After the difficult process this year of piecing together Missouri’s budget, lawmakers believe they’ve found a way to get more money for vital state services: Cutting tax credits.
But a report from state Auditor Nicole Galloway’s office shows that even with big changes to popular incentives, it could be years before the state saves a significant amount of money.
Here’s why: Galloway’s report found that, as of June of last year, roughly $3 billion worth of tax credits have been authorized but not redeemed. The bottom line, according to Galloway, is that “due to significant outstanding and obligated tax credit balances that exist, attempts to reduce the impact of tax credits on the budget will not result in an immediate impact.”
That may provide pause to critics of the tax credit programs, including Gov. Eric Greitens and a slew of Republican legislators who decry the incentives as “corporate welfare.” Even if legislators drastically cut programs that renovate historic buildings, provide property tax relief for seniors or help develop low-income housing, substantial budgetary relief could be more than a decade away.
Sen. Bill Eigel acknowledged last week that “a lot of credits have already been issued, and I believe the state is going to honor all those credits that have already been issued.” But the Weldon Spring Republican added that “moving forward, I expect some massive reforms to our credit programs so that we’re not spending a billion dollars a year in what I term as corporate welfare.”
“I ran a skylight business for 10 years. I never got a single dollar of tax credit money from the state,” Eigel said. “And I don’t think that the benefits or, certainly from my perspective, the lack of benefits from these programs justify how we’re utilizing the people’s money.”
Eigel’s GOP colleague from St. Charles County, Sen. Bob Onder of Lake Saint Louis, concurred with that view.
“They are inefficient, they’re out of control. And as Sen. Eigel implied, they do constitute a form of crony capitalism,” Onder said. “I think they really need to be revisited. And I think the work of the governor’s tax commission is going to be very useful in guiding the way in what to do in this area.”
Fight on the horizon
The “commission” Onder referred to is Greitens’ Committee for Simple, Fair and Low Taxes. It’s supposed to recommend “comprehensive tax reform legislation” by Friday. And because members of this committee are generally on record bashing tax credit programs, there’s a strong likelihood the “comprehensive tax reform legislation” will include cutting tax credit programs.
Actually accomplishing that goal may be easier said than done.
Historic Preservation Tax Credit and Low-Income Housing Tax Credit have traditionally had strong support from both major political parties. It certainly doesn’t hurt that some powerful interest groups, including banks, major developers and preservationists, often lobby against major cuts to the programs.
Backers contend that without the historic tax credit, it would have been significantly more difficult to redevelop parts of Downtown St. Louis. And low-income housing tax credit supporters point to how the incentive helped provide the poor, elderly and disabled with good places to live.
“They’re the school teachers, the health care workers, the shop workers,” said Joan Dennison, the executive director of the Covenant Place senior living facility, last year. “It’s difficult for people to amass significant retirement funds, particularly when they’re living so long into their 90s and hundreds now.”
The tax credit programs also have the backing of lawmakers from St. Louis and Kansas City. State Rep. Bruce Franks, D-St. Louis, said he’s preparing to fight off expected attempts to curtail the incentives.
“I think that’s what they’re going to target next year, a lot of the tax credits — especially the historic tax credit. It got brought up so much in debates,” Franks said. “And so, I’ve made it my business this summer and this fall to really hone in and learn and get as educated and equipped as I can to see exactly how I can defend our historic tax credits and other tax credits so we can keep them intact.”
The last major bid to curtail tax credits was in 2011, an effort that dramatically imploded during that year’s special session. But most of the lawmakers involved in that debacle are out of the General Assembly, and have been replaced with people much more willing to curb tax credit programs.
On the Trail, a weekly column, weaves together some of the intriguing threads from the world of Missouri politics.
Follow Jason on Twitter: @jrosenbaum
