- Associated Press - Friday, June 30, 2017

JEFFERSON CITY, Mo. (AP) - A panel appointed by Gov. Eric Greitens is recommending an overhaul of some of Missouri’s main tax credits, including ones for low-income housing and historic buildings, but has shied away from more sweeping changes to state income and sales taxes.

The report released Friday suggests the state should reduce the tax credits available for the redevelopment of historic buildings, convert a tax credit for the construction of low-income housing into a loan program and make both programs contingent upon the annual state budget adopted by lawmakers and the governor.

The final report focuses only on tax credits. It excludes more comprehensive changes that had been included in an earlier draft to lower individual income taxes, revamp corporate taxes, eliminate various sales tax exemptions and raise vehicle fuel taxes.

The Committee on Simple, Fair and Low Taxes honed in on things that can “make real change, now,” by “strengthening several of our tax credit programs,” said chairman Joel Walters, who also is director of the Department of Revenue.

Greitens, a Republican, created the panel shortly after he took office in January and gave it a June 30 deadline to produce recommendations.

A similar committee created by former Democratic Gov. Jay Nixon in 2010 had recommended revamping and reining in some of the same tax credit programs, but a special legislative session called for that purpose in 2011 fizzled out as the GOP-led House and Senate failed to come to a consensus.

Missouri redeemed more than $575 million of tax credits during its 2016 fiscal year, up from $521 million in the 2010 fiscal year. Tax credits reduce the amount of income tax paid, meaning that money never flows into general revenues where it could be used for such things as public schools, universities and prisons. Critics of Missouri’s many tax credits have long complained that they function as off-budget entitlements.

The new report suggests a fundamental change in the way tax credits are handled. Lawmakers would allot money upfront into a new budget fund for some tax credits, capping the total amount that could be provided annually.

The report recommends consolidating the current historic preservation and Brownfield environmental remediation tax credits into a single program limited to $50 million annually, with a per-project limit of $2 million. The historic preservation program issued nearly $60 million of tax credits in fiscal 2016 - far less than its annual cap of $140 million - while nearly $10 million of tax credits were issued through the Brownfield program.

Missouri issued $102 million in low-income housing tax credits in fiscal year 2016, by far its most costly tax credit. The report said the program is inefficient because the tax credits typically are sold at a discounted rate to private entities, such as banks and equity firms, that invest in housing developments. It recommends converting the tax credits into a forgivable loan program.

Lobbyists for developers have opposed previous attempts to revamp the housing and historic development tax credits.

Jeff Smith, executive director of the Missouri Workforce Housing Association, said the newest recommended changes actually would be less efficient than the current tax credits and would effectively end the low-income housing program. He said Greitens‘ panel was stacked with “some of the state’s most vocal opponents of affordable housing programs.”

Republican Sen. Will Kraus, who was a member of Greitens‘ tax committee, said there was “just not consensus” about several other proposed changes to state tax law, particularly an earlier recommendation to replace corporate income taxes with a gross receipts tax. He said paring down the proposal could smooth its path in the GOP-led Legislature.

“Let’s be honest,” Kraus said. “If we’re going to reform tax credits, we’re going to have an uphill battle going against the political insiders that have been gaming the system for years. So why not break this down to one battle at a time?”

House Speaker Pro Tem Elijah Haahr, who also was on Greiten’s panel, said he hopes the Legislature can eventually pass a more a comprehensive tax overhaul.

“I signed the final report with the recommendation that any savings from this reform be used to lower the tax burden on Missourians,” Haahr said.


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