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Business Wants Tax Credits

August 23, 2001
By: Nicholas Rummell
State Capital Bureau

JEFFERSON CITY - Missouri's two top business organizations are voicing opposition to the governor's suggestion to repeal various tax credits in order to alleviate the budget crisis.

The fiscal affairs director for Missouri's Chamber of Commerce, Ray McCarthy, called the plan "completely unfair to business."

"The legislature has to be careful not to cut off their nose to spite their face," he said, adding that eliminating tax credits would turn away new business from Missouri, as well as stymieing investments.

According to McCarthy, more than $4 billion in private investment came from business tax credits last year, spending that McCarthy believes is essential to the budget.

David Smith, director of the taxpayer's research institute at Associated Industries, also criticized such a move, citing that this is Holden's "last resort...a political overkill without looking at other areas first."

"Tax credits are essential for Missouri businesses," he said. "If credits are decreased, the burden gets transferred over to the consumer."

Smith said that businesses aren't truly hurt by less tax credit, as businesses just apply the increased costs to their products, forcing consumers to foot the extra money themselves.

However, the director of Missouri's Economic Development Department, Joe Driskill, says that the governor's proposal is merely for discussion of tax credit programs, and "is not only aimed at businesses."

Driskill went on to say that the purpose of this discussion was to help manage the budget, as well as getting tax credits to their maximum amount of benefit.

Both Smith and McCarthy said that balancing the budget and helping businesses are not mutually exclusive.

In fact, McCarthy stated, government spending seems to be the main problem facing the budget, with over $2.6 billion approved for 2002, the largest increase in state history.

Businesses who take advantage of tax credits are also on the rise, limiting tax revenue further, while local and state tax credits are increasing, a leap of $209 million seen in the past year.

These findings, in addition to a 2001 report by the state auditor's office that classifies Missouri tax credits as not well researched, raises questions of the effectiveness of simply eliminating certain tax credit programs. That report also states that due to insufficient data, it is impossible to evaluate each credit program.

"It would be more responsible [for the governor] to look at inefficient agencies first," said McCarthy. "And then evaluate programs and the best use of tax credit money."