JEFFERSON CITY, Mo. – State Auditor Tom Schweich released an audit critical of the state’s low-income housing tax credit Monday, leading to the stalled debate over a tax cut bill in the state Senate.
Schweich found that for every dollar of the $144 million spent on the low-income housing tax credit in 2013, only 42 cents went to building actual housing. The remainder of it goes to federal taxes, firms, and investors. He was also critical of the economic impact, noting that the credit only created 63 jobs, or approximately $61,000 per unit of housing or $2.3 million per job.
Schweich recommended that the state mull making the tax credits refundable, using a direct appropriation to build low-income housing, and reduce the number of hers over which the tax credits are spread (currently dispersed in pieces over 10 years).
The audit was cited as State Sen. Will Kraus, R-Kansas City, introduced a substitute to his tax cut bill that essentially stripped the tax cut provisions and replaced them with controversial tax credit reform provisions. His substitute language would adopt a $110 million annual cap on low-income tax credits and $90 million for historical redevelopment tax credits – the two largest drivers of tax credit spending – in accordance with nearly identical caps passed by the House last week.
Kraus pulled back the tax cut provisions of his bill because he believes that there was no real chance of a tax cut passing without tax credit reform, first. The Kraus substitute language also included a $1,000 tax exemption for poor Missourians. His language was not adopted and the Senate moved forward with debate without taking a vote.
The bill drew concern from lawmakers like Sen. Eric Schmitt, R-Glendale, who has been a supporter of the tax credits in the past. He offered an amendment to the substitute language that would adopt Kraus’s original tax cut proposal, hoping to add back in the 50 percent tax cut for businesses and the notably smaller cut for individuals, with a $100 million trigger before the cut would go into affect.
“This substitute totally retreats from that effort entirely,” Schmitt said. “We’re going to have the opportunity to deal with economic development and tax credits at some point later.”
Kraus said that without tax credit reform, he does not believe that a tax cut could move this year. He said he would have an additional tax cut bill coming later this session. Sen. John Lamping, R-Glendale, one of the largest opponents of the large tax credit system, said he was supportive of Kraus’s effort.
“We haven’t stopped the effort to cut taxes,” he said. “We’ve just stopped at this juncture to reform tax credit programs.”
Kraus had announced the original bill along side Democratic Gov. Jay Nixon, who vetoed a similar sized tax cut last year due to his concern that it may negatively effect education.