More aggressive oversight needed in Missouri for tax breaks

The Joplin Globe — Galloway said, “As a taxpayer, we want to know that each one works as it should and as taxpayers we’re getting a return on investment.”

We’ve always been skeptical of those specialty tax breaks that lawmakers in Missouri give out each year. There are dozens of them on the books now, costing the state hundreds of millions of dollars. Many are nothing more than special-interest giveaways and a means of paying back campaign donors.

While some have proven their worth over the years, we think it’s both bad public policy and a bad business practice for the state to divvy out tax breaks as rewards, and in effect to pick winners and losers.

Nevertheless, they’re here to stay.

What has to change, however, is the state’s misfiring on the projected cost of those tax breaks, and the havoc it causes the budget.

Every tax break in Missouri is supposed to be accompanied by a fiscal note, so lawmakers can see the impact when voting on it. But when the folks in Jefferson City miss the mark, the fallout rains down on the rest of us.

Consider this year’s budget crisis, and the fact that thousands of people who need in-home health care have seen their benefits cut, and that colleges and universities also took a hit, meaning higher tuition.

That crisis was in no small part driven by a 2015 tax break that allows Missouri corporations to exclude income made in out-of-state sales or services when paying Missouri corporate income taxes. The projected cost of that break was put at $15.2 million per year, or $30.4 million for the 2016 and 2017 budget years.

Its actual cost was $177 million for that same two years, according to Missouri Auditor Nicole Galloway.

She also found that the state is not doing any follow-up to find out if its tax breaks in reality come close to the forecasts.

In fact, of 209 tax exemptions her office reviewed that were in place as of June 2016, the Missouri Department of Revenue tracks only three.

“I’m not saying that exemptions are bad. I’m not saying that incentives are bad. They can be useful tools,” Galloway said when releasing the results. “But as a taxpayer, we want to know that each one works as it should and as taxpayers we’re getting a return on investment.”

Benjamin Franklin warned us that only two things are certain in this world: death and taxes. What he neglected to tell us is that as long as there are taxes, there also will be tax breaks. We’ll probably never be able to do away with them, no matter what kind of tax structure we use.

But lawmakers can demand more precision out of these fiscal notes and need to implement mandatory reviews.

Galloway noted that Tennessee has a program for reviewing fiscal notes to determine their accuracy, and these reviews have identified ways to bring more precision to the process, and even resulted in the termination of tax breaks.

We don’t think Missouri should do any less.