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Senators talk tax credits, reform

JEFFERSON CITY, Mo. — Receiving some mainstream attention during floor debate, one issue this session that has caused a significant amount of behind the scenes discussion in both chambers and beyond the Capitol walls is tax credits.

Sen. Brad Lager, R-Savannah
Sen. Brad Lager, R-Savannah

Leading the Senate tax credit discussion in terms of reform is Sen. Brad Lager, R-Savannah.

While there are some credits Lager has gotten on board with this session — like New Markets and the sporting credits as the likelihood of the state breaking even, or coming close, is higher — there are others he says he just ca not get behind and wishes the legislature would consider reevaluating.

“The way I benchmark this stuff is by how we are on spending,” Lager said. “I believe the budget reflects your priorities. [Missouri] is 46th or 47th in higher education funding, and really low in elementary and secondary education funding. But we’re second in the nation for low-income housing and number one in historic preservation. Those just don’t reflect my values.”

Lager said the push for reform began in 2007, with him being “the only guy” willing to start the conversation. By 2009, he said other senators got on board. He attributed this in part to the fact that “the economy plummeted,” and said many senators were realizing that programs like Parents as Teachers were getting cut, and other education funding was lacking, yet “we fund tax credits at $600 million every year.”

“I believe that ultimately what tax credits do is skew the tax code,” he said. “I think the best public policy is reducing or minimizing your tax credits and eliminating your income tax.”

During the 2011 special session, Lager said a tentative, loose agreement was made that programs at a certain dollar amount would have sunsets on them so the legislature can reevaluate costs and efficiencies down the road — as they did this year with New Markets. The other part of the agreement was if the sunsets were removed, the caps on the programs would lower. He said if that agreement is not met during debate, he will be willing to filibuster.

“What I want to do more than anything else is establish a process that outlasts me,” he said. “I think it’s important we establish a process by which credits are started with a finite amount (caps), and a finite window (sunsets), and if they’re legitimate then there’s thoughtful consideration to renew them.”

Earlier this session, Lager proposed $50 million in tax credit caps. He said he is “not naïve enough” to believe that’s realistic, but wanted to prove that the Senate has moved from where it used to be.

“Of all of our priorities for the state, rebuilding buildings and low-income housing are not our vision for the future,” he added. “That’s why I went to $50 million.”

Sen. John Lamping, R-Creve Coeur
Sen. John Lamping, R-Creve Coeur

Another senator calling for tax credit reform who has worked with Lager this session on issues such as New Market credits is Sen. John Lamping, R-Creve Coeur. Lamping argues that tax credits are essentially a form of government control.

“The market does a good job deciding what should or shouldn’t happen,” Lamping said. Pointing to Missourians, he added, “Let them decide where to buy and live, and they’ll decide the right thing. When the government stops and says ‘no, we’d like to see the economy move into this neighborhood, or focus on this industry,’ that changes. The basic, philosophical thought is how do you know what’s the right thing to do in Missouri. I trust everyone in the market place will do what’s in their best interest.”

Lamping said he does not think it will ever be possible to eliminate credits entirely, but he does think reform is eventually possible.

“Every program is a subsidy to a specific person or industry,” he said. “Once you give someone a subsidy, they’re going to fight to keep it. As much as I’d like to see Missouri take back programs, it’s not going to happen.”

While he does not think reform will happen this year — he adds that he doesn’t think any new credits will either — he said it likely will not happen unless a Republican governor steps in and tells the General Assembly “we’re not doing this anymore.”

Another issue both Lager and Lamping say could affect reform: the House.

Lager said in the past that the House has not bargained in good faith on the tax credit issue, claiming that House Speaker Tim Jones, R-Eureka, was never part of those discussions. The Senate, he said, is much closer to a cohesive idea on the need for reform, attributing that to the fact the body moves much slower than the House, allowing time to analyze what is at stake.

A list of Missouri tax credits.  (Click to enlarge photo)
A list of Missouri tax credits.
(Click to enlarge photo)

“Historically, the House has always viewed that they have a lot of help and support in the Senate,” Lager said. “That’s no longer the case. I believe the whole House is close to my position on tax credits. I think without influence of leadership pushing members, if members had the ability to vote up or down on their conscious, they would vote with me.”

Sen. Scott Rupp, R-St. Charles, said that while he supports credits Lamping and Lager might not, such as low-income housing, he also is a proponent for reform. Rupp said he is a bigger proponent of the tax credits that offer broad-based credit or investment to various or multiple industries, rather than those that are industry-specific.

“Who’s deciding what industry is going to get [funds] this year?” Rupp asked. “Is it just who has the best luck or the best lobbyist? Granted, I’ve supported a lot of those [credits] because a good argument was made, but if I could have a general tax credit for businesses to get financing or expand, those that aren’t so specific — I’m a fan of those.”

Whether it’s a tax credit or social program, Rupp said he does not think it is possible to point to any government program and say it runs perfectly, which is why he supports reform.

“I believe in low-income [housing], but is the way we structure it the best way for the taxpayers? Probably not,” Rupp said. “I don’t want to see them go away, but I think there are ways you can provide more projects to the tax payers for the same dollar amount and eliminate the middle man.”

Sen. Scott Rupp, R-St. Charles
Sen. Scott Rupp, R-St. Charles

Brian Schmidt, a lobbyist for Northside Regeneration — a major proponent for the land assemblage credit — and a former executive director of the Joint Committee on Tax Policy, disagrees with Lamping and Lager when it comes to credits like low-income housing and historic, but he agrees with their sentiment that there are, frankly, too many tax credits.

“We have 61 programs and about 45 are active,” Schmidt said. “There would be a lot of benefit to looking at how effective some of these are.”

Schmidt said he thinks reform is possible considering the amount of progress made since the discussion began during 2007. Whether or not reform happens is “up to the Senate and the House to negotiate.”

To contact Ashley Jost, email ashley@themissouritimes.com, or via Twitter at @ajost.