The Wrong Way to Fix Property Taxes

Posted on by Mike Ederer
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A version of this commentary appeared in the St. Louis Business Journal.

Missouri’s property tax system works best when the assessments are accurate, the tax base is wide, and the rates are low. That combination will help grow Missouri’s economy for everyone while properly funding the necessary functions of local government. However, a radical change in the system is being put before voters in St. Charles, Jefferson, and Franklin counties in April. These three counties will vote on whether to prohibit any property tax increases due to reassessments. Current law requires local governments to roll back tax rates as assessments increase, but we all know that taxes still go up, sometimes substantially.

This change would also reduce the ability of school districts to fund themselves and would make them more dependent on state aid. Consider the following: Parkway school district in St. Louis County is 89% funded by local taxes. However, Fox school district in Jefferson County is only 51% locally funded, while Wentzville school district in St. Charles is only 64% locally funded, and St. Clair school district in Franklin is just 45% locally funded. These changes would make school districts in these three counties more dependent on state aid, not less. Again, I’m aware that many voters may view that as a benefit, but it is anything but.

At the Show-Me Institute, we support low taxes, and I am well-aware of how tempting this will be to voters. But using market valuations in reassessment to set tax levels is a good system. While our property tax system needs reforms, eliminating any and all tax increases from reassessments will make Missouri more dependent on other taxes that hurt our economy far more than property taxes do. Hate them as much as you wish, but property taxes indisputably harm economic growth less than other taxes do.

Numerous other harmful effects would come from diluting the market forces (in the form of assessments based on market values) that form the basis of property taxation. California provides us with an example of the harms of these types of property tax caps with its famous Proposition 13, passed in 1978, which dramatically limited increases in property assessments and taxes. Proposition 13 certainly had its intended effect of lowering property taxes for California homeowners. However, it also reduced mobility, significantly increased alternative taxes, limited homeownership opportunities, and caused substantial tax disparities for similar properties receiving similar services. These negative consequences are exactly what St. Charles, Jefferson, and Franklin counties would experience over the long run.

There are also significant constitutional concerns with this legislation. Missouri Constitution Chapter X, Section 3 states that “taxes . . . shall be uniform upon the same class or subclass of subjects within the territorial limits of the authority levying the tax.” So, consider the issue of the Meramec Valley R-III school district. This school district serves families in three counties. If voters approve these tax changes, the property tax system in one of those three counties would remain unchanged (St. Louis), while in the other two (Jefferson and Franklin) it would be illegal to have a tax increase from reassessment. It would certainly seem unconstitutional for property owners within the same taxing district who own the same type of property (single-family homes) to face different tax and assessment systems for the same services.

We need property tax reform in Missouri, but this total limitation is too severe. If enacted, the property tax proposals before the voters in these three fast-growing counties would make the region’s overall tax system worse, not better. I hope voters will look past the easy appeal of a tax limit to think about the long-term harms.

Missouri Should Update Its Renewable Portfolio Standard to Include Nuclear Energy

Posted on by Mike Ederer
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A version of the following commentary appeared in the Columbia Missourian.

Missouri, like many states, mandates that a certain share of electricity come from renewable energy sources. Those sources typically include solar, wind, and biomass—but in many states, including Missouri, they exclude nuclear energy.

A productive debate could be had about whether state government should issue any such mandates. But in the meantime, legislators in Jefferson City have introduced several bills using different approaches, each of which would broaden Missouri’s existing standard to include nuclear energy.

Governor Kehoe discussed the issue in his recent State of the State Address, recognizing the long-standing mismatch between policy and reality.

What Is Missouri’s Current Policy?

Missouri’s current renewable portfolio standard (RPS) mandates that no less than 15 percent of each electric utility’s sales come from generated or purchased renewable energy resources (such as solar, wind, biomass, small hydropower, and other non-nuclear sources certified by the state as a renewable). Many other states have adopted similar standards.

Justifications for RPSs vary. Some view them primarily as a tool to improve air quality or limit greenhouse gases. Others argue that portfolio standards help newer energy technologies compete with established fossil fuels or ensure a diverse and resilient mix of energy sources. In any case, if Missouri is going to have an RPS, nuclear energy should be included.

Is Nuclear Energy Clean?

If Missouri’s RPS exists in order to protect the environment, nuclear energy’s exclusion is unreasonable.

Nuclear energy is a zero (or near-zero) emissions energy source, in terms of both criteria pollutants (those that affect air quality) and greenhouse gases.

Further, to produce the same level of electricity, solar farms need 31 times more land than nuclear plants, while onshore wind farms need 173 times more land. In terms of total direct and indirect land use, nuclear is by far the most efficient.

What About Nuclear Waste?

This concern is common but often misguided. Nuclear energy does produce waste, but the waste is compact, carefully managed, and tightly regulated. Much of what is labeled “waste” still contains usable energy. In fact, only about four percent of nuclear fuel is truly unusable after each use, and the United States could reduce nuclear waste in terms of both volume and radioactivity if the industry recycled used fuel. While existing American nuclear power plants are not well equipped to use spent fuel, new advanced reactor designs are increasingly capable of using it to generate electricity.

Regardless, the presence of safely stored waste should not prevent nuclear energy from being included in an updated portfolio.

Government Interference in the Energy Market

Past arguments have held that subsidies level the playing field for renewable energy. Yet, while solar and wind have expanded rapidly in recent years, only seven nuclear plants have been constructed in the U.S. since 1990. Factors such as regulatory burden have also contributed to nuclear energy’s stagnation, but government interference has played a role. Subsidies, tax-credits, and mandates have actually significantly distorted the market in favor of renewables.

The lion’s share of the more than $80 billion in federal support for renewables came through tax expenditures—driven overwhelmingly by the investment tax credit (ITC) for solar projects, which is claimed when a project begins operation, and the production tax credit (PTC) for wind generation. State RPSs create guaranteed demand for these resources, while federal tax policy lowers the cost of supplying them—effectively a double incentive.

This is not to argue that nuclear energy should be subsidized to a similar degree. However, including nuclear energy in Missouri’s RPS would at least make existing policy more even-handed. Nuclear energy meets growing electricity demand cleanly and reliably. The Missouri Legislature should update the state’s RPS to recognize this fact.

Charter Schools Are More Likely to Be Bright Spots

Posted on by Scott Tanner
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The 74’s Bright Spots project identifies public schools across the country that are beating the odds in reading. Specifically, “Bright Spot” schools have literacy rates that are significantly higher than what is predicted based on their student poverty rates. In other words, these schools are outperforming expectations in terms of teaching kids to read.

The project is impressive in both scope and purpose. Using data from 41,883 schools across 10,414 districts in all 50 states and Washington, D.C., it shines a light on excelling schools. Too often, education debates fixate on failure. Highlighting success—and learning from it—is just as important.

While there are surely all kinds of interesting tidbits in the data, in this post I want to focus on the disproportionate representation of charter schools among Bright Spots.

Charter schools make up seven percent of The 74’s national sample, but 11 percent of schools identified as Bright Spots. This means charter schools are overrepresented among Bright Spot schools by more than 50 percent. If performance were unrelated to charter status, we would expect charter schools to comprise seven percent of the Bright Spot list—not 11 percent.

This adds to a large and growing body of evidence showing that charter schools produce stronger academic gains than traditional public schools, on average. This does not mean that every charter school is more effective than every traditional public school, nor does it mean that there aren’t high-performing traditional public schools (indeed, the Bright Spots project highlights many!). But it does mean that, more often than not, a school system with more charter schools will outperform a school system with fewer charter schools.

In Missouri, we’re missing the boat on charter schools. Our outdated charter laws result in them operating in just four jurisdictions in the state (Boone County, Kansas City, Normandy, and the City of St. Louis). This leaves most Missouri families without charter school options.

The fundamental reason is that outside of these four jurisdictions, a charter school can only open with the approval of the local school board. But because the local school board has a vested interest in maintaining resources for its own traditional public schools, this rule effectively serves as a ban on charter schools in most of our state.

If state policymakers are serious about improving student outcomes, they should modernize Missouri’s charter law. A simple solution is to allow the Missouri Charter Public School Commission to authorize charter schools statewide, rather than relying on local school boards to approve them. This would allow the charter sector to expand and result in more students attending high-quality public schools.

Who’s Paying for What with Data Centers?

Posted on by Scott Tanner
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Last legislative session, Missouri lawmakers took a swing at addressing anxiety over data centers increasing electricity rates with the passage of Senate Bill (SB) 4. This bill requires that customers with loads over 100 megawatts (MW) pay their share of costs associated with connecting to the regulated grid (the Missouri Public Service Commissions recently expanded that rule to 75 MW). For reference, 100 MW is roughly equivalent to the electricity needs of 80,000 U.S. households.

There has been confusion about whether average Missourians’ rates would increase due to data centers. It’s understandable that people might be confused about some language in the bill. For example, what exactly does “any unjust or unreasonable costs arising from the service to such customers” or “pay their share of costs” mean?

A recent hearing at a St. Louis Board of Alderman committee meeting brought some needed clarity to the matter. When questioned, Ameren’s manager of economic development clarified that “all Ameren customers, including residential customers, pay for expanding the grid through building new power plants through rate increases, and that may be needed to accommodate large-load customers.”

In plainer English, average Missouri ratepayers would pay for new power plants constructed to meet data center demand—which could be a hefty bill if Missouri does indeed need new power plants.

Major technology companies (Amazon, Google, Meta, Microsoft, xAI, Oracle, and Open AI) are meeting with President Trump to sign a pledge that they will supply and pay for their own power for artificial intelligence data centers.

So average Missourians won’t be paying for new data centers at all?

Potentially, but it depends on the deal that is finalized with the major tech companies.

While there is some uncertainty about who will pay for what, Missouri could bring clarity by allowing consumer-regulated electricity (CRE).

CRE offers a private, parallel pathway to energy abundance, and gives data centers a private partner (CRE utility) to meet their own energy needs with less red tape, more certainty, more control, and more freedom to innovate. A CRE utility would develop and operate generation on behalf of large-load customers that prefer not to own and operate power plants themselves.

SB 4 was a good start, but Missouri can go further in protecting ratepayers and attracting investment. Allowing CRE could create a clear, structural pathway that could not only further protect ratepayers, but also provide attractive, tangible benefits to the developers paying for their own energy needs.

David Stokes Was Right: Property Tax Caps Are Squeezing Local Budgets Nationwide

Posted on by Scott Tanner
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Property tax relief has become a rallying cry for state policymakers across the country. Frustration over rising home values and the cost of living has driven lawmakers in states including Indiana, Ohio, and Wyoming to enact sweeping property tax cuts in recent sessions. But while these measures may look attractive on the campaign trail, they are already putting real strain on local governments that depend on property taxes to fund schools, public safety, and other essential services.

An article in the publication Governing titled “State Property Tax Relief Pushes Local Budgets to the Brink” highlights this emerging dynamic. Lawmakers in several states have pursued homeowner tax credits, rate caps, or other limitations without fully compensating counties, cities, and school districts for the revenue they lose. The result? Significant budget shortfalls, belt-tightening by local governments, and even more political pressure from local leaders to revisit state legislation cutting their revenue.

These developments matter to Missouri because they illustrate the unintended consequences of well-meaning tax cuts. As my colleague David Stokes has written in testimony before the Missouri Legislature, Missouri depends on property taxes to fund local services efficiently, and ill-designed state interventions can do more harm than good. Stokes emphasized that “Missouri’s property assessment and tax system needs reforms, but efforts to reduce it dramatically or eliminate it entirely go too far,” and that the state should not trade one revenue problem for another by hollowing out the tax base localities rely on.

What’s happening outside of Missouri mirrors Stokes’ concerns. In Indiana, a roughly $1.2 billion homeowner tax relief package enacted in 2025 will cost local governments an estimated $1.5 billion over three years, forcing many towns and counties to cut services or revise budgets mid-cycle. Wyoming’s 25 percent cut on assessed home value for tax purposes similarly leaves schools—which receive roughly 70 percent of property tax revenue—scrambling to balance their books.

Stokes has warned that limiting property tax growth without careful policy design reduces the property tax base, shifting the burden to other, more distortionary taxes. He argues that property taxes—particularly on land and real estate—are among the least harmful taxes to economic growth compared with income or sales taxes. Wholesale caps or freezes discourage local fiscal responsibility.

Missouri’s recent property tax changes—including the creation of “zero percent” and “five percent” counties where valuations can’t drive tax increases without voter approval—reflect a similar temptation to cut taxes without addressing the broader revenue implications. Stokes has noted that such approaches may do little to improve fairness while shrinking the tax base that supports schools and local services.

If policymakers in the Show-Me State pay attention to the experience of other states, they’ll proceed with caution. Cutting property taxes without sustainable alternate revenue exacerbates budget stress for counties and schools and shifts costs to taxes that are more damaging to growth, such as income or sales taxes. Ensuring that relief targets those most in need—as opposed to broad caps that change how local governments fund core services—preserves local autonomy and avoids the fiscal cliff other states are now confronting.

Missouri’s leaders should focus on reforms that improve fairness and economic efficiency—not simply reducing bills at the expense of services Missourians value.

Bloated Bureaucracy and Failing Kids The Case for School Choice with Christopher Talgo

Posted on by Zach Lawhorn

Susan Pendergrass speaks with Christopher Talgo, editorial director at the Heartland Institute, to discuss his recent piece in The Hill on the state of American public education. They explore why the claim that public schools are underfunded doesn’t hold up to scrutiny, how per-pupil spending often exceeds private school tuition while outcomes continue to decline, and where all that money is actually going. They also discuss the growing administrative bloat crowding out classroom resources, the dysfunction baked into teacher tenure and union structures, why school choice may be the only real path to meaningful reform, and how states like Florida and Arizona are already demonstrating what’s possible when parents are empowered to choose, and more.

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Produced by Show-Me Opportunity

Luxury Housing Still Helps Lower-Income Renters

Posted on by Scott Tanner
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In 2019, I argued that Kansas City’s debate over “luxury” apartments missed a basic point: housing markets are connected. When higher-income households move into new buildings, they leave something behind. Those vacancies matter. New research now makes that case with concrete evidence.

A recent piece in The Atlantic detailed the study. Researchers studied a 43-story condominium tower in Honolulu and tracked what economists call “vacancy chains”—who moved into the new units and who moved into the homes they left. The results were measurable and citywide.

The building’s 512 units generated at least 557 vacancies elsewhere. On average, residents moving into the tower left homes that were 38 percent cheaper per square foot. One step further down the chain, homes were 44 percent cheaper than the new condos. Each new market-rate unit created roughly 1.6 vacancies elsewhere in the city.

This research builds on earlier national work, which found that new market-rate construction prompts substantial movement out of below-median-income neighborhoods. As households move up, older units filter down. The process is gradual but observable.

Kansas City is not Honolulu. Our housing stock is less geographically constrained, and our prices are lower. But the economics of supply do not change by region. When we restrict new multifamily construction—through zoning caps, parking mandates, or prolonged approval processes—we constrain mobility.

Mobility allows households to adjust to new jobs, schools, and changing family needs. Nationally, residential mobility has fallen sharply over the past half-century. Culture plays a role, but so does housing availability. Fewer vacancies mean fewer options.

Kansas City faces a quieter risk: complacency. Because our prices have not reached coastal extremes, it is easy to assume supply is sufficient. Yet rents and home prices have risen faster than incomes in recent years. If we make it harder to build—luxury or otherwise—we should expect fewer vacancies and higher prices over time.

Certainly, luxury housing construction should not be subsidized. Much of the local controversy over “luxury” projects arises when developers seek public incentives. But housing construction at all levels is welcome. Today’s Class A building becomes tomorrow’s middle-income housing. Aging is built into the market.

The real question is not who benefits from the first occupant of a new building. It is who benefits over the next decade.

If Kansas City wants more affordable options tomorrow, it needs more housing—of all kinds—today.

Kansas City’s Bus Riders Union Is Right about One Thing

Posted on by Scott Tanner
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Kansas City’s new Bus Riders Union says city hall and the Kansas City Area Transportation Authority (KCATA) need to listen to riders.

On that point, it is right.

For years, KCATA has made major policy decisions without clearly anchoring them to what riders consistently say they value most. The most consequential example was the move to eliminate fares.

In late 2019, the Kansas City Council voted to subsidize fare-free bus trips tied to city service. In March 2020, as a COVID-era public health measure, fares were suspended regionally across RideKC partners. The pandemic decision effectively made the fare-free policy far broader than the original city-centered framing.

But fare-free did not make bus operations cheaper.

Before 2020, several Missouri-side municipal contracts operated under a net operating cost model: KCATA calculated operating costs, subtracted passenger revenue, and allocated the remaining loss among funding partners. In the year before fares were suspended, passenger revenue covered roughly $9 million of operating costs.

The fare-free policy eliminated that recurring revenue stream, but it did not eliminate operating costs. Fare-collection expenses declined modestly, but those savings were far smaller than the forgone revenue, and additional pressures—including ADA complementary paratransit demand—complicated the balance sheet.

During the pandemic, federal funds offset the lost fare revenue. But as one-time COVID-era funding dwindled, the structural question reemerged: who permanently pays for free fares and full service?

Multiple forces drove the budget stress that followed—expiring federal relief, post-pandemic inflation, and negotiated cost-sharing changes. Fare-free was not the only cause of rising costs, but it was a significant one.

Removing a revenue stream embedded in cost-allocation formulas increased the amount that had to be covered by subsidies. Without a dedicated replacement source, the system became more financially fragile. That coincided with contract disputes, service cut threats, and regional withdrawals—all of which riders experience as instability.

Just as important, fare-free did little to address passenger concerns. It did not fix whether the bus shows up on time or is clean and safe. It may have worsened these issues.

Research across major transit systems shows a similar pattern: riders tend to rank frequency, reliability, and safety above fare reductions as the changes most likely to increase their use.

Kansas City has tested fare-free transit. It proved impossible to sustain without stable, dedicated funding, making the service less attractive to other neighboring municipalities.

If the Bus Riders Union wants to ensure riders are heard, the focus now should be on what riders consistently say they need: buses that run frequently, arrive on time, and feel safe.

Unfortunately, KCATA’s past policy missteps have made this more difficult.

St. Louis County to Raise Park Fees—That’s Good

Posted on by Scott Tanner
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St. Louis County Executive Sam Page has announced that the county is raising park and recreation fees as part of an effort to address budget shortfalls in county government. This is after the county announced a reduction in recreation facility hours a while back (among other cuts) in response to the same budget issues.

The increase in fees is a good move by St. Louis County government. According to the article:

Page . . . [said] the changes stem from a comprehensive review of the actual cost of providing services and reflect “operational realities, market standards, and equity considerations.”

The most important part there is “operational realities.” (I’ll let you guess which one I think is the least important.) I covered this topic in my most recent paper in the free-market municipality series. The operating costs of recreational facilities should be funded to the largest extent possible by user fees. (Capital costs are generally funded through bonds paid back by taxes.) It may not be possible to get 100% of funding with user fees, but fees should consistently be updated to ensure that they cover as much of costs as they can.

One increase that the county announced is that ice rink rentals are increasing to $300 per hour. Building, managing, and maintaining an ice rink is very expensive, and it is not something that most of the general public often uses. The hockey teams that rent it out should pay the cost of the service, not the general public. The same reasoning applies to regular ice skaters during open ice time. The fee for a ticket and skate rental should cover the costs.

Parks are different. Nobody wants to pay a fee to take a walk in a park. That is why general taxes are the best way to pay for community parks. (Many national parks and some state parks are more “destination” type facilities where user fees should be and are a part of the funding.)

St. Louis County is doing the right thing here. I hope other cities and counties also stay on top of the fee structures to make sure their recreational facilities are capturing the right amount of money in user fees.

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