JEFFERSON CITY — The Senate stalled late Tuesday on an economic development bill that would cap most of Missouri's tax credit programs and expand a job-based tax incentive favored by Gov. Jay Nixon.
After nine hours of debate and several proposed revisions, lawmakers decided to set the bill aside and promised to work on it next week.
At the heart of the bill is a proposal backed by Nixon to expand Missouri's Quality Jobs program, created in 2005. The program lets companies claim state tax credits and retain the payroll taxes of newly hired employees who earn at least average wages and receive health benefits.
Currently, no more than $60 million in Quality Jobs credits can be issued in a given year. One version of the bill would increase that cap to $100 million. The bill also places an annual $100 million limit on new historic preservation tax credits, which currently have no cap.
The Quality Jobs program has not yet reached its current cap, although Department of Economic Development officials say projects could cause the program to reach its limit within the next year. In fiscal year 2008, about $140 million in historic preservation credits were authorized.
Several St. Louis-area lawmakers said they were concerned with the proposed historic preservation cap because they argue those credits have been used to revitalize urban decay.
Another key disagreement is whether most of the state's tax credit programs should be subject to the annual budget process, which would give the legislature a role in allocating the credits.
The Senate rejected that proposal on an 18-16 vote. But after several hours of delay by Sen. Jason Crowell and other tax-credit critics, Senate leaders said they would debate the bill next with the budget provisions put back in.
At the end of the night, the chairman of the Senate economic development committee implored his colleagues to put aside their differences in the interest of passing the tax credit package.
"Everybody can find things in this bill that they don't like," said Sen. John Griesheimer, R-Washington. "Just please try to compromise on the end product so we can turn this state around and get people working again."
Missouri's many income tax credits are approved through various executive branch agencies and directly reduce the amount of taxes due to the state. During the 2008 fiscal year, Missouri forwent nearly $505 million of revenues because of tax credits — an increase of more than 40 percent from five years earlier.
Unlike most state spending decisions, tax credits do not currently appear in Missouri's budget bills. The proposed legislation would have allowed lawmakers to control tax credits by inserting an annual dollar amount that could be authorized for each tax credit program in the state budget.
Supporters of putting tax credits under the budget say it would allow lawmakers to rein in what they say is an out-of-control process.
But critics warn it could create uncertainty for businesses who might want to use the credits for a project but would worry about the credits not being issued in future years.
Besides the budget provision, a group of Republican senators have also proposed several changes to how Missouri manages its tax credits, including:
- Placing in law a cap on the amount of tax credits that can be issued under each program, as already exists for Quality Jobs.
- Setting an automatic expiration date on each tax credit program, which would require future legislative approval to extend.
- Adding the approval of the House and Senate budget committee chairmen to that of three executive branch officials as a necessary step for the Missouri Development Finance Board to exceed its annual cap on tax credits for projects.
Senators said during debate that a proposed research tax credit included in the bill could help the state compete with Iowa for a Monsanto expansion that could bring more than 1,000 high-paying jobs.
But Griesheimer acknowledged that competing forces — those opposed to a historic preservation cap and those seeking to rein in tax credits generally — could derail the bill.
"If the bill goes down the tubes, life goes on," he said. "We're probably going to lose Monsanto."
Griesheimer was referring to the proposed expansion of the St. Louis-based agricultural company, not the company leaving the state entirely.