Tax credits would be aimed at helping small businesses
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Tax credits would be aimed at helping small businesses

Date: February 23, 2009
By: Emily Coleman
State Capitol Bureau
Links: Afroworld, SB 45, HB 191

JEFFERSON CITY - Running a small business can be taxing. Just ask Sheila Forrest.

"Today is getting up, being a mom, getting the kids off to school, meeting with teachers if need be, coming into the office at 8 o'clock," said Forrest, the owner of Afroworld in St. Louis. "The store opens at nine. You're preparing, talking to customers from worldwide, people are calling literally from all over, addressing any fires that may have occurred the day before with employees and also with customers, also working in the mail order, in retail division, meeting and greeting customers, sweeping and vacuuming the floors, wiping the windows down. ... In the small business, we do everything."

Afroworld is a small business that sells hair goods and African products such as jewelry, clothing and artifacts. Forrest said it was started in 1969 by her father, Russ Little Sr.

"He grew up in the civil rights era, so during the late '60s and early '70s, most African-Americans were wearing Afros," Forrest said. "His whole specialty is hair for extensions. He started losing his hair while he was in corporate at an early age. And there was no one making hair replacements for African-American men, so he started that. He started braiding hair for men, and then people started asking him, 'Hey, Russ, who did your hair?' And he was able to tell them, 'Well, I can get this done for you.' And that's how the business was created."

Forrest was one of 11 people who met with Gov. Jay Nixon immediately following his inauguration to discuss the needs of small-business owners.

"The governor was interested in knowing about each of the businesses in representation there, in terms of small businesses, and some of our needs that we had as small businesses, (such as) do we think the government can help or be accessible to small businesses for future growth," Forrest said. "He was curious to know who was hiring or if anyone had future expectations of hiring any new employees."

In December, Nixon announced his Show-Me JOBS initiative and urged state lawmakers to provide additional tax credits -- essentially state funding -- for small business startups.

The House approved a version of his proposal on Feb. 12, and it is now pending before the Senate, where the measure has run into opposition from lawmakers questioning giving tax breaks to selected businesses.

"We've got to create jobs. That is the absolute No. 1 priority," said Nixon's spokesperson, Scott Holste. "The governor was very pleased that the House moved so quickly on his jobs bill, and now it's going over to the Senate."

Sen. Luann Ridgeway, R-Smithville, an opponent of the bill, said she thinks the bill is tailored to help only those businesses that can afford to send lobbyists to Jefferson City to create specialty legislation.

"The situation isn't so much that I'm opposed individually to the tax credits. The problem is that the tax credit policy has been designed down here in our state Capitol by very particular special interest groups," Ridgeway said. "Not all Missourians can participate in those tax savings. As a result, we have a patchwork or designer tax credits."

She said this bill was one that Leona Helmsley would be proud of. Helmsley, a billionaire who was convicted of tax evasion in 1989, is famous for saying, "We don't pay taxes. Only the little people pay taxes."

Bill sponsor Sen. David Pearce, R-Warrensburg, disagrees.

"The beauty about this bill is there are components that affect, really, every part of the state," Pearce said. "There's some for large industry; there's some for small business. There's some for research and development; there's some for beginning businesses, and so there's different components of the program, but if you look at the program, there's something for everybody that will help create jobs in our state."

One section of the bill makes changes to the Quality Job Act. It removes the cap on taxes that can be withheld for jobs created by Technology and High Impact projects and doubles the annual cap on tax credits issued.

Former Gov. Matt Blunt originally proposed the program, which would use tax incentives to lure new jobs to Missouri. Nixon has supported it as well, making it the centerpiece of his Show-Me JOBS initiative.

Some senators have criticized the focus on the Quality Jobs Act because it has not reached its original cap or created as many jobs as were projected.

"One of the reasons that was put forward was to raise the cap on Quality Jobs and said that raising that cap would create 30,000 jobs when, in fact, we haven't even reached the cap from the last year's cap," said Sen. Chuck Purgason, R-Caulfield. "So it's kind of hard to understand if employers haven't accessed the program enough to get up the cap level, how increasing the cap will increase jobs. It just doesn't make sense."

Pearce said that the Quality Jobs Act has been effective and that jobs are just in the process of being created.

"I just look at in my hometown of Warrensburg. One company is expanding by 180 jobs. They're investing $10 million in that facility. Now those jobs haven't materialized yet, but they will," Pearce said. "So I think that's how you have to look at that, and the beauty about the Quality Jobs is that if those jobs don't materialize, the state's not out any money. It's not like we had to put a lot of money out there to attract them to begin with. It's just that the credits aren't extended if the jobs don't materialize."

The bill would also establish the Small Business and Entrepreneurial Growth Act, or the Quality Jobs Lite, which would allow eligible small businesses to retain their taxes related to the newly created jobs for a year or two if they also pay more than 50 percent of their employees' health insurance.

There are also a variety of tax credits aimed at businesses using abandoned mines for alternative uses, new home purchases, businesses in new markets and businesses that create jobs in economically distressed areas.

Meanwhile, as legislators debate giving tax breaks to business, Forrest said she would like to see legislation that would help with loans.

"So those bigger emergencies -- for example, if you have a whole roof that needs to be repaired, which is close to $30,000 -- to find a loan that would be affordable, you know, so you're not paying all this interest rate," Forrest said. "And for small businesses, that would be really helpful. But right now, it's really difficult to find loans for small businesses because everybody's pretty much cutting back on loaning at this time."

But Forrest is not critical of the tax-break approach being promoted in the legislature. She said she would like tax credits related to hiring new employees and raising the overall salaries of her employees.

"Particularly, I hire low-income people, so a lot of mine are entry-level positions," Forrest said. "Any type of tax break that I can use as an incentive for future raises to help bring the level of salary up would be helpful for me. We're in the process of hiring a few new people at this time, and if there was some kind of tax credit that went along with that, that would be fantastic for a small business."