Missouri could save more than $200 million a year if the legislature adopts the recommendations of the Tax Credit Review Commission.
The Tax Credit Review Commission bottom line: to save $220 million eliminate 28 tax credits and scaled back 32.
Commission Co-Chairman Chuck Gross, a former state senator, says some tax credits simply no longer make sense.
“Some of them are programs that just have outlived, in the commission’s opinion, their usefulness,” Gross tells reporters during a conference call. “Some of them are programs that just have such a low return to the state that an investment of a dollar by the state and not receiving at least a dollar in return just was not a good idea to continue, we believe.”
The largest tax credits proposed to be eliminated are the Wood Energy Tax Credit at $3.4 million a year, the Film Tax Credit at $3.2 million, the Rebuilding Communities Tax Credit at $1.7 million and the Self-Employed Health Insurance Tax Credit at $1.3 million.
Of course, those who back such tax credits argue they spur economic growth. Not enough, responds Co-chairman Steve Stogel.
“If the state’s going to support something with a credit program for a project it should be the minimal investment possible,” Stogel says.
Tax credits have come under increased scrutiny after the recession drastically dropped state revenue and forced the legislature to cut programs and services. Even as the state budget shrank, tax credits grew. State Senate Appropriations reports tax credit programs grew by more than 400% from Fiscal Year 1998 to FY 2010, from a total of $102.7 million to $521.5 million.
The commission rejected a proposal which has been gaining ground in the state senate. It doesn’t recommend that tax credit programs be subjected to the annual appropriations process. Instead, it recommends sunset provisions for all tax credits, which would allow the legislature to review their effectiveness periodically.
The commission recommends further scaling back the Historic Preservation Tax Credit, which became the poster child for tax credit reform. The tax credit given to those who restore historic buildings, both commercial and residential, has grown far larger than expected, reaching an historic high of nearly $212 million in Fiscal Year 2009. The legislature has approved a cap of $140 million a year. The commission recommends lowering that cape to $75 million.
The commission made a number of suggestions to adjust the various economic development tax credits to make them more efficient and effective; credits such as BUILD, Quality Jobs, Enhanced Enterprise Zone, MDFB Infrastructure, Development Tax Credit and others.
Gov. Nixon appointed 27 people to the commission, some harsh critics of tax credits. They began meeting in September and held their last meeting in Jefferson City in mid-November.