The state of Missouri has more than 50 tax credit programs. They offer coupons good for discounts on corporate and personal income tax bills. Last year, the state redeemed $487 million worth of these coupons. That’s nearly half a billion dollars that didn’t go into the state treasury.

The tax credit programs are designed to help finance a variety of programs that produce social and/or economic benefits, and many actually may do so. Downtown St. Louis, for example, is among the many areas of the state that have benefited from the historic tax preservation credits. Other tax credits — say for grape producers or film production — generate smaller yields that are harder to measure.

Each tax credit program has been approved by the Legislature, ostensibly as an investment that will spawn revenue, growth, jobs and other economic and social benefits far in excess of their cost. Whether that’s true is open to debate.

Rex Sinquefield, the retired investment banker who actively promotes conservative economic causes in the state, argues that the benefits of tax credits are “almost certainly” overstated.

“Historically, the general revenue fund receives between three and four cents of every dollar of final goods and services produced within Missouri’s borders,” he says in an opinion piece co-written with economist Joseph Haslag of the University of Missouri-Columbia. “Thus, for every dollar of tax credit, Missouri’s economy has to produce between $25 and $33 worth of final goods and services in order for the general revenue fund to break even.”

It’s not often that this editorial page finds itself in agreement with Mr. Sinquefield on the subject of tax policy. This may be one such time.

Consider the findings released last week by state Auditor Susan Montee. Her office released a long-awaited report on the state’s Low Income Housing Tax Credit Program, one of the largest of the tax credit programs — $82 million in coupons redeemed in 2007. The audit found that only 35 cents of every dollar the state gave up in tax credits actually was used to build low-income housing; the rest went to federal taxes, developers, investors and tax credit brokers.

(Believe it or not, 35 cents is an improvement. In previous years, the state had received as little as a quarter’s worth of housing for every dollar invested).

The state handed out another $176.3 million worth of new low-income housing tax credits in 2007; at 35 cents on the dollar, Missouri can look forward to getting back $61.7 million in housing equity. Because the tax credits are redeemed over a period of 10 to 15 years, that’s the equivalent of the state borrowing $61.7 million for 10 years and paying 20 percent interest. Talk about your sub-prime loans.

The audit also found that the Missouri Housing Development Commission lets builders — let’s just say it straight — gouge the state on construction costs. In the St. Louis area, federal Housing and Urban Development Department guidelines say development costs for a two-bedroom unit should be $157,260. The commission allows builders to charge as much as $253,188.

One of the reasons the audit has been controversial is that Ms. Montee’s predecessor as auditor, U.S. Sen. Claire McCaskill, D-Mo., is married to Kirkwood developer Joe Shepard, who is in the business of buying and reselling low-income housing credits.
Brokers, builders and developers are making out like bandits. But the poor and elderly residents who need quality housing? Or state taxpayers? Not so much.

Last year, the MHDC commissioned its own analysis of the tax credit program by a Springfield, Mo., accounting firm and Missouri State University. Their report said that when “quality of life” was taken into account, the program was more than paying its way. Thirty-five cents in equity and 65 cents in quality of life strikes us as very creative accounting.

The Legislature must demand a more rigorous test, not just of the low-income housing tax credit program, but of the other tax credit programs as well. Senate Bill 735, sponsored by Sen. Matt Bartle, R-Lee’s Summit, would do just that. Alas, it’s languishing in committee. Everyone likes to talk about efficient, accountable government, but talk is all they seem to do.