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Friday, November 27, 2009

Missouri to Examine Tax Credits

A recent post noted a proposal in Oregon to add sunset dates to many tax breaks in order to bring some scrutiny to them which otherwise does not exist as it would if they were instead budget line items. Another post noted a proposal in Florida to review all of the sales tax exemptions and the exclusion for services.

And a new one - there is a proposal in Missouri to examine all tax credits. In a 10/26/09 "dear colleague" letter, State Senator Crowell states:

Looking at the state’s current fiscal situation, it is my opinion that the General Assembly should provide itself with as many options as possible as we begin to make the tough decisions inherent in our state budget. In an effort to afford Missouri Legislators with an option, I am respectfully proposing that Missouri’s tax credit programs be made subject to the appropriations process.

Tax credits play a vital role in Missouri’s economical development, but these cannot be an entitlement and should compete for Missouri’s limited amount of resources against basic services provided by the state. By being subject to the appropriations process, the General Assembly will be able to provide greater accountability on how Missouri uses tax credits and have a greater ability to ensure our shared budgetary priorities are preserved.

A 11/25/09 article in the Kansas City Star, Missouri lawmakers call for closer look at tax credits, states that in 2008, $438.6 million of credits were claimed.

I've discussed this a few times - the need to periodically review tax expenditures to see if any no longer serve a legitimate purpose or should be modified or reduced (see 11/19/09 post). With states in need of revenue, it would be a good time to see if any expenditures should be phased out to generate needed revenue now and going forward. In better budget times, it is too easy to let unneeded or ineffective deductions and credits be ignored. In tougher budget times, it is inappropriate to jump to rate increases rather than doing the more difficult work of removing unneeded subsidies buried in the tax law.

What do you think?

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