JEFFERSON CITY, Mo. – Having completed their four town hall events, the Governor’s Committee for Simple, Fair and Low Taxes returned to the capital city this week for more presentations.
Half of the committee was in attendance as Chairman Joel Walters was joined by Will Scharf, Rep. Jay Barnes, Sen. Dan Hegeman and Sen. Will Kraus for this week’s presentations on gross receipts taxes and low-income housing tax credits.
The first presenter was William F. Fox, Director of the Boyd Center for Business and Economic Research and professor at the University of Tennessee – Knoxville.
Fox spoke to the committee about gross receipts taxes (GRT) and corporate income taxes (CIT). The question he put before the committee was relatively simple, but also very complex: Should states use a GRT, CIT, or neither?
He said that data shows that GRTs are much more stable than CITs, but that the “devil is in the details.”
“What we’ve done is create a reverse tariff. As a result, Missouri firms are less likely to hire workers, invest, and pay less taxes to Missouri,” Fox said. “In the end, we need a national solution, not a state solution.”
Fox noted in his presentation that e-commerce sales are growing rapidly, but also said that the ability to collect sales tax revenues are declining. He noted ways that several states are trying to address the issue, including altering Nexus rules, increasing the ability to enforce the use tax through information reporting, streamlined sales tax governing boards and federal legislation.
Overall, Fox said the goal is the same for every tax: “finding a tax that’s less burdensome.”
The second part of the meeting focused on low-income housing tax credits (LIHTC), with a presentation by Peter Czajkowski, the Director of the Municipal Securities Group at Stifel Public Finance in St. Louis. He began reminding the committee members of the purpose for LIHTC, which is to support housing infrastructure, not providing rental assistance as HUD Section 8 does that.
The LIHTC program was founded by President Reagan in the 1980s and brought to Missouri by Governor John Ashcroft shortly thereafter.
The goal of LIHTC is to bring down net project costs per unit to allow members of the lower-income population, people living with special needs, and lower-income seniors an option for adequate housing with affordable rent.
According to Czajkowski, about 17 states have LIHTC programs now, with Missouri and Georgia being the most successful in usage of the programs.
Czajkowski says that the price of these kinds of credits has risen as competition increases, interest rates have fallen, and investors get better at using tax credits annually than the full term.
Czajkowski also spoke about the potential use of forgivable loans, and while he didn’t make recommendations per se, he did share the concept with the committee.
When Rep. Barnes asked Czajkowski if he knew of any state that had a law like that, he responded, saying he knew of none.
The committee decided to forego any executive session in Monday’s meeting, with just four members present, as Chairman Walters was forced to leave halfway through the meeting.
The committee has until June 31 to submit their findings to the Governor.