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23 September 2011

Engler: Special Session Costing Missouri Taxpayers

With the special session dragging on in its third week, I want to apologize. As your elected representatives, you should be able to expect us to move efficiently to pass legislation. I’m honored to serve the citizens of Missouri, but these last three weeks have demonstrated a level of government incompetence of which I’m not proud to be apart.

This special session was called with the goal of passing legislation to create jobs and trim our strained budget through tax credit reform. These are important, vital issues we must address.

In reality, though, a special session should never have been called unless there was complete confidence the legislation had a chance of passing. Instead, we have a session in deadlock, while the taxpayers foot the bill of nearly $25,000 a day for having us in Jefferson City. This is not money we can afford to spend, especially as our state continues to face a budget crisis.

The budget is the very reason the Senate is standing firm on its stance that tax credits must be capped, and in some instances, allowed to sunset, specifically the Low-Income Housing and Historic Preservation tax credit programs. When a sunset comes up, we can then review the tax credit and make sure it was effective.

Used reasonably with responsible oversight, tax credits can be a valuable tool for economic development. They should not, however, become government giveaways that return little of our investment, not when we have to make tough cuts to our budget in important areas like education and transportation.

In 1999, the state spent roughly $142 million on tax credits. This year, we spent $545 million. Next year, it’s estimated we’ll spend $639 million. We continue to issue these tax credits, more and more every year, and we’re losing money on them.

Over the last 10 years, Missouri has given away more than $1 billion in Historic Preservation tax credits. In 2011 alone, we spent $107 million. Maybe this could be justified if we were getting a solid return on our investment. Instead, for every dollar we spend on Historic Preservation tax credits, Missouri’s return was 21 cents, according to the Joint Committee on Tax Policy. And we rank No. 1 in the nation for giving these out.

Low-Income Housing tax credits are an even worse venture. Missouri gave $156 million in tax credits to developers for affordable housing, making us the second state in the nation for issuing the largest amount of Low-Income Housing tax credits. And yet these credits rarely reduce the tax liability of the developer. Often, they’re sold for cash to finance the units. Of every dollar we give to a developer to build low-income housing, 35 cents goes to development costs, and the remaining 65 cents goes to investors.

Worse, these tax credits are streamed to developers over 10 years, meaning if a developer receives $1 million in Low-Income Housing tax credits this year, we’re still obligated to pay an additional $1 million a year for the next nine years.

Currently, Missouri taxpayers are on the hook for more than $1.3 billion in not-yet redeemed Low-Income Housing tax credits and almost another $1 billion in other tax credits. And when the numbers come back, we get 11 cents for every dollar we spend on them.

If these tax credit programs were such great deals, other states would be adopting them, but Missouri remains at the top of the list for these giveaways. As we continue to struggle with a budget facing incredible short-falls, it is ridiculous to let these tax credit programs continue indefinitely unchecked. This is why the Senate’s legislation filed during the special session will reduce the amount of funding going to these tax credits, which could save Missouri taxpayers $947 million over the next 15 years. Every dollar in tax credits is a dollar away from other state funded programs such as education.

It is my hope that through compromise the House, Senate, and governor can reach an agreement to pass legislation that is fiscally responsible and will create jobs. If we can’t, these last three weeks have been pointless, and I am, as well as you should be, extremely disappointed in the lack of support for this legislation that will save tax payer dollars, reform an outdated program, and create much-needed jobs and economic development throughout the state.
Very rarely has the state been as inefficient as the federal government, but in this instance, we deserve the criticism. And I apologize.

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