A state audit finds that Missouri’s tax credit programs have cost $5.4 billion over the past decade and will cost the state $3 billion more dollars for at least the next 15 years. Tax credits are authorized by the state legislature to give businesses or individuals a break on taxes owed to the state of Missouri. State Auditor Nicole Galloway says her office’s report also shows a $50 million understatement of outstanding tax credits reported in fiscal year 2016.
The audit says the current process makes it difficult for policymakers to get access to information about the cost of the tax credits because of incomplete or inaccurate information provided by the Department of Economic Development and other state agencies. Additionally, Galloway says legislators do not have a clear picture of the amount of tax credits allowed under the law because funding limits are unclear for some programs and non-existent for others.
“Policymakers need accurate and realistic data on tax credits in order to weigh the social and economic benefits against the impact on the state’s finances,” says Galloway. “The General Assembly must demand more from the agencies that are charged with administering these programs.”
Tax credits are not considered state expenditures and may be redeemed years after issuance. Galloway says the impact on the state’s budget can be volatile. She says even if the number or amount of tax credits were reduced immediately, the state’s financial obligation would continue well into the future.
“Tax credit programs serve a purpose, but each one must be regularly analyzed for efficiency, effectiveness and to ensure they meet desired purposes,” says Galloway. “Budgets are about priorities and the impact tax credits have on the budget has to be considered.”
Galloway, a Democrat, says tax credits have been redeemed at a 20% increase in Missouri over the past 10 years.
During Republican Governor Eric Greitens’ state of the state address this year, he said “insiders are gaming this system.” According to Greitens, nearly $2 billion has been promised to special interests since 2010.
A complete copy of the Galloway’s report is available online here.