These are the economic times that try the souls of legislators, the governor and the citizens of Missouri. The state has an allergy to raising taxes in good times or bad. The Missouri Constitution requires a balanced budget. Without raising taxes, where can the state find the money to balance the budget?

The usual suspects are the school districts and the families struggling to send children to state-supported higher education.

But shorting an underfunded education system is particularly shortsighted because it helps assure that the next generation of workers will be even less able to help the state compete in the global marketplace than the current generation.

But what if there were hundreds of millions that Missouri could find to plug its budget shortfall? That extra cash would mean that schools would be fully funded and college education would be more affordable for the average family.

Missouri will give up about hundreds of millions of dollars at tax-payment time to taxpayers who hold transferable tax-credit coupons that these taxpayers use instead of cash to pay their taxes.

Where do these coupons (actually called tax credit certificates) come from? Missouri gives tax credits to sponsors of economic development projects, land developers and others; these tax credits are used as "coupons" to pay state income taxes. Because the tax credits are transferable, sponsors and developers can sell their "coupons" to high-income taxpayers to raise cash for their projects.

Missouri expects that taxpayers this year will use about $500 million to $600 million in transferable tax credits coupons to pay their taxes. (I refer only to "transferable" tax credits that are bought and sold, not the kind of limited credits that an individual may claim on a tax return for certain kinds of donations, such as to food pantries, domestic violence shelters or maternity homes.)

The use of transferable tax credit coupons to pay taxes is called redemption. There are certain rules that prohibit redemption of tax-credit coupons. For example, if a taxpayer has hired an illegal immigrant, the taxpayer cannot use the tax-credit coupons.

Because the Legislature has decreed that there are circumstances when the state need not honor its obligation to allow tax-credit redemptions, could the governor or the Legislature do so for the serious purpose of raising cash to keep from putting the state's education on a meager diet?

The Post-Dispatch recently urged the governor to declare a tax-credit "holiday" by executive order, prohibiting the state from accepting tax-credit coupons as payment of taxes for a year (or more).

What does that mean?

Let's look at how these transferable tax credits work: The Legislature authorizes state agencies (such as the Department of Economic Development) to issue transferable tax credits to support a variety of projects. The state gives up the right to receive the tax-credit amounts in cash at tax time, but agrees to accept the coupons instead.

These giveaways of the state's right to collect its taxes in cash are called "investments" on which the state can expect "returns" — such as buying land to redevelop a distressed area of north St. Louis, or enticing a business to relocate to Missouri or helping to make movies, such as "Winter's Bone" and "Up in the Air."

When a state agency approves a project, it issues tax-credit certificates (the correct name for these coupons) that the sponsor or developer can sell, at a discount, and the sponsor or developer will get cash for its project. The reduction is about 10 percent, which covers the discount to the buyer and the commission a bank or broker will charge for handling the sale.

If the governor or the Legislature declared a holiday on accepting tax-credit coupons in payment of taxes, the state would not be reneging on its promise to accept tax credit coupons to pay taxes. The state simply would be saying, "wait until next year."

Should the state pay interest on tax credits that are on holiday for a year (or more, perhaps)? For example, when a taxpayer eventually is allowed to use its $10 million in tax-credit coupons, which the taxpayer bought for the discounted amount of about $9 million, perhaps the state should pay interest because the tax-credit owner has had to wait. Because these tax credit certificates are bought and sold through banks, perhaps the passbook savings account rate should apply. At the current generous rates, that might cost the state 1 percent or less per year.

But what if the taxpayer does not want to spend cash to pay its taxes because it needs the $10 million to rebuild its jet plane's engines or to refurbish the yacht? Not a big problem, actually, because remember, the tax credits can be sold. But can these $10 million in tax credits be sold for the taxpayer's original price of $9 million? Well, probably not, there could be a further discount; markets work, even markets for tax credits.

So there's the choice: Would the Missouri be better off in the long run if it fully funds its public schools and stops stiffing higher education? Or is the state better off making sure its tax-credit buyers get immediate redemption? The high-income taxpayer, who has to pay his taxes in cash, would not find redemption for his tax credits. But in paying his taxes in cash to be used to educate the next generation, he may find redemption for himself. 

Mike Wolff is a law professor at St. Louis University School of Law. He served on the Missouri Supreme Court for 13 years.