Governor’s tax committee report targets tax credits in review of state taxes
JEFFERSON CITY, Mo. – After months of meetings, town halls and public comment, the Governor’s Committee for Simple, Fair and Low Taxes has released their report, and the results aren’t all that unexpected. Everyone knew that the committee was bound to find some areas to make changes or reductions, as Gov. Eric Greitens had made it clear from the beginning that he intended to curb government spending and eliminate inefficiencies.
Greitens announced the formation of the committee early in office, with the purpose of investigating the state’s tax credit programs and locating ways to fund tax cuts for Missouri citizens.
And the committee’s final 33-page report does just that: it located several areas in which they believe some reforms can be made, most notably in the Low Income Housing Tax Credits (LIHTC) and the State Historic Preservation Tax Credit Program, which the committee recommended that both be modified in rather significant ways. The committee heard weeks of testimony from various groups throughout the state who recommended a variety of changes.
The report issued on Friday is vastly different from a previous draft that had been obtained by the Missouri Times, in that the earlier version had included changes to the state’s income and the sales and fuel taxes. Over 50 pages of the draft was cut. The reports echo reports made by a similar former committees (appointed by Gov. Jay Nixon).
The final document, at a glance, seems to focus solely on the tax credit programs.
In their report, the committee suggests that the LIHTC program is converted into a low-interest loan program for affordable housing construction. The report says that for ever state dollar invested, the current program returns 42 cents of housing. By making the proposed changes, the committee says that the same amount of money will be available for the use of low-income housing construction without “wasting millions on well-connected insiders.”
The committee also recommends buying low-income tax credits that have already been approved and exchanging them for bonds, which they estimate could save Missouri taxpayers somewhere in the range of $200-250 million over the next decade.
As for the State Historic Preservation Tax Credit Program and the State Brownfield Redevelopment Program, the committee report said that neither have objectively delivered on their economic development promises. As such, they recommend merging the two into a new “State Rehabilitation Tax Credit program,” with an annual cap of $50 million. The current Historic Preservation cap of $140 million.
They also propose that the “broad majority of underperforming tax credit programs” be subject to the appropriations process, and recommended that a state-issued tax credit should be denied if it does not show a positive fiscal return to the state, if the recipient fails to show a technical or financial ability to perform, or if the activity would occur without state incentives. By making each credit subject to appropriations, it would give legislators more of a say in whether tax credit programs receive funding each year and also allow the governor to withhold money for the programs.
They also suggest that, to “improve tax administration,” the Director of Revenue will repeal “all outdated or inapplicable regulations” and create a statewide tax advisory committee.
You can read the full 33-page report below: