Taxes - Policy Study
Policy Briefing: Missouri Transition Costs and Public Pension Reform Print E-mail
By James V. Shuls, Ph.D. and Michael Rathbone   
Monday, March 03, 2014

The goal of public employee pensions is twofold: to provide a safe and secure retirement for our valued state employees and to help recruit and retain talented individuals into public service careers. Unfortunately, many of Missouri’s public employee pension systems have flaws that make it difficult to achieve either of these tasks.

 
Missouri Transition Costs And Public Pension Reform Print E-mail
By Andrew G. Biggs   
Monday, February 17, 2014

Pension plans for state and local government employees have become increasingly underfunded in recent years, with total shortfalls nationwide ranging from approximately $1 trillion to more than $4 trillion, depending on how plan liabilities are measured. Annual required contributions have more than doubled over the past decade, and many plan sponsors were unable to make required contributions during the recession that began with the financial crisis of 2007 and the slow recovery that followed.

Closing defined benefit plans reduces or prevents the accumulation of additional unfunded liabilities. There are many reasons elected officials may favor or oppose shifting public employees out of traditional defined benefit pensions into cash balance or defined contribution plans. But concerns over so-called “transition costs” are largely mistaken and should not stand in the way of public employee pension reforms.

 
Public Employee Pensions in Missouri: A Looming Crisis Print E-mail
By Andrew G. Biggs   
Monday, March 11, 2013

Missouri and around the country, elected officials, taxpayers, and financial markets have expressed concerns about the financial health of defined benefit pension plans for state and local government workers. Public employees also are concerned, as many rely heavily upon these plans for income in retirement.

 
A Comparison of Missouri Pension Plans Print E-mail
By John S. Howe   
Friday, December 28, 2012

State and local employees in Missouri typically are eligible to receive pension benefits upon retirement; the particular pension each worker is eligible for depends on the employer and the position. In this paper, we examine the return performance of five Missouri pensions ...

 
Homes, Taxes and Choices: A Review of Real Estate Assessment and Property Taxation in Missouri Print E-mail
By David Stokes, Christine Harbin   
Wednesday, August 10, 2011

Local governments in Missouri are primarily funded by property taxes. Property taxes are an ad valorum tax, which means they are based on the value of the real estate or other property being taxed. Taxable property in Missouri is appraised at its market value, a ratio is applied to the market value to determine the taxable — or assessed — value, and a tax rate is then applied to that value determining the amount owed in taxes. Property taxes fund schools, counties, cities, fire districts, libraries, and other types of smaller taxing districts.

 
Defined Benefit and Defined Contribution Retirement Plans Print E-mail
By John S. Howe   
Wednesday, December 22, 2010

This study addresses an important issue with implications for public policy: retirement plans. It compares defined benefit (DB) and defined contribution (DC) retirement plans in order to assess whether the recent trend toward DC plans is, on balance, beneficial to workers. It further identifies policies — both public and private — that would make retirement plans more effective, with the goal of advancing liberty and responsibility.

 
A Review of Cross-Country Evidence on Government Fiscal Policy and Economic Growth Print E-mail
By Shawn Ni   
Wednesday, December 01, 2010

It is widely believed that fiscal policy plays an important role in determining economic growth, but the specific policies that would best foster growth are hotly debated. This study provides a review of the recent economic literature that examines the effect of government fiscal policy actions on economic growth. Because the effect of changes in tax and spending programs may take a long period of time to become evident, the findings of the studies reviewed here are based on data taken from across a large sample of countries. Despite the justifiable belief that fiscal policy does influence economic growth, interpreting the empirical evidence from aggregate cross-country data turns out to be less than straightforward. Even so, stepping back and considering the accumulated evidence reveals a robust conclusion from the data: Distortionary taxes on personal income or corporations have a strong negative effect on investment and, therefore, slow the rate of economic growth.

 
Taxes and Growth: A Review of the Evidence Print E-mail
By Mark Skidmore   
Tuesday, March 09, 2010

This study provides a review of the academic literature that has examined the relationship between taxation and economic growth, with an emphasis on the taxation of income. The study provides reliable information that may inform policy options.

 
Why Missouri Taxpayers Should Not Build High-Speed Rail Print E-mail
By Randal O'Toole   
Monday, September 28, 2009

In February 2009, Congress dedicated $8 billion of stimulus funds to high-speed rail projects. In April 2009, President Barack Obama released his high-speed rail vision for America, which includes 8,500 miles that the Federal Railroad Administration had identified as potential high-speed rail routes in 2001. In June, the FRA announced its criteria for Missouri and other states to apply for high-speed rail grants out of the $8 billion in stimulus funds. Yet the FRA has no estimates of how much high-speed rail would ultimately cost, who would ride it, who would pay for it, and whether the benefits can justify the costs. A realistic review shows that high-speed rail would be extremely costly and would add little to American mobility or environmental quality.

 
Missouri's Challenge: Managing Long-Term Employee Benefit Costs Print E-mail
By Richard C. Dreyfuss   
Friday, November 21, 2008

The Missouri public pension system currently faces serious long-term financial challenges. Missouri taxpayers are facing compound problems regarding the state’s ability to manage effectively both defined benefit public pension and retiree medical liabilities. While current payments to retirees are not in jeopardy, the emerging cost patterns to both current and future members and taxpayers will be predicated upon future asset growth and favorable health care cost trends, both of which present significant risks to taxpayers.

 
Should Missouri Eliminate the Individual Income Tax? Print E-mail
By Rik W. Hafer   
Wednesday, December 05, 2007

This study considers the effects of eliminating Missouri's income tax, which would alter the state's tax structure in a way that encourages a wide variety of individuals and firms to relocate here. Evidence shows that this would not be detrimental to the growth of employment and income. Moreover, it may be possible to eliminate the income tax without sacrificing current levels of state services. Other states make up for lost income tax revenue in a number of ways, such as through higher property tax or sales tax rates. This study concludes that altering or even eliminating Missouri's individual income tax could well improve the state's economic condition.

 
How to Replace the Earnings Tax in Kansas City Print E-mail
By Joseph Haslag   
Thursday, January 25, 2007

If we can eliminate the distortions created by the earnings tax, jobs will be created and residents will flow into the city. My model takes into account the dynamic effects that the elimination of the earnings tax would have on migration and job creation. I find that at the end of the phase-out period, the revenue-neutral land-value tax rate would be 6.7 percent. The model predicts that Kansas City could eliminate the earnings tax in a revenue-neutral fashion over 10 years, replacing it with a 6.7 percent tax on the assessed value of land. The number of people working in Kansas City would increase by 50 percent in the long run. Replacing the earnings tax with higher sales taxes is not a viable option. Like the earnings tax, the sales tax is distortionary. Higher sales taxes will simply cause consumers to shop outside of the city. Although a land-value tax would be more costly to administer than the earnings tax, the economic gains of eliminating the earnings tax would be substantial.

 
How to Replace the Earnings Tax in Saint Louis Print E-mail
By Joseph Haslag   
Wednesday, January 24, 2007

If we can eliminate the distortions created by the earnings tax, jobs will be created and residents will flow into the city. My model takes into account the dynamic effects that the elimination of the earnings tax would have on migration and job creation. I find that at the end of the phase-out period, the revenue-neutral land-value tax rate would be 10.04 percent. The model predicts that in the long run, the number of people working in Saint Louis would double. Replacing the earnings tax with higher sales taxes is not a viable option. Like the earnings tax, the sales tax is distortionary. Higher sales taxes will simply cause consumers to shop outside of the city. Although a land-value tax would be more costly to administer than the earnings tax, the economic gains of eliminating the earnings tax would be substantial.

 
Repealing the State Income Tax by 2020 Print E-mail
By Stephen Moore, Richard Vedder   
Monday, December 11, 2006

Although Missouri is a relatively low-tax state, its tax advantage has been declining in recent years. Today its tax burden is roughly on par with those of its neighbors. It’s not surprising that the state has had little success attracting new jobs and businesses. We believe that Missouri can do better. The nine U.S. states with no income tax offer a particularly appealing model. They have enjoyed enviable success in attracting jobs, investment, and new residents. If Missouri phased out its own income tax, it could “break away from the pack” of Midwestern states. It would then offer a compelling alternative for prospective businesses and families interested in moving to the region and would increase wealth and opportunity for all of its residents.

 
The Impact of Missouri's Proposed $6.50 Minimum Wage on the Labor Market Print E-mail
By Kenneth R. Troske and Aaron Yelowitz   
Tuesday, October 10, 2006

The typical minimum wage worker is young, still in school, living with a relative and living in a family that has a total family income of over $57,000. The typical poor worker is older, out of school, earning a wage substantially above $6.50 an hour, and the sole earner in a family with children. Most poor workers are poor because they work relatively few hours, not because they are paid low wages. The fact that minimum wage workers tend to look very different from poor workers suggests that increases in the minimum wage would have a limited impact on poverty. We estimate that an increase in the minimum wage would result in over 18,000 Missourians losing their jobs and would raise total labor costs for Missouri firms by $340 million. Increasing the minimum wage would reduce the overall poverty rate by less than 0.5 percentage points.

 
The Economic Effects of Minimum Wages: What Might Missouri Expect from Passage of Proposition B? Print E-mail
By David Neumark   
Monday, October 02, 2006

The evidence from a large body of existing research suggests that minimum wage increases do more harm than good. Minimum wages reduce employment of young and less-skilled workers. Minimum wages deliver no net benefits to poor or low-income families, and if anything make them worse off, increasing poverty. Finally, there is some evidence that minimum wages have longer-run adverse effects, lowering the acquisition of skills and therefore lowering wages and earnings even beyond the age when individuals are most directly affected by a higher minimum.

 
How an Earnings Tax Harms Cities Like Saint Louis and Kansas City Print E-mail
By Joseph Haslag   
Wednesday, March 08, 2006

By adopting an earnings tax, a city gives businesses and residents an incentive to locate production outside the city. People go where they will obtain the highest after-tax return on their labor or investments. In order to raise the return, people locate more productive capacity outside the city limits in order to avoid the tax burden. This incentive effect can account for why the city share of per capita income is smaller in cities with earnings taxes than without. The bottom line is that city earnings taxes do matter. Cities that wish to increase their rate of economic growth should consider reducing or eliminating their earnings taxes.

 


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