An Ode to Caps
Last week, a committee of the Missouri Tax Credit Review Commission reviewed the Historic Preservation Tax Credit and the Low Income Housing Tax Credit. If your eyes have not totally glazed over after that sentence, I thank you for your dedication.
The commission agreed on reducing historic tax credit spending. Unfortunately, the power to make changes does not lay with the commission members. And, to twist the knife a little more, the suggested cut is not really much of a cut.
Policy Analyst Patrick Ishmael wrote about the revival of the Tax Credit Review Commission and questioned how it will be different this time. It is great for policymakers to suggest that the state reduce or eliminate failing credits, but after the 2010 review, there was no reform. Why should we believe that recommendations will be acted upon this time?
To be honest, tax credits make me feel like Homer Simpson when he cried that he is a rageaholic (cannot live without ‘rageahol’). We need major reform here. But if the historic credit reduction is actually enacted, I will take it as a step in the right direction. Currently, there is a $140 million cap on historic credits (with some exceptions for smaller projects). The suggested cap would reduce it to $90 million.
It appears to be a $50 million cut, but like I mentioned before, it is not. Actual issuances have averaged $111 million the past four years, which is admittedly preferable to $140 million. But what is the point of a cap if it does not help limit spending? If the cap is lowered to $90 million now, there would be a real limit imposed for the first time.
Missouri Gov. Jay Nixon claims he is committed to fiscal responsibility and wants to reduce spending on tax credits so we can focus our resources on critical priorities. We need to see real changes that are consistent with this message. There are other solutions that would help the state more effectively than issuing tax credits.