Opinion: Tax credits don't meet promises

Tax credit programs defeat the purposes that supporters usually cite in their favor: encouraging employment and helping states compete. In short, tax credits are a form of wealth redistribution – we all bear the cost, but only special interests and favored industries benefit.

The Missouri auditor recently found that fiscal notes underestimated the total cost of the programs by $1.1 billion during a five-year period. Tax credit programs have failed to deliver on their promises in other states, too. The Mackinac Center for Public Policy in Michigan released a study that found only 7.9 percent of tax credit projects were completed on time and produced the number of jobs promised. Missouri cannot afford this failure rate.

Dollar signs are missing too frequently from these discussions. A dollar spent on tax credits in Missouri is a dollar that the state must cut from another program. The state should consider whether the social benefits of, say, increased wine production, film production or vacant land assemblage are worth cutting the budget of another state program.

Another recent audit by the state auditor found that the Department of Economic Development had a 43-percent error rate just when recording estimated jobs and investment figures from businesses receiving enterprise zone tax credits. In one instance, the DED inflated a business’ investment estimate by 333 percent.

The government has no special ability to predict which businesses and industries will succeed, yet tax credits are an attempt to identify and subsidize future successes.  

Missourians would benefit if the state government took a hands-off approach to economic development instead of providing subsidies to private companies. Missouri’s tax credit programs have not fulfilled their stated purposes, and spending more on them will not likely result in better outcomes. Missouri’s tax dollars would be much better spent in the hands of individual Missourians than on enticements for companies.

—Christine Harbin, Show-Me Institute[[In-content Ad]]