Missouri House advances economic development package

Thursday, February 5, 2009 | 9:27 a.m. CST; updated 12:21 p.m. CST, Thursday, February 5, 2009

JEFFERSON CITY — The Missouri House gave first-round approval Wednesday to an array of business tax incentives that lawmakers hope will spur job creation.

Facing a recession, Republican leaders in the House and Senate and Democratic Gov. Jay Nixon all cited pocketbook and economic development issues as their top priority. The economic development measure that received initial approval Wednesday was the first bill to be debated on the House floor.

The legislation, which needs another vote before moving to the Senate, includes an expansion of a popular tax incentive program for employers who add well-paying jobs with health insurance benefits. It also promises tax breaks for investors in early stage technology-based companies and sales tax exemptions for companies operating underground data storage centers.

Sponsoring Rep. Tim Flook said the bill contained "targeted" tax incentives that would help sustain jobs. He contrasted it with stimulus legislation being debated in Congress.

"This is about spurring investment and spurring competition and not just spending money and bailing people out," said Flook, R-Liberty.

One of the bill's main provisions is to expand Missouri's Quality Jobs program, which was created in 2005 and awards tax credits to companies offering jobs with health benefits and salaries that equal the wage in that county. The state Department of Economic Development estimates the program has created 22,000 jobs.

The legislation would remove a $60 million cap on how many tax breaks can be awarded and makes it easier for large employers to get a tax credit for sustaining their work forces.

Currently, a business can get up to a $1 million tax break if it has kept at least 1,000 workers for two years and meets certain benchmarks, such as being likely to invest at least $70 million within two years. That entire tax credit program is capped at $3 million.

So far only one company — Express Scripts Inc. in St. Louis — has received money, and two others have been approved.

The House voted 149-13 to expand those available tax breaks by tenfold to $30 million, to lower the qualification standards and to give the Economic Development Department until 2015 to approve new projects.

To qualify, a company would need to employ 1 percent of all those working in the county where it is located, or 750 workers in seven heavily populated counties and St. Louis city.

Lawmakers in recent years have touted the Quality Jobs program and regularly increase the amount of tax breaks that can be awarded through it. Last year, the Legislature bumped up the program's cap by $20 million.

In his State of the State speech last month, Nixon drew applause from Republicans and Democrats when he urged the Legislature to expand employer tax incentives to help spur the economy. He praised House members Wednesday for voting to expand the Quality Jobs program.

"Today's vote is a major step toward achieving my goal of signing a bold, comprehensive jobs bill before the legislature's March break," Nixon said in a written statement.

The House economic development bill also creates a tax incentive similar to the Quality Jobs program but targeted at small businesses. Among the requirements for qualifying starting in 2010, employers would need to expand their payroll by 20 percent and pay a salary at least equal to the county's average wage.

It's unclear exactly how much the entire bill will cost. An estimate prepared by legislative staff puts the tax breaks' annual cost to the state at a minimum of $312,000. But that analysis notes the measure could cost the state more.

The House debated the legislation for about five hours before approving it by voice vote. The most contentious issue was a tax credit for expenses for research in agricultural biotechnology, plant genomic products, prescription drugs and other areas.

Some abortion critics questioned if the tax credit could be used to support embryonic stem cell research. But it wasn't enough to derail that segment of the bill.

Besides the Quality Jobs program, the legislation offers a carrot to companies for developing underground storage centers for data processing and Internet portals. Starting in 2010, state and local sales taxes would be waived for utilities, machinery and equipment for underground facilities with at least 500,000 square feet.

The legislation also allows for the creation of special business, education, science and technology districts that would be modeled after tax increment financing areas, which divert local sales taxes to pay for development.

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