Corporate Welfare - Policy Study
Tax Increment Financing and Missouri: An Overview Of How TIF Impacts Local Jurisdictions Print E-mail
By Paul F. Byrne   
Friday, April 13, 2012

Tax Increment Financing (TIF) has become a common economic development tool throughout the United States. TIF takes the new taxes that a development generates and directs a portion of them to repay the costs of the project itself. Missouri is one of many states where TIF is authorized for purposes of combating blight, engaging in conservation efforts, fostering economic development, or a combination of those factors.

Supporters of TIF argue that it is a necessary tool for redevelopment in older communities. Detractors contend that it is used to simply subsidize development, and that variances in tax systems allow some governments to implement and benefit from TIF even if its use harms other levels of government.

This study provides an overview of the history and basic structure of TIF. It then analyzes the basic tax components of a TIF plan and compares how various aspects, such as tax capture and tax competition, play out in the standard system of TIF. The study then reviews the economic literature on TIF, and ends with a direct application of how TIF operates within Missouri.

Tax Credits as a Tool of State Economic Development Policy Print E-mail
By Howard Wall   
Tuesday, November 01, 2011

Tax incentives are among the main instruments of state and local economic development policy, and tax credits are among the most prevalent types of tax incentive. Tax credits come in many forms and serve an array of purposes, although economic development is central to their existence. The purpose of this paper is to summarize the findings in the economics literature on the effectiveness of state tax credits in spurring economic development. The context for this survey is the establishment of an official commission to review Missouri’s tax credit programs with the purpose of streamlining and consolidating the state’s myriad tax credit programs. The commission’s efforts are certainly worthy, and its report contains many eminently sensible suggestions, but its proceedings avoided the extremely important question of whether or not the tax credits have been, or even can be, effective. This survey is a contribution to a clearer understanding of this issue.

The remainder of this paper surveys the state of the academic literature regarding the effectiveness of economic development incentives, with particular attention paid to state tax credits. The next two sections describe the basic structure of tax credits and their use in Missouri. Sections 4 and 5 discuss the use of development incentives in general, first outlining the economic efficiency arguments in their favor and then summarizing the literature estimating their effects. Section 6 describes the literature dealing specifically with the effects of tax credits, and the final section provides three broad conclusions drawn from this literature.

Assessing the Economic Impact of the Proposed Aerotropolis Legislation Print E-mail
By Saku Aura   
Thursday, September 08, 2011

This essay discusses the costs and benefits of the proposed Aerotropolis tax credit legislation currently before the Missouri legislature. The main purpose is to provide a methodology for evaluating whether state tax credits and direct export subsidies are warranted in this case. In order to do so, I first review the traditional arguments for state intervention in a market economy. With the potential exception of so-called agglomeration externalities, the traditional arguments for state subsidization are found irrelevant with respect to the Aerotropolis project. Simply stated, there seemingly exists no market failure on which one may justify government intervention in support of an Aerotropolis at Lambert-St. Louis International Airport (Lambert).

Gradual and Silent Encroachments: How the Missouri Supreme Court Expanded the Power of Eminent Domain Print E-mail
By Timothy Sandefur   
Tuesday, September 15, 2009

The Constitution of Missouri includes more provisions addressing the property rights of citizens than that of any other state. The careful restrictions it places on the use of eminent domain show that, in ratifying the Constitution, the people of the Show-Me State intended to prevent the abuse of eminent domain to benefit private parties. Despite these protections, however, few states today have so dismal a record of eminent domain abuse as Missouri. And, in 2008, despite the constitutional and statutory restrictions on the government’s ability to take one person’s home, business, or house of worship and give it to another private owner, the Missouri Supreme Court chose to expand the power even further, placing the property rights of all Missourians in even greater jeopardy.

The Specter of Condemnation: The Case Against Eminent Domain for Private Profit in Missouri Print E-mail
By Timothy B. Lee and Shaida Dezfuli   
Wednesday, October 17, 2007

This study examines the abuses of eminent domain when used for private profit in Missouri. Although many government officials believe that eminent domain is necessary for comprehensive development projects that will help stimulate the economy, authors Timothy B. Lee and Shaida Dezfuli focus on how eminent domain often hurts economic development by creating economic uncertainty and harming small businesses. Furthermore, it exacerbates poverty in inner city communities by destroying affordable housing and undermining community reform efforts. The study documents numerous examples of the negative impact that eminent domain has brought to local communities. It argues that the abuses will only worsen, until the Legislature passes a constitutional amendment that strengthens property rights in Missouri.



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