In Jefferson City, tax credit reform has come back on the agenda. This has become a semi-annual fix in the legislature, with libertarian and the fiscal hawks arguing the markets are distorted by such programs. Detractors like them allege that the state spends a lot of money without any adequate return. Defenders of the program say that the credits catalyze the affordable housing, business expansion, and also urban redevelopment. When it comes to St. Louis, potential changes loom large. This is as Missouri has the biggest program of this kind in the United States, and the city has used more credits compared to any other metropolis.
The point of contention right now is the state's two most pricey programs: tax credits for historic preservation and for low-income housing. Credits are utilized by developers to raise the requisite money for projects. The credits are then sold to various financiers, including banks at a discount. The credits then get resold to businesses. Individuals searching for ways to offset state taxes also buy them. The result? Only a fraction of total credits' value actually reaches the projects. As per experts, the housing program for low-income families gets only 42 cents of the dollar originally allocated. This is an expensive proposition.
Eric Greitens, the Republican Governor, instituted a special committee, which reported that these programs need major changes to be successful. The report published by this committee came out barely a week post after Nicole Galloway, the Missouri Auditor, and a Democrat by political standing reported that the credits have made the state poorer by $5.4 billion in the form of tax revenues which remained uncollected over the preceding decade. About $1.15 billion credits remained outstanding as of June 2016. It means that the owners can redeem those to the lower tax bills anytime during the subsequent years. These will only add to the uncertainty regarding the revenue collections achieved by the state.
According to financiers and developers, the recommendations will cripple them. According to Senator Andrew Koenig, a Republican elected from Manchester, the governor will happily go on with the reforms. The Senator himself is a committee member which plans to introduce the legislation that will result in curtailing credits. His rationale is that the government is trying to intrude on the workings of the private sector, and the former is not doing a good job when it comes to manipulating the market.