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Business tax breaks grow in tight budget year

January 29, 2002
By: Matt Williams
State Capital Bureau

JEFFERSON CITY - While Gov. Bob Holden proposes deep cuts to many state programs, tax breaks for businesses and individuals are projected to increase by $55 million this year.

Missouri's Economic Development Department projects that tax breaks would cost the state $277 million next year and would balloon to more than $400 million annually by 2005.

The state has cut back on several programs by $7.7 million in this fiscal year that ends June 30, following Holden's request last fall to trim the cost of tax credits. But that will not reverse the growth in tax breaks.

A panel of economists and business leaders recommended the cuts after examining the state's programs and hearing testimony from the public. The panel found very little room for cuts because many credits were either already awarded or required by law.

Sen. Larry Rorhbach, R-California, said he was concerned that while the reductions have been touted as cuts, they really are just a one-time reduction in growth.

"When state employees don't get a pay raise and they're paying more for health insurance and it's difficult to hire folks to work with abused and neglected kids, it makes a nice headline to say you're going to cut tax credit benefits for businesses by $7.7 million, when in fact, they're going up by $20 million," Rorhbach said, referring to the increase in discretionary programs this year.

Holden's proposed budget includes $480 million in appropriation cuts from state agencies, including a $49.1 million reduction in appropriations for the University of Missouri system's general education budget.

Rep. Quincy Troupe, D-St. Louis City, who has criticized the governor's budget for neglecting social services, said he isn't surprised that services to senior citizens will be cut while tax breaks will increase for businesses.

"The seniors probably didn't donate any money to his campaign," Troupe said. "If you look at his campaign coffers, most of that money came from the business community, and he's taking care of them."

In a recent budget hearing, several senators said some of these tax breaks were approved during times of rosier budget conditions that have since worsened.

For instance, a tax credit to offset the cost of renovating historic buildings went from $2.6 million a year in 1999 to $65 million this year.

"It just kind of crept up on people," said Chip Cooper, director of a University of Missouri program that provides assistance for new business development. Cooper served on thee state panel that recommended tax credits for the governor to reduce.

Cooper said many programs were created without regard to cost because the state's coffers were overflowing. Nonetheless, he said, many programs serve vital functions and eliminating them would be "throwing the baby out with the bath water."

The governor did not include any legislative roll-back on tax credits in his State of the State address to lawmakers.

Spokesman Jerry Nachtigal said Holden was still looking at whether to recommend cuts in tax credit programs to shore up the state's budget.