Tax credits and new jobs: Incentive or myth?

Wednesday, April 4, 2012 | 10:37 a.m. CDT; updated 9:07 a.m. CDT, Monday, May 7, 2012

COLUMBIA — Job growth in Missouri, as in much of the nation post-recession, has been slow and painful — and the numbers cited by politicians and the media don't always tell the real story.

Gov. Jay Nixon recently announced that Missouri gained 21,100 jobs in January. But as Rudi Keller of the Columbia Daily Tribune points out: "Nixon didn’t mention bad news contained in the same report: When measured against January 2011, the state lost 4,100 jobs." Read on in that report to find out all about how officials bend the job numbers for political purposes.

I've been looking into how jobs are created in Missouri and found that one of the state’s most used tools for luring businesses — tax credits — does very little to create jobs. Reviewing the numbers on the Missouri Quality Jobs Program, I’ve found that since 2005, companies reported to the Department of Economic Development only about 14,000 out of 60,000 projected jobs. Of companies that did report adding new jobs, they reported about half the jobs they originally projected.

The reasons for this are twofold, says Judith Stallmann, a professor of applied economics at MU's Truman School of Public Affairs. One, businesses that anticipated creating more jobs before the recession can't hit their marks in a stalled and uncertain economy. Two, businesses tend to inflate their projections for job creations — and the state doesn't look too hard at whether the companies they authorize for tax credits can meet their projections.

In programs like Missouri Quality Jobs, businesses don't get the tax credits until they report new jobs to the state, which means there isn't strong incentive for the state to look too closely at whether those businesses deserve tax credits. Which means the state can't tell which companies are creating jobs because of tax credits and which are creating jobs regardless, and collecting tax credits as a bonus.

Those programs still cost the state even if the companies don't receive the money. As Brad Jones of the National Federation of Independent Business points out, that money is set aside in the budget and can’t be used for anything else. A legislative review of Missouri's Department of Economic Development last year found that out of all the states Missouri borders, it offered the most in tax incentives but still had the second highest job-loss rate. That means the state allocates hundreds of millions across its tax incentive programs in the hopes of creating jobs, but we see little return for that chunk out of the state budget.

This story is part of the American Next, a special project exploring the hopes, fears and changing expectations of Missouri's next generation in challenging times.

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