Tax credit reform has been a major concern of legislators this session. In 2010, Governor Nixon appointed a Tax Credit Review Commission to examine the more than sixty different tax credits that together total over $625 million. Various ones of these tax credits have proven to be profitable to the state, though not all have fared as well. With the economic downturn and continual budget challenges, many in state government still believe that spending on tax credits is out of control and very costly to the state. Senate Bill 350, that passed the House this week, addresses the tax credit issue and would bring an end to the renter’s portion of the Circuit Breaker Property Tax Credit.
The Circuit Breaker Tax Credit dates back to 1973, and its original intent was to provide tax relief to property owners, not to renters. Consequently, this tax credit has always been controversial. In his State of the State address at the beginning of the 2013 Session, Governor Nixon proposed the elimination of the renter’s portion of this tax credit, which would have freed up approximately $57 million. In his budget proposal, the governor included the savings from the potential elimination of the Circuit Breaker Tax Credit, in part, to balance his budget. His own Tax Credit Review Commission recommended the elimination of the renter’s portion in both 2010 and again in 2012.
The tax credit received by renters is greatly exaggerated compared to the proportioned amount of property tax estimated to have been paid. This means that renters are getting more money back than what the original program was designed to do. This credit is considered unfair to the many seniors who live in nursing homes, assisted living facilities, and some apartments run by non-profit organizations. Seniors living in these places are not allowed to claim the credit, despite the fact they have a similar income level and a similar cost of living. Additionally, many of the renters who benefit from this credit already have reduced rent because they live in facilities that benefit from other tax credit programs, such as the low-income housing tax credit.
Agreeing with the governor, both the House and the Senate proceeded with legislation to eliminate the renter’s portion of the tax credit. The governor authored and supplied language to the General Assembly for this legislation. His Budget Director testified in favor of the bill and his Chief of Staff came to the House to lobby the legislature on behalf of SB 350.
About three weeks ago the governor began to waffle on eliminating the circuit breaker tax credit, because he was persuaded by his political base supporters that it would hurt the poor and the elderly. However, even with the elimination of the renter’s tax credit, the state’s commitment to provide assistance to seniors and the disabled will not be diminished. In SB 350, the proposal is to use the $57 million, which will be saved by eliminating the renter’s portion of the tax credit, to fund health, mental health, and social services, areas that will be of even greater benefit to seniors and the disabled. As it is now, this tax credit only benefits a small portion of the elderly and the disabled.
The approximate $57 million from the Circuit Beaker Property Tax Credit Program savings can be redirected to provide services for our most needy Missourians, especially vulnerable seniors, at-risk women and children, and individuals with physical, developmental, and mental health disabilities. This money can be used with the Federal Medical Assistance Percentages (FMAP)—joint federal-state partnership programs that have funding available for eligible Missourians—and this could mean as much as an additional $60 million federal dollars to match our state funds.
This tax credit does not serve in the best interest of our state and her taxpayers. We are committed to using Missouri tax dollars wisely, and as a state, we can and should provide a much fairer and more equitable means to help those who really need the assistance—something that the tax credit for renters does not do.