Analysis: Tax credit bill needs approval from Missouri Senate

Sunday, February 8, 2009 | 4:13 p.m. CST; updated 11:05 p.m. CST, Sunday, February 8, 2009

JEFFERSON CITY — Missouri lawmakers say the state's economy demands quick action to stimulate growth and add new jobs. So they have turned to an old friend with a new name: tax credits for businesses.

The House late last week approved an economic development package that spreads tax breaks to businesses that run underground data storage centers in Missouri caves and to firms that expand their headquarters. The bill also makes it easier for companies to get state incentives if they add workers or if large businesses agree to stay in the state.

The concept of giving tax incentives to employers is not new, but it's been re-branded. Gone are the days of massive "economic development" bills filled with various tax incentives aimed at employers and businesses. Now, as the state's unemployment rate has hit its highest point in a quarter century, it's called a "job creation" package.

Whatever it's called, the idea is popular among Republicans and Democrats, who contend it makes clear that state government is serious about helping a recession-weakened economy — even if the practical effect of the message is less clear.

David M. Mitchell, the director of the Bureau of Economic Research at Missouri State University in Springfield, said certain tax credits can work, but he said policy makers are better positioned to promote long-term growth than to turn around a recession.

"In the short-term, it's difficult not to do something because of the politics of the situation," Mitchell said. "But with the stimulus package being proposed in Congress right now, for example, by the time it comes online and starts sending money, it's likely that (the recession) will be over."

The Missouri legislature's own plan is now headed to the Senate after sailing through the House with 85 percent support. That bill expands an already popular business tax incentive program that lets employers earn tax credits and keep a portion of the payroll taxes for newly-hired workers whose jobs pay at least average wages and include health benefits.

State economic development officials credit the program with helping to create 22,000 jobs. Since passing the program in 2005, lawmakers have regularly increased a cap on the tax credits to be awarded. This year, the legislature is trying to do one better: Remove the tax credit limits and extend many of the same benefits to small companies.

One of the legislature's economic development gurus — House Speaker Ron Richard — said lawmakers are doing what they can but acknowledged part of the effort is to position Missouri for the recovery.

"Is this going to create a bunch of jobs? No, not yet, but it's going to help for those that will," he said.

Richard, R-Joplin, said he wants to spend more time debating job training, a tax credit overhaul and other pocketbook issues.

Gov. Jay Nixon spent nearly 20 percent of his State of State address last month detailing the state's economic woes and proposing antidotes. Last week, Nixon issued written statements praising the House's "job-creation bill" as a "major step" in his "jobs plan."

Nixon said, however, there is no way to know exactly how many will be employed because of the "jobs bill."

"It just provides us the tools to be able to be competitive," Nixon said. "I don't think you can quantify exactly what it does."

A spokesman for the Democratic governor said the legislation will help but it needs to be supplemented with a boost to employee training.

The new name for economic development efforts hasn't stopped the old arguments that tax credits for businesses amount to "corporate welfare" and are not the ticket to new jobs and economic recovery.

Rep. Beth Low, D-Kansas City, said that under the House bill, the "public puts up the money and takes all the risk, and private businesses reap the windfall."

Another critic, Rep. Jeanette Mott Oxford, said it's smarter for the legislature to aim stimulus efforts at the bottom half of the economic rung. She said expanding health care, for example, would free more money for those in the middle and lower classes to buy consumer goods. That, in turn, would generate economic activity and lead to more jobs.

Oxford, D-St. Louis, said the state has "over-saturated" the marketplace by liberally spreading tax credits and that she doubts the legislation will work.

Bill supporters "are grasping at a good luck charm," she said. "They've been told that this is the kind of thing that will work."

Whether its name is corporate welfare, job creation or economic development, Mitchell said the best way to rejuvenate the state economy is to focus on future growth, instead of immediate stimulus, and that takes a better education system and more diversified industry.

"I think in the long run, the more the government gets involved in the economy, the worse the economy becomes," he said.

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Scott Callier February 12, 2009 | 12:47 a.m.

The phony part of this bill is "offers heath insurance".
If these jobs pay,say $8-$9 per hour,the workers can't afford to pay the premium for the ins.
The bill should include a living wage,otherwise it'a just a
PR action for our elected officials.

(Report Comment)
Ayn Rand February 12, 2009 | 6:29 a.m.

"Living" is a vague adjective, but as the article notes, the tax credit requires that the jobs "pay at least average wages."

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