With a May 7 deadline looming for the Legislature to submit a balanced budget to the governor (we are currently in the red about $500 million), the pressure is on in the Capitol to find ways to save money. It is time that we take a hard look at the hundreds of millions of dollars we award each year in tax credits.
Tax credits reduce the amount of taxes that are owed. The problem is that they are only given to certain lucky businesses or special interest groups, or in some cases, citizens who engage in activities approved by the government. Tax credits are often granted to those who have enough political power to push them through the Legislature. According to Senate Appropriations, the state issued $453 million in tax credits in fiscal year 2009.
In the case of businesses that get these credits, since their taxes are lower than their competitors, they have a competitive advantage. This is fundamentally unfair. Why should a large “big box” store with its superior advertising, reputation and supply chain get the added benefit of taxes that are lower than the “mom and pop” operation that is trying to attract the same customers?
For every dollar we give away, there is one less dollar available for schools, roads and prisons. The excessive amount we reserve for tax credits is putting tremendous pressure on our schools and other state services and programs.
I favor a much more simple plan that would abolish tax credits and lower taxes for all Missourians. However, since such a plan appears unlikely to pass, I would support an alternative—but still straightforward—fix for this problem. Legislators are given the authority to appropriate funding under our state’s constitution. Rather than allowing certain groups to be exempted from this process, every year, each program, department and interest group should have to bring their case for why they are deserving of state dollars to the Legislature—including everyone who gets tax credits. They should have to stand in the same line as public schools, the highway department and other worthy programs so that legislators can judge among all interests to see which is the most deserving. This is a common-sense solution, and more importantly, it is the only fair way to award tax credits if they must be awarded at all.
Put simply, there is just not enough money to go around without making fundamental changes to the way our state awards tax credits. If we do nothing, schools, roads and other programs will continue to take the brunt of the cuts while special interest groups get a free pass.
Saturday, April 10, 2010
Bartle: Tax credits give free pass to special interests
Reforming tax credits could help Missouri with its budget crisis, Sen. Matt Bartle, R-Lee's Summit, says in his latest capitol report: