Missouri House Republicans question tax credit report

Wednesday, December 15, 2010 | 6:54 p.m. CST

JEFFERSON CITY — Missouri House Republicans said Wednesday that they doubt the state would save a couple hundred million dollars per year by overhauling dozens of tax credit programs.

A special commission appointed by Democratic Gov. Jay Nixon concluded that Missouri could eventually save up to $220 million annually by reducing, revamping or eliminating tax credits that no longer are useful or that do not produce much benefit. The commission's recommendations, released last month, include limiting tax breaks for historic preservation and low-income housing developments.

But House Republicans said the tax credit commission did not adequately consider the financial benefits generated by state tax credits and that the savings likely would not be an immediate help for the state's budget. Plus, House Republicans contend that federal law would need to be changed to get more than $100 million of the projected savings.

Incoming House Speaker Steven Tilley said it does not make sense to book savings that require changes to federal law, and that state economic development officials have said some of the tax credit programs targeted for changes ultimately boost state revenues. He called them "phantom savings."

"Don't expect $200 million in savings out of tax credit reforms. One, I don't believe they're there, and two, there is not a consensus on what to do," said Tilley, R-Perryville.

Nonetheless, House leaders said some of the commission's recommendations are worth examining and expected committees to review the report when lawmakers return for their annual session Jan. 5.

Linda Luebbering, Nixon's budget director, said Wednesday that it had not been decided whether to include possible savings from tax credit changes in the state spending plan the governor presents lawmakers. She said the projected $220 million in savings from tax credit changes was for the long term and not for a single budget year.

Missouri has 61 tax credit programs that waived $521 million in state income taxes last year. Costs for tax credits have increased five-fold during the past dozen years while state revenues have risen much less.

The tax credit review commission was led by former Republican state Sen. Chuck Gross, who has said that Missouri's current system is too generous and too fragmented.

The review commission advised that Missouri could save $85 million to $112 million by limiting tax credits for low-income housing developments and millions of dollars more by lowering the cap for historic preservation tax credits from $140 million per year to $75 million. It also suggested ideas like eliminating a tax credit for vineyards and shifting $4.5 million from a tax break for producing movies to a new tax credit for investors in technology companies.

Even before House Republicans — who in past years generally have defended tax credits as important economic development tools — aired their criticisms Wednesday, it was going to be a challenge to adopt the commission's recommendations.

Nixon last week expressed opposition to proposed changes to a tax break for low-income and disabled seniors. Currently, they can claim an income tax credit for their rent or property taxes. The commission said only homeowners should be eligible for the tax break.

The governor said allowing the tax credit to continue for renters and homeowners was an important "consumer protection" and said that it should not be curtailed because of the economy.

Previously, state Sen. Jason Crowell, R-Cape Girardeau, said the commission's report fell short because it did not support his idea of making tax credits subject to the annual budgeting process used for other state programs.

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