JEFFERSON CITY, Mo. – One of Missouri’s first tax incentive programs where the homeowner, instead of the developer, directly receives the benefit is set for third reading in the Senate.
House Bill 194, the homebuilder income tax deduction benefit, would provide an incentive to Missourians who choose to build homes during the next two years.
“This is probably the single economic development bill this year that we could pass and would have the most immediate impact on our economy,” House Majority Leader John Diehl, the bill’s sponsor, said. “It will directly put people back to work — immediately.”
The incentive would be calculated using an escalating formula based on the cost to build the home and would be capped at a maximum of $10,000.
“The incentive goes directly to the family paying to build the house, not a lawyer or developer, but the person trying to make a living,” said Sen. Mike Parson, R-Polk County. “This is a pretty easy way to give the economy a shot in the arm.”
Parson announced on the Senate floor that he and Senate President Pro Tem Tom Dempsey, R-St. Charles, have heard a commitment from the Chief Executive Officer of McBride & Sons, one of the largest homebuilders in the state, that if House Bill 194 is passed and is effective August 28, then August 29 the company would be able to hire significant numbers of construction workers to build the homes that would benefit from the program.
The unemployment rate in the residential construction industry in Missouri is 25 percent — higher than at any time since World War II.
“Now is the time the state can take this common sense action and not only boost our economy, but most importantly put our carpenters back to work,” Rep. Jeremy Lafaver, D-Kansas City, said.
“HB 194 is a win-win for everyone,” John Bardgett, who represents the St. Louis Home Builders Association, said. “The homebuyer wins, as they will be able to lessen their tax burden when they invest in building a new home. This incentive benefits the Missouri citizen directly and does not go to any builder or developer.”
Bardgett said if the state wins, as they will receive a significant return on its investment collecting sales tax on construction materials and additional payroll taxes generated for currently unemployed construction workers.
“In every case, the state comes out ahead,” he added. “With the tremendous focus in the legislature on the importance of job creation, I’m amazed that when an opportunity like this comes along with a two year sunset, a hard cap of 2 percent, not to exceed $10,000 per home, and a claw back provision, that it still faces opposition from a few members. Perhaps they will get an opportunity to explain their position to some of the thousands of unemployed construction workers in Missouri.”
A study by RubinBrown estimated that on a $100,000 home the state receives $1,373.13 in sales tax from the materials of the home, and, $1,575 in income tax from the home construction. Their estimate shows $2,948 in revenue to the state on the $2,000 incentive.
“The new home tax deduction bill is a great bill that promotes the American dream of home ownership while simultaneously encouraging job growth and creation. I am proud to support the bill,” Rep. Robert Cornejo, R-St. Peters, said.
The program is capped at $10,000 no matter how much the home construction costs, and will sunset after two years if not renewed.
“We don’t want to do any more tax credits, and we didn’t want the bureaucracy of administering them,” Diehl said. “The incentive needs to go to the purchaser of the home, not a developer.”
The bill was laid over after limited debate on third reading in the Senate, so time is rapidly becoming a factor as to its passage.
“At this point, time is not on our side,” Parson said. “It is a good piece of legislation that would help the housing industry. More importantly, it would help give a break to the working class.”
While time is a factor working against its passage, the bill does also have its detractors, such as Sen. Brad Lager, R-Nodaway County, who is against perceived government intrusion into the market.
“If we believe the only way to stimulate the housing market in Missouri is through government subsidy, then we have real problems,” he said.
To contact Scott Faughn, email email@example.com, or via Twitter at @scottfaughn.
Scott Faughn is the publisher of The Missouri Times, owner of the Clayton Times in Clayton, Mo; SEMO Times in Poplar Bluff, Mo.; and host of the only statewide political television show, This Week in Missouri Politics.