Could The Tax Credit Bar For A 'Solid Investment' Be Any Lower?
Former state Sen. Jeff Smith argued that Missouri's Low Income Housing Tax Credit was a “solid investment for taxpayers.” That claim deserves skepticism, particularly because Smith was serving as executive director of the Missouri Workforce Housing Association, an organization whose mission includes influencing housing policy and working with programs such as the LIHTC.
The central problem with tax-credit programs is not only that they can grow; it is that their public benefits may be far smaller than their costs. Missouri's LIHTC regularly removed more than $100 million a year from the state budget, while estimates of the taxpayer return were only a small fraction of each dollar spent.
A policy that loses most of every tax dollar it commits is a difficult investment to defend. Missouri would be better served by broad, stable tax reductions that apply to all businesses rather than targeted credits for selected projects. The strongest version of that approach would eliminate taxes on business activity altogether instead of continuing to pick winners and losers.
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