Many of you know that a tax credit is a direct reduction in a taxpayer’s tax liability that a government grants for the performance of a government-desired activity. Tax credits are often used as a way to promote activities for the expressed or implied purpose of promoting economic development. In contrast to a tax deduction, which decreases a taxpayer’s taxable income, tax credits are applied against a tax liability dollar for dollar, and although not technically considered spending by Missouri courts, public officials often portray tax credits as the state making “investments” in the economy. One need not look far to find a Missouri Department of Economic Development (DED) press conference or press release announcing, with great fanfare, the “new jobs” being brought to a community as the result of a tax credit.
Unfortunately, the jobs that are promised do not always happen, and part of the reason for this is that governments, by and large, are not very good at picking successful “investments” for their constituents.
