Not everyone is happy with the creation of the Tax Credit Review Commission, unveiled by Missouri Gov. Jay Nixon, to review the state’s 61 tax credit programs. While some fear the commission will recommend cutting tax credits, others think it will not go far enough to reign in what they describe as corporate giveaways.

The Missouri Coalition for Historic Preservation and Economic Development criticized the tax credit commission as lacking enough representation of people who know the economic benefits of historic tax credits.

“There are, for example, no representatives from small main street organizations, community development organizations, or historic preservation organizations, all of whom have firsthand experience in how well the program works for the average citizen,” said spokesperson Deb Sheals in a statement.

It also appears that members chosen for the commission will pit education interests against development and redevelopment efforts, according to the MCHPED, a coalition of business leaders, developers, preservationists, and labor groups that works to lobby and educate in an effort to protect historic tax credits in Missouri.

Return on investment

The governor named 25 business, community and legislative leaders to serve on the commission earlier this week, noting the mission of the group is to perform analysis to ensure taxpayers receive the greatest possible return on investment from the state’s tax credit programs and make recommendations for modifications.

“Missouri must have sharp, effective development tools that will promote growth, create jobs, strengthen our communities and continue to drive our economic recovery forward,” Nixon said in a statement.

The tax credit review commission meetings will be open to the public and press, a spokesperson for the governor told Missouri Watchdog. However, the meetings have not been scheduled yet. It is up to the co-chairs, Steve Stogel and Chuck Gross, to decide when and where the commission will meet, she said.

Stogel is president of DFC Group in St. Louis. Gross is director of administration for St. Charles County.

Increasing tax incentives

Tax credits in Missouri came into focus recently after the governor called a special session. Nixon signed the Missouri Automotive Manufacturing Jobs Act earlier this month after the four-week session.

The tax incentives will allow automakers to retain withholding taxes only after a company makes a firm commitment to keep workers on the job and make capital investments. If the commitments are not upheld, the company will be required to repay the incentives, which are capped at $15 million a year.

An audit by Missouri Auditor Susan Montee released in April reported that tax credits in Missouri increased from about $372 million in fiscal year 2001 to more than $584 million in fiscal year 2009, an increase of 57 percent.

In comparison, general revenue in the state increased from $6.44 billion to $7.45 billion, an increase of 15.7 percent. Tax credits as a percentage of general revenue in the same period went from 5.8 percent to 7.8 percent.

Cutting incentive programs

If the governor was serious about stimulating productive economic growth in Missouri, he would eliminate the programs entirely, said Christine Harbin, a research analyst with the Show-Me Institute, a free-market think tank.

“Although I applaud the effort to review tax credit programs, I am skeptical that this commission will accomplish anything, since the governor continues to dole out tax credits to his favored few,” Harbin told Missouri Watchdog. “We live in a world of second-best options, and a review process is more desirable than nothing.”

Tax reform is needed, not tax credit reform, said Carl Bearden, executive director of United for Missouri, a grass roots organization formed within the last month to focus on local and state issues across Missouri.

Most of the commission is comprised of people  impacted by tax credits, he told Missouri Watchdog.

“There should have been more representation from fiscally conservative groups,” Bearden said.

By Brian R. Hook, brhook@missouriwatchdog.org, (314) 482-7944