Tax-break-heavy economic development bill hits snag

Legislation aimed at expanding tax credits built into Missouri's Quality Jobs program and extending new ones to angel investors who are shareholders in technology startup companies is stranded in the state Senate after sailing through the House.

House Bill 191, which was introduced by state Rep. Tim Flook, R-Liberty, received an early nod from the House on Feb. 4, but a group of Republican senators last week criticized the scope of tax breaks contained in a companion bill, Senate Bill 45, sponsored by Sen. David Pearce, R-Warrensburg.

Jobs central

Expansion of the Quality Jobs program is at the crux of the economic development package, which has Gov. Jay Nixon's support. The program, which was created through legislation signed into law in 2005 by former Gov. Matt Blunt, extends tax credits to companies that create jobs with health benefits and salaries at or above the average wage in their respective counties.

HB 191 eliminates several spending caps attached to the Quality Jobs program, including an overall annual limit of $60 million in tax breaks, a $750,000 per-company annual cap on high-impact projects and a $500,000 per-company annual cap on technology business projects. The legislation also increases the annual cap on job-retention projects tenfold to $30 million.

Greg Williams, senior vice president of economic development at the Springfield Area Chamber of Commerce, said Quality Jobs program expansion is a no-brainer.

"That is the most effective tax credit program ever created by the Missouri General Assembly, because it is creating good jobs," he said.

Williams said benefits of the Quality Jobs program were spelled out in a 2007 report by Ray McCarty, executive director of the Taxpayers Research Institute of Missouri - a division of Associated Industries of Missouri.

In the program's first 19 months, tax credits were approved for 104 projects that created more than 12,500 jobs with an average annual wage of almost $47,000, according to the study.

Based on those projects, McCarty calculated that the program produced an average of $3.18 in state tax revenue for every dollar invested by the state.

State Rep. Eric Burlison, R-Springfield, sees the Quality Jobs program as the single-most important piece of the legislation in the Senate. Burlison, who was elected to his first term in November, said creating jobs that include health insurance coverage is beneficial on many levels.

"By having more people shifted to jobs that are paying health insurance, the overall cost of health care will go down for everybody," he said.

Burlison also is a proponent of exempting companies that relocate to underground data centers in Missouri from paying sales tax on utilities, equipment and telecommunications services - another tax break that's part of HB 191. Southwest Missouri is home to at least two such facilities, Springfield Underground and The Mountain Complex in Branson.

Missouri was among the states Google Inc. was considering for an underground data center, Burlison said, but the California-based tech giant opted to locate the $600 million facility near Tulsa, Okla.

"If Google had moved here, we would have gained several hundred IT jobs, which are professional, white-collar jobs that could hopefully employ good graduates from our universities," he said.

Angel-investor credits

Another provision contained in HB 191 would authorize the Missouri Department of Economic Development to allocate up to $5 million in tax credits annually for angel investors who take an equity position in Missouri technology startups.

Angel investors would receive a tax break of up to $50,000 for investing in a single business or up to $100,000 for investing in two or more businesses.

The chamber's Williams, who was instrumental in forming the Springfield Angel Network last summer, said the tax credit could be a tipping point for area angel investors.

"I think it will strongly encourage those who might be on the fence of making an investment to go ahead and do so," he said. "And along those same lines, investors can perhaps invest a little more than they might have otherwise."

Williams said Wisconsin - a state that has become a haven for angel-investor groups - has a similar tax credit to the one being considered by Missouri lawmakers. Wisconsin angel investors are eligible for an income tax credit that's equal to 12.5 percent annually for two years, according to the state's Department of Commerce.[[In-content Ad]]