A proposal to reform the state’s tax credit programs has met a cool reception from a legislative committee.
Members of the Interim House Committee on Budget Transparency questioned the economic model a special commission used to determine the return Missouri receives from tax credits. Representative Chris Kelly (D-Columbia) told the co-chairman of the Tax Credit Review Commission it’s time for Governor Nixon’s administration to propose legislation based on the report.
“If this is something other than political rhetoric, we need to start seeing legislation that we can deal with,” Kelly said during the hearing held at the Capitol, “because to say out in the sky, ‘Oh, $220 million for tax credits,’ has no meaning on this side of this table. It only has meaning if it manifests itself in terms of specific legislation.”
The Tax Credit Review Commission estimates that the state can eventually save $220 million annually if it eliminates 28 tax credit programs and makes changes to 31 others. The state has 61 tax credit programs. [download report PDF]
Commission co-chairman Chuck Gross, a former state senator from St. Charles, outlined the commission’s findings and defended its conclusions during an appearance before the interim budget committee. Gross fielded questions from various members of the committee as well as other legislators invited to join the hearing. Some questions strayed from the commission report into concerns about why specific projects hadn’t yet received certification for tax credits. Others focused on immediate needs; trying to shore up a state budget projected to be short $400 to $700 million next year.
The House Budget Committee will be the first legislative body to receive the budget submitted by Governor Nixon for Fiscal Year 2012. It will look for savings to avoid cutting any deeper than it has to into state programs and services. The commission report might not offer much help.
House Interim Budget Committee Chairman Ryan Silvey, a Republican from Kansas City, questioned Gross about the commission’s recommendation to eliminate a property tax credit for senior citizens who pay rent.
“And who typically benefits from those credits?” Silvey asked Gross. “Obviously, renters, but in what situation?”
“Low-income seniors,” responded Gross.
“Low-income seniors,” Silvey repeated. “OK, so if we go and eliminate the tax credit for low-income seniors, we can save $57 million.”
That savings will not be realized. Governor Nixon has rejected the recommendation, signaling that it won’t be included in his budget proposal to the legislature next month.
Several committee members expressed doubt about the economic model used by the commission in evaluating tax credit programs. The commission relied on the Regional Economic Models, Inc. standard, known as REMI, in calculating a tax credit’s return on investment.
The state’s two largest tax credits didn’t fare well. The REMI model estimates the state only receives a 20 cent return on each dollar issued through the Historic Preservation Tax Credit and only 12 cents for each dollar spent on the Low Income Housing Tax Credit. Gross, though, stated that not all tax credits can be measured on an economic scale alone. He said some tax credits, such as the credit to renovate historic buildings, have intrinsic value.