Smoke and Mirrors in Creating Jobs in Missouri

Steve Giegerich had a great article about tax credits on the front page of the Post Dispatch yesterday. I encourage our blog readers to check it out. The Liberty Mutual project that Giegerich highlighted is one of the many cases in which tax credits are allegedly used to stimulate business, but actually do the opposite.

Here’s the issue: Shortly after the announcement that Liberty Mutual would receive tax credits for creating new jobs, the company gave pink slips to 45 employees. The company told the affected employees that they could apply to lower-paying and lower-level positions.

Despite the layoffs, Liberty Mutual is on track to receive $1.6 million in tax credits through the Missouri Quality Jobs Program, because it can show — at least on paper — that 100 “new” jobs exist at its Safeco service center in Fenton.

Is this the kind of economic development that we want in Missouri?

It is important to note that Quality Jobs is the worst-performing tax credit program in Missouri, yet lawmakers continue to expand it. According an April 2010 report from the state auditor, lawmakers underestimated the cost of the Quality Jobs program by more than $100 million over four years. This didn’t stop them from raising the annual cap from $12 million to $80 million in 2009. That’s an increase of 567 percent!

The Tax Credit Review Commission and the Missouri state auditor have looked at tax credit programs in the Missouri, and they both have called on lawmakers to limit them. However, lawmakers have not taken this advice. Policymakers like to talk tough on tax credits, but their actions and words don’t match up. This is bad news for taxpayers, who have to foot the bill.

Missouri has serious budget problems. If lawmakers were serious about fixing Missouri’s fiscal health, they would implement measures that limit tax credits, like stricter caps and sunset requirements.