This article first appeared in the St. Louis Beacon, Oct. 6, 2011 - The Missouri House passed an economic development bill on Thursday that cuts the state's corporate income tax and leaves out "sunsets," or expiration dates, for two widely used tax credit programs.
The bill, which passed by a 98-48 margin, is substantially different from the Senate's version passed last month. The Senate had insisted that any legislation include "sunsets" on the low-income housing tax credit and the historic preservation tax credit.
On Tuesday, senators will reconvene to decide whether to go to conference or whether to pull the plug on the special session altogether.
Gov. Jay Nixon was not pleased with the House's version of the package. "While the differences between the House and Senate versions of the 'Made in Missouri Jobs Package' remain bridgeable, today's action by the House is not a step toward a resolution," Nixon said in a statement late Thursday. "After nearly five weeks in special session, they should bridge these differences swiftly, or bring this process to a close to avoid additional costs for the taxpayers."
A Different Bill
Both chambers reconvened in early September to consider a litany of items, including a sweeping economic development bill that included numerous changes to tax credit programs. The original economic development plan included nearly $360 million worth of incentives for a "China Hub" at Lambert-St. Louis International Airport.
The Senate ended up passing legislation that stripped the China Hub incentives of all but $60 million proposed. It also placed "sunsets" on both the low-income housing and the historic preservation tax credit programs. With that, the special session effectively ground to a halt.
The special session was shaken out of hiatus on Wednesday, when a House committee sent to the floor legislation that substantially changed the Senate bill.
The House bill retains the slimmed-down China Hub plan, as well as incentives to recruit amateur sporting events and set up data centers. It also caps the low-income housing tax credits at $110 million and the historic preservation tax credits at $90 million.
But the House version removed the Senate's sunsets for the two programs and also left out a consolidation of incentives under an umbrella known as "Compete Missouri."
In addition, the House also included language altering the "land assemblage tax credit," a program aimed at revitalizing large tracts of property. It's been associated with developer Paul McKee, who hopes to move forward with a large-scale redevelopment in north St. Louis. The bill extends the amount of time the tax credits can be provided to August 2016. It also increases the annual amount of tax credits issued a year from $20 million to $30 million but keeps the total amount that can be issued at $95 million.
In addition, the House would allow tax credits for "reasonable demolition costs." It also strips out a five-year limit on interest costs.
"I don't consider it an expansion," said House Speaker Steve Tilley, R-Perryville. "We're not changing the overall cap for the program and we're making other people eligible for it. I would say if you're opposed to a program where ... one group is eligible for it and then somebody offers a solution that other people could be eligible for it ... you can't look at that as an expansion. I think it's just a matter of fairness."
The changes to the land assemblage tax credit may not sit well with Gov. Jay Nixon. In a letter written before the special session, the governor specifically said he did not want the matter included.
Tilley, though, dismissed whether the move could cause Nixon to veto the bill.
"I'm not going to do everything that the governor tells me to," Tilley said. "And he doesn't do everything I tell him to. If he gets a jobs bills and he wants to veto it because of it, that's going to be his decision. But we're going to run the legislative body the way we see fit and he should run the executive branch he sees fit."
House Nixes Sunsets, Approves Corporate Tax Cut
The sunset issue has been a major roadblock slowing down the special session. Some senators -- such as state Sen. Jason Crowell, R-Cape Girardeau -- want to rein in tax credits in light of diminishing state revenue. An expiration date, senators say, provides lawmakers with a chance to decide the value and effectiveness of the program.
At least one GOP state representative. Rep. Kurt Bahr, R-St. Charles, unsuccessfully offered an amendment restoring 2018 sunsets on the two programs.
"I want to force us to do our jobs and take a look at [these programs] to decide as a body if this is still the public policy we want to have in our state," Bahr said.
House leaders, such as Tilley, have argued the sunsets allow a senator to filibuster -- and kill -- a program's reauthorization. Tilley, who handled the economic development package on the floor, repeated that point during debate.
"Many times, not necessarily in this body but certainly in the body across the hall, merit doesn't matter," Tilley said. "And so if you set up a sunset seven years from now and [the program] goes away if you don't reauthorize it, what you've done is given the power to one senator who maybe doesn't like a developer or one senator who doesn't like the program to end the program regardless of whether all the other senators agree."
The amendment ended up failing by 131-17 margin. The House did approve language from House Budget Chairman Ryan Silvey, R-Clay County, that could pave the way for a constitutional amendment stipulating an up-or-down vote on tax credits every four years. Such an amendment would need voter approval.
"What we would do is take a proposal like state Rep. Silvey has, which assures that no one person can kill a program and each program would have an opportunity to prove their merit and have an up-or-down vote," Tilley said after the vote.
The House also approved an amendment presented by state Rep. Andrew Koenig, R-Winchester, that lowers the state's corporate income tax from 6.25 percent to 5.5 percent. Tilley said the tax cut, which passed by a 95-51 margin, could cost the state anywhere from $40 to $50 million a year.
Supporters of the amendment said lowering the corporate income tax could provide an economic boost for the state.
"This is what this chamber is about," said House Speaker Pro Tem Shane Schoeller, R-Willard. "When you approve this amendment, you will be speaking for every business owner. You will be speaking for every person who doesn't have a job. And you will saying, 'We understand that you want to keep your job. We understand that you want to add jobs.'"
But opponents -- mainly Democrats -- said lowering the corporate tax rate would cut money for necessities, such as education. And state Rep. Mike Colona, D-St. Louis, noted that surrounding states already had higher corporate income taxes than Missouri.
House Minority Leader Mike Talboy, D-Kansas City, said in an interview he doesn't expect the tax cut to survive if the bill is taken up for conference. Later, Talboy released a statement saying since Republicans gave "wealthy corporations a tax cut while expecting working Missouri families to pay in full, House Republicans are engaging in class warfare."
"Missourians expect everyone to pay their fair share," Talboy said. It is simply wrong to give a $50 million tax break to corporations while not providing a penny in tax relief to struggling families."
Slim Chance In The Senate?
As passed, the House bill is unlikely to make it through the Missouri Senate. Senate President Pro Tem Rob Mayer, R-Dexter, and Crowell have said that without sunsets on the two tax credit programs, any economic development bill would die in the Senate.
In an interview, Mayer said he was disappointed about the sunsets, adding that he and other senators will spend the next few days reviewing the bill before deciding how to proceed.
"At first glance, it seems that many of the reasonable tax credit reform provisions that the Senate had in its version of the bill to protect taxpayers failed to survive in the House," said Mayer, referring to the sunsets.
Mayer said senators would come back to the Capitol on Tuesday to caucus. Their two options, he said, two options would be to go to conference or pull the plug on the special session. Right now, he is unwilling to predict what course the Senate will take.
"It's difficult for me to say," Mayer said. "We'll review the bill as a Senate and determine what our next action will be."
He said he's also eager to hear what the "taxpayer savings" would be for the House version. Asked about whether the corporate income tax would survive, Mayer questioned whether it was broad enough to make a bigger impact.
"As a state legislator both in the House and Senate, I've supported tax cuts for a variety of individuals," Mayer said. "However, if it's tied strictly to corporate income tax, I think it needs to be probably broader than that. Other businesses and industries out there have different types of business structure. Some of them use corporations, some are LLCs, some are self-proprietorships. If we want businesses to create jobs, it would have to go beyond cutting the corporate tax rate."
Tilley -- who had previously said he wasn't in favor of going to conference on the bill -- softened his position on Thursday.
"I don't think it makes sense to go to conference because they can take up the bill and pass it and we can all save a day or two," Tilley said. "But at the end of the day, if they feel like there's a few things in there that they can't deal with, clearly the House was always willing to work with the Senate."
Jason Rosenbaum, a freelance journalist in St. Louis, covers state government and politics.