JEFFERSON CITY — A backlash against tax credits is brewing in the Missouri Senate as Gov. Jay Nixon seeks an expansion of business tax incentives aimed at spurring the creation of more jobs.
Several senators vowed Thursday that no economic development bill will pass unless colleagues also agree to new restrictions on state tax credits.
"We are going to have tax credit reform this session," Sen. Jason Crowell said as he outlined one of several proposals aimed at controlling state tax credits.
Crowell, R-Cape Girardeau, wants to firmly cap the amount of tax credits that can be issued through the Missouri Development Finance Board, or simply eliminate the board altogether.
He and others also want to limit the amount of tax credits granted for the renovation of historic buildings. They also want a better means of accounting for whether tax credits actually result in jobs and tax revenues for the state.
The tax credit critics are hoping to attach their restrictions to a job-creation bill estimated to include about $100 million worth of additional tax credit authority. The bill has been a priority of both the Democratic governor and some Republican legislative leaders, who contend it contains essential tools for an economic revival.
The legislation already has passed the House and cleared a Senate committee. The full Senate is expected to begin considering the legislation next week. Sponsoring Sen. John Griesheimer, R-Washington, predicts a tough fight.
The debate over tax credits is not new. Some lawmakers have complained for years that Missouri is forgoing far too much tax revenue by granting incentives to favored industries, interest groups and individuals. But the tax credit debate has intensified this year because the recession has resulted in a state budget shortfall.
Critics note Missouri missed out on nearly $505 million of revenues during the 2008 fiscal year because of tax credits — a more than 40 percent increase from five years ago.
While state law caps the amount of tax credits that can be issued through some economic development programs, others are unlimited and essentially are an entitlement to anyone who qualifies.
Chief among those is Missouri's historic preservation tax credit, which covers 25 percent of the cost of redeveloping buildings located in historic districts or listed on the National Register of Historic Places. In 2008, the state issued nearly $162 million of tax credits under the program.
Developers defend the historic tax credits as a way to revitalize run-down areas and to ensure jobs for a wide variety of construction workers.
But some senators want to either cap the amount of tax credits that can be issued annually under the program or reduce the size of the tax credits.
"The group that is out there stealing from us is the historic preservation tax credits, and I'm coming," Sen. Brad Lager, R-Savannah, said on Thursday while declaring his desire to place restrictions on the program.
Crowell, Lager and Sen. Wes Shoemyer, D-Clarence, also are targeting the tax credits issued by the Missouri Development Finance Board. Although the board does have a cap on the amount of credits it can issue, that cap can be exceeded if three members of the governor's administration sign off on doing so.
That's what happened last month, when departing members of Republican Gov. Matt Blunt's administration signed off on a finance board plan to issue $25 million in state tax credits for the Kansas City Chiefs. That came on top of $50 million of tax credits the board awarded in 2006 for the renovation of the Chiefs' and Kansas City Royals' stadiums.
Crowell and others contend the board has been used as a backdoor approval method for projects that would fail to win legislative approval.
As the state has increasingly turned to tax credits to entice development, some lawmakers who have supported tax credits are starting to turn away from them.
"I used to be a huge proponent of tax credits, however I'm not a proponent of them anymore," Sen. Luann Ridgeway, R-Smithville, stated Thursday on the Senate floor.
Ridgeway, who voted against the tax incentive legislation Wednesday in a Senate committee, introduced legislation Thursday that she said would repeal the state's corporate income tax. She said that would be a better way of drawing businesses to Missouri than continuing to adopt "special-interest, designer tax credits."