As the state takes a hard look at its tax credit programs, the credits accounting for the most money spent are likely targets for cuts.
Governor Nixon has charged his Tax Credit Review Commission with finding out which credits have the best return on investment and affect growth in the state. Tom Sullivan with the Affordable Housing Coalition says the Low-Income Housing Tax Credits meets those standards, as evidenced by a study from 2007.
“The Low-Income Housing Tax Credits generate more revenue for the state than they cost. In fact, (the study) pointed out that $9.60 of economic activity was generated for every dollar of tax credits issued,” Sullivan said.
But the state spent $176 million dollars on this tax credit last year, the second highest for any single tax credit program. Sullivan says if the commission can look past that number and instead focus on the impact, things should work out.
“It’s increased as it’s gone along, and everybody talks about, ‘Oh it’s this much or it’s that much.’ The comparison I’ve given, it’s like a car dealer who sells more cars. Obviously he’s going to owe more to the auto manufacturer. But at the same time, he’s taking in more money, he’s made more profit and he’s got the money in the bank to pay the bills. So having an increase in the tax credit is not a bad thing,” Sullivan said.
He says there are also more intangible impacts as well.
“Here you have a program that provides jobs, it helps stabilize neighborhoods, provides housing for people that need it and also it generates construction projects that otherwise would not be done. So when you look at the Governor’s criteria, we feel that the Low-Income Housing Tax Credits are a worthwhile program,” Sullivan said, “Earlier this year, the Department of Economic Development it released a report and found that of 78 projects, 41 of them would not have been completed if it were not for the credit.”
But Sullivan’s group, the Affordable Housing Coalition, was recently formed ‘to highlight the many benefits’ of the Low-Income Housing Tax Credits. He says it’s yet to be seen whether they can have confidence in the Governor’s review committee to stand behind this tax credit.
“We’re concerned, but at the same time I think it’s just a question of getting the information, I think, to the commission members. I don’t think they’re going to, in these particular difficult times, I don’t think they’re going to want to cut the tax credit,” Sullivan said.
The Tax Credit Review Commission expects to have its recommendations to the Governor by Thanksgiving. The 61 total tax credit programs have ballooned over the last few years, now accounting for 8% of the state’s general revenue spending.
Sullivan says the Coalition will have a presence at many of the review commission’s public hearings across the state in the coming weeks. He says the St. Louis hearing will be especially important, because that’s been the location of many of the major projects involving the Low-Income Housing Tax Credit in recent years.