I just read an opinion editorial entitled,"Economic development bill a formula for failure" by Joe Haslag, Michael Podgursky and Steve Bernstetter published in the Springfield News Leader. I was appalled that these educated people could appear so uneducated on the great benefit the State of Missouri has enjoyed from the proper use of economic development legislation.
While I agree with the general premise of the article that the best way to approach economic development is through true tax reform through the elimination or lowering of rates, the pathway to achieve that goal is not to reduce tax credits and incentives that are working. To put all tax credits and incentives in a box and declare all of them are failures is simply to be misinformed.
The Quality Jobs Act was passed after the Missouri Economic Development Council (MEDC) authorized a study of best practices in economic development at the state level. This study showed that similar programs in other states had been successful and could be successful in Missouri. The MEDC carefully drafted the plan, along with the experts at the Department of Economic Development, so only companies creating true quality jobs that paid greater than county average wage and that provided employees health insurance would be rewarded under the program. Further, the Quality Jobs Act only pays a dividend to the job creator if they actually create the job. In contrast to other incentive programs that require a benefit first and hope for a job to be created later, the Quality Jobs Act requires a job to be created before any benefits are awarded to the employer. This novel concept enjoyed great support from Governor Matt Blunt and the legislature. In fact, Representative Ron Richard from Joplin, Chairman of the House Job Creation and Economic Development Committee, sponsored the bill and, using his ability to drive bipartisan consensus, he was able to solicit the support of nearly all members of the Missouri House - Democrats and Republicans alike. Rep. Richard is correct when he says there are no Democrat jobs or Republican jobs – good paying jobs are good paying jobs, period. Liberal groups, usually at odds with business friendly legislation, were equally supportive because of the health insurance requirement. Business groups like the MEDC and Associated Industries of Missouri supported the concept because of the great potential to attract and retain good paying jobs.
And the results have been better than any of us could have imagined in 2005. According to a report issued earlier this year by the Taxpayers Research Institute of Missouri based on actual data from the Missouri Department of Economic Development, the first 104 Quality Jobs projects have stimulated Missouri employers to create 12,500 jobs with an average annual wage of $46,856. Estimated annual wages from jobs created under the program are anticipated to exceed $630 million by 2012 from these first 104 projects alone.
Concerned about the return to the state? The Quality Jobs program has returned $3.18 in new tax dollars for every state tax dollar invested in the program! And that does not account for any additional economic benefits that could be measured using respected economic modeling software - those are strictly tax dollars yielded from a great incentive program that actually works as intended.
I agree with the authors of the article that many of our tax credit and incentive programs should be reviewed for effectiveness and those that cannot prove results should be changed or eliminated to provide the most benefit from each tax dollar invested. In fact, when we originally passed the Quality Jobs Act, we did exactly that, taking money away from a program that had never used the full amount of allocated tax credits and using that otherwise wasted resource to fund this new innovative program. The state should look harder at available tax incentives and their benefits, both economic and social, and those that cannot be justified should be eliminated. But looking at the failure of some of these programs and somehow concluding that all tax incentive programs are ineffective is simply incorrect.
In addition, the health insurance requirement rewards companies that provide health insurance for employees, reducing the number of uninsured families that must be supported by the state's health care plan (Medicaid or its successor). By providing true quality jobs with health benefits, workers are able to afford quality health insurance for themselves and their families, reducing the amount that must be poured into government health care by all other taxpayers.
One final thought: those that decry the use of tax incentives should also realize that Missouri economic development professionals are in a daily competition with incentives available in other states and low wage rates in other countries. Any elimination of incentives that are producing results in Missouri without a corresponding elimination of incentives in other states will cause Missouri economic development professionals to lose this daily competition. Jobs will flow to other states while Missouri's economy lags if we use such a shortsighted approach to economic development. Rather, the responsible use of incentives to attract and retain quality jobs in Missouri should be reviewed and enhanced where appropriate so we may continue to win this competition. Remember, 12,500 jobs were created with the Quality Jobs program alone. That's 12,500 men and women that are employed in Missouri, making good wages for their families, enjoying the benefits of health insurance, paying taxes, supporting our schools with property taxes on houses they can now afford, and generally supporting our local economies all over the state. Missouri should continue to welcome job creation by Missouri employers and programs such as the Quality Jobs program that make such job creation possible.
The Quality Jobs program is the best economic development program Missouri has seen in a long time, perhaps ever. The "pay as you go" method of rewarding job creation that is embodied in the program should serve as a model for other tax incentives. We should support all efforts to enhance and expand the Quality Jobs program and continue to enjoy greater tax revenues from the jobs created through the use of the program.
Ray McCarty
MEDC Legislative Consultant
