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Tax Credit Reform: Education comes first – part II

Tax credits in Missouri have become a special interest redistribution of wealth, entitling those who receive a tax credit to receive that money first, before Missouri’s priorities are funded.  I believe this is wrong and is causing us to leave our children and grandchildren to shoulder the burden of these unfunded handouts.  This is why, over the next few week,s I am sharing with you why I believe we must change our use of tax credits.


When it comes to education, early education is one large key to the development of our students’ future.  The research study, Early Learning Left Out: An Examination of Public Investments in Education and Development by Child Age, shows us that 85 percent of the core structures of the brain are formed by age 3.  Yet in light of this, Missouri has continued to cut one of its central building-block programs for early childhood development; Parents as Teachers.  In FY 2009, funding for Parents as Teachers peaked at $34 million, but, in the middle of economic downturns, was one of the first programs cut, seeing its funding reduced by more than half to $13 million for FY 2011.

What happened was Parents as Teachers had to wait in line before the General Assembly and demonstrate why they should receive funding important to our children’s future. Problem is, while Parents as Teachers stood in line, the politically connected who receive tax credits cut to the front of the line, taking money before this vital educational program got its chance to present its case.  Then when Parents as Teachers finally reached the front of the line, the politicians told parents and Missouri’s future students, sorry, we don’t have the money to fund your educational needs, but they had the money for tax credits.

One of the biggest offenders of cutting the line for Missouri’s scarce resources is those who are receiving the Low Income Housing Tax Credits.  This program provides federal and state tax credits to investors where, each year for 10 years, these tax credits can be sold to raise equity to construct or acquire and rehabilitate affordable rental housing. 

But Low Income Housing Tax Credits are, as a 2008 report by the Missouri Auditor called it, “costly” and “inefficient.”  The audit showed that only 35 cents for every dollar in tax credits go to development costs while the remaining 65 cents go to investor needs.  To demonstrate the ballooned cost of tax credits, consider the cost of the Schultz School Senior Housing project in Cape Girardeau.  The amount of tax credits received by the project developer equaled $372,997 per apartment unit. 

The same auditor’s report also criticized the selection process of not documenting how projects are selected; suggesting that political influence impacts the selection of Low Income Housing Tax Credits.  I believe it is this political influence that made Missouri # 2 in the nation in 2009, where developers redeemed $106 million in Low Income Housing Tax Credits.  And in the midst of an economic downturn in 2010, where $21 million was cut from Parents as Teachers, Low Income Housing Tax Credits grew by $36 million to $142 million.  This year-to-year handout has created a tax liability of $1.37 billion of unfunded Low Income Housing Tax Credits we have given out but have not yet been redeemed by those holding them. 

The same politicians who claim to put education first, let their actions speak louder, allowing influential developers and campaign donors to receive more while our children do with less.  In my opinion, education should be our highest priority, and that is why I am calling for tax credit reform. My plan would be to subject tax credits to the appropriations process, making every expenditure–whether Parents as Teachers or Low Income Housing Tax Credits–stand in line to prevent from playing favorites by allowing those receiving tax credits to cut to the front of the appropriations line. 

In this transparent process, developers would have to be accountable as to why they should receive increasing tens of millions in tax credits, while our Parents as Teachers program lost $21 million in funding.  At the same time, your elected representatives will have to prioritize whether tax credits are more important than funding the educational opportunities for our children and grandchildren. 

As I go through this series, it is important to me to know your thoughts on tax credits and how we spend your money.  Your elected representatives work for you, not the other way around; therefore, your feedback is extremely important.  I also would like to know what other issues you would like to know more about so in future Capitol Reports, I can share with you what we are doing in those areas.

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