TIGHT BUDGET ILLUSTRATES NEED FOR TAX CREDIT REFORM
On Feb. 2, the governor presented to the General Assembly his proposed $27.6 billion budget for the state of Missouri. Missouri’s Constitution wisely requires the governor and General Assembly to pass a balanced budget. With our current revenue estimates though, this means we must make many tough decisions on where to scale back our spending from previous years.
While I am confident our new executive branch will find ways to make your government more efficient, our problem is not only lack of revenue. I believe our problem is how past policy makers have prioritized where your money is spent. For too long, corporate subsidies in the form of tax credits have been protected, leading to a total of more than a billion dollars in outstanding credits. This crony capitalism has utterly failed to create economic growth. Throughout the ten-year span that saw $5.2 billion in taxpayer funded tax credits given out, Missouri ranked 49th in the country in real GDP growth.
Tax credits – commonly referred to as corporate welfare – are taxpayer-funded handouts to a select few businesses and developers in the name of economic development. In Missouri’s Fiscal Year 2015, $669.4 million were redeemed and another $575.4 million were authorized in the 2016 Fiscal Year. The amount authorized in 2016 alone would cover most of the gap the governor and the General Assembly will ask of our schools, colleges and departments throughout the state to forfeit.
There are many tax credits in need of reform – Missouri has 36 different business tax credit programs – but two of the largest are given to well-connected developers in the form of Low Income Housing Tax Credits (LIHTC) and Historic Preservation Tax Credits. It is easy to see how these tax credits are out of control when you look at the average of the past five years of Historic Preservation Tax Credits redemptions. Missouri gave away more “historic” tax credits than the 13 original states combined. Furthermore, a 2014 report by the Missouri Auditor showed of the 10 states with LIHTC programs, Missouri ranked highest in LIHTC funding. The Auditor’s report concluded:
”The LIHTC program results in a very low return on investment. The Fiscal Year 2013 analysis shows the program returned $0.08 in state revenue for every dollar spent and created approximately 63 new full-time jobs. With redemptions of $144 million in 2013, the program costs the state approximately $61,000 per unit of housing or $2.3 million per job.”
The problem is this corporate welfare program is not working, and it is time to reform this entitlement. Two days before the governor released his budget, I heard Sen. Koenig’s reform plan, Senate Bill 285, which would reduce the corporate income tax and makes modifications to several tax credit programs, in the Senate Ways and Means Committee. During the hearing, I shared my concerns of the current system not allowing your elected representatives the ability to weigh the opportunity costs of this bloated and failing boondoggle. This short video is a clip of my comments in that committee meeting.
Last week the General Assembly took additional steps in rebuilding our economy, which will help prevent future budget years like this year. We let companies know Missouri is open for business by sending Right to Work (Senate Bill 19) to the governor’s desk for him to sign into law. Today, the governor signed this bill, giving Missouri a more competitive climate to allow companies the opportunity to create better jobs with growing incomes.
The Senate also passed the first of what I hope to be many reforms this session. Senate Bill 31 strengthens Missouri’s collateral source rule and allows juries to have a more accurate assessment of medical damage claims. You can read more on SB 31 and other actions going on in the Missouri Senate at the Senate Republicans’ new blog – https://mosenatesidebar.wordpress.com/
Contacting Sen. Onder
Throughout this session, I will do my best to keep you informed of our work here in the Capitol. I encourage you to contact my office if you have comments, questions or concerns.
For constituent questions, scheduling and general questions, please contact my Scheduler and Director of Constituent Services Theckla Spainhower at Theckla.Spainhower@senate.mo.gov.
For questions pertaining to legislation, please contact my Chief of Staff and Legislative Director Ryan Nonnemaker at ryan.nonnemaker@senate.mo.gov.
You can reach my Capitol office at (573) 751-1282. You can also e-mail me personally at Bob.Onder@senate.mo.gov.
I would like to encourage you to sign up for my weekly capitol reports so we can inform you of our work each week. Please email Theckla Spainhower at Theckla.Spainhower@senate.mo.gov to be added to our mailing list.
Thank you again for your support. I look forward to serving you.