doesn’t reflect modern value-added agriculture. The authority claims the model used by the State Auditor is biased against agriculture.
A University of Missouri Extension, Commercial Agriculture Program study indicates the tax credits have spawned $10 million in economic activity in rural Missouri. One of its authors’s, Vern Pierce, says it is not that the two studies take different tones; it is that they are totally different studies. The university study says the Missouri Value Added Program contributed $9.8 million in grant funding the past seven years to rural projects. Those projects, according to the study, generated $17.9 million in gross economic activity. It concludes that value added agriculture, spurred by tax credits, has created an economic ripple effect that created 186 jobs and added $10.7 million to the state economy.