Thomas Friestad at the Kansas City Business Journal wrote recently that an engineering firm (Gannett Fleming TranSystems, formerly GFT) is moving its offices to the H&R Block building in downtown Kansas City.
Longtime Show-Me Institute readers will recognize H&R Block as a poster child for the false claims that economic development subsidies drive job creation. But this latest news only makes the point more relevant.
The TIF project was adopted in July 2006 and will last for 23 years, through 2029. For the duration of that time, all the additional property taxes and half the increase in sales and income (earnings) tax generated at the site are returned to the developer to offset the costs of developing the site. According to the latest report from the Missouri Auditor’s office, as of April 2023, this subsidy has redirected $23.5 million in property taxes and another $73.4 million in sales and earnings taxes away from the basic services they would have otherwise supported (schools, roads, libraries, etc.), instead sending the money back to the developer.
GFT moving into the H&R Block building means that a portion of the taxes it pays, most notably the 1% earnings taxes levied on each employee, will now also be redirected away from basic services to the developer to pay down the cost of the H&R Block building.
A lot of time is spent talking about how Kansas City loses revenue when businesses leave the city. We need to remember that due to our generous subsidy culture, we often lose revenue even when companies remain.
Side note: One can immediately imagine a scenario wherein developer landlords in TIF districts lower their rents because they know they will capture the additional tax revenue, thus undercutting properties that actually pay taxes. These deals are no way to run a city.
