Agricultural Tax Credits Are Still a Bad Deal
Last week, Governor Parson called a special session of the Missouri Legislature to pass the “largest tax cut in state history.” In addition, the governor called for the extension and creation of eleven agricultural tax credit programs. While my colleagues and I have written a lot about the benefits of lowering the state’s income tax, we’ve also written about how bad of a deal these agricultural tax credits—like almost all tax subsidies—have historically been for Missourians.
Missouri’s already one of the national leaders in sacrificing state tax dollars for private economic development interests. Over the past decade, our state has devoted nearly $6 billion to tax credits with little to show for it. That’s also why my colleague David cheered when four of the tax credits listed below were allowed to expire last year. But now that the state has a surplus of revenue as a result of a better-than-expected economy (in the year these tax credits were not active), it’s apparently time to bring them back.
I’m not disputing that rural parts of the state would benefit from greater investment. But state tax credit programs are clearly not the way to do it. Government officials cannot predict the future, nor should they be in the business of picking winners and losers, which is something I thought Governor Parson agreed with. When the governor vetoed the tax rebate bill that spurred this special session call, he criticized the legislature’s decision to approve one-time tax benefits for some, instead of favoring permanent tax relief for all Missourians. The governor was correct then. So why is he now supporting tax credits paid for by so many to benefit so few? Here is a list of the tax credit programs being considered in the special session, and how many (actually, how few) entities used each program in the last year credits were issued:
- Wood Energy Tax Credit – 8
- Meat Processing Facility Investment Tax Credit – 13
- Ethanol Tax Credit – NEW
- Biodiesel Retail Sellers Tax Credit – NEW
- Biodiesel Producer Tax Credit – NEW (6 producers)
- Urban Farm Tax Credit – NEW
- Rolling Stock Tax Credit – 0
- Agricultural Product Utilization Contributor Tax Credit – 31
- New Generation Cooperative Incentive Tax Credit – 4
- Specialty Agriculture Crops Act Tax Credit – NEW
- Family Farm Breeding Livestock Tax Credit – 15
As you can see, in total, only 71 entities used these tax credits in the last full year they were active. That’s right, just 71! Forgoing millions of state tax dollars in favor of so few entities seems like the opposite of the governor’s sentiment in the tax rebate discussion. I’d simply ask the same logic to be applied to agricultural tax credits. Research and experience have shown us that these programs do not work. Instead of using the special session to double down on bad policies, a better and fairer solution is to lower taxes for everyone.