There is a long list of really dumb taxes in Missouri. The St. Louis and Kansas City earnings taxes are actively harmful to growth and opportunity. The personal property taxes on livestock are absurd. The pool table tax has long been an anachronism. But I have always thought that the single worst tax is Missouri is the local economic development sales tax. Why is it the worst? Because while the other taxes are harmful, they at least fund, in part, necessary functions of government. The economic development sales tax is a tax that entirely funds actions that cities should not be engaged in. It’s a tax that collects more money from people to make our communities worse off.
What does the economic development sales tax do? It is a sales tax for economic development purposes, but mostly it serves as a vehicle for corporate welfare. That’s all. It may be sold to voters in terms of new jobs, infrastructure, growth, and all sorts of things, but it is really nothing more than a vehicle for the exact types of corporate welfare that numerous studies have shown accomplish nothing except involving the government more in our economy.
We have a perfect example of the uses of the economic development sales tax from University City. A business in University City wanted to upgrade its manufacturing system. So, the company asked the city for tax money for this entirely private purpose. In a decision that should be shocking and illegal but somehow is neither, University City just gave the business $175,000 using money collected through the economic development sales tax. This is just one example of how this money is used statewide.
This is apparently what Webster Groves looked at and said, “How can we get in on that action?” Under the guise of addressing a budget deficit, Webster Groves has somehow decided that increasing sales taxes to fund corporate welfare will help it with its budget deficit. If you think this is absurd, congratulations—it is. If you think this is smart public policy, then you probably are an economic development official somewhere. (There are two sales taxes being proposed in Webster Groves. This post is focused on the economic development sales tax mentioned in the link.)
The economic development sales tax is the last tax any city in Missouri should institute. Those that already have it should remove it. Government-led “economic development” rewards cronyism and involves government in things it has no business doing. This tax is the last thing that Webster Groves needs.
