Missouri needs to remain economically competitive with Kansas and other neighboring states. Eliminating income taxes on job producers would be a great step toward this goal.

Missouri needs to ensure that public pensions don't wreck state and local finances.

Missouri should not enact job-devastating regulations like the minimum wage. Well-intentioned as it might be, an increase to the minimum wage would destroy jobs for the people who need them most.

These are a few of the many topics that Missourians will need to address going forward, and my colleagues will carry on that fight in the months and years ahead. For my part, it was an honor to work with them, and for you.

The post So Long, Farewell, Auf Wiedersehen, Goodbye appeared first on Show-Me Institute.

Chris Edwards of the Cato Institute and Veronique de Rugy of the Mercatus Center wrote a report that was highly critical of the EITC and called for its abolition. They raise several points that are worthy of discussion.

First, they say that contrary to claims that the EITC encourages work, the program does not do much toward this end. “In sum- the overall work incentive effect of the EITC is mixed…”.  I would say that even if the EITC’s effect on work incentives is neutral, it is still superior to increasing the minimum wage, because higher minimum wages will likely reduce employment.

Second, the authors criticize the EITC as being overly complicated and prone to large errors in making payments to recipients. I agree with this point. The Government Accountability Office has as well. It’s something that policymakers should consider when deciding whether to enact or expand the EITC.

Third, the report says that paying for the program would force tax increases, thus damaging the economy. It’s true that raising taxes would damage the economy, but are tax increases the only way to pay for an expanded EITC? The first place I would look to as a way to pay for an expanded EITC would be to cut spending on other welfare programs. The main purpose of the EITC is to alleviate poverty for working families. If recipients are no longer in poverty, then they should need fewer welfare benefits. Therefore, before raising taxes to pay for an expanded EITC, how about cutting welfare spending?

Overall, this report does highlight important issues regarding the EITC. It is clear that the program is not perfect, but it does deliver positive benefits to recipients. I wonder—if the authors had to choose between increasing the minimum wage or expanding the EITC, which would they choose? Despite its issues, I still think expanding the EITC is a better policy option than increasing the minimum wage.

The post No Government Program is Perfect appeared first on Show-Me Institute.

20150814 – Compairing Income Tax Liability Accross States – Hafer_Rathbone.pdf

The post Comparing Income Tax Liability Across States: Where Does Missouri Rank? appeared first on Show-Me Institute.

My colleague Rik Hafer and I decided to compare Missouri’s income taxes to those of other states. In our anaylysis, we went beyond looking at states’ top marginal income tax rates or income taxes collected per capita. Using tax preparation software, we examined how much an average family of four would have to pay in income taxes in each state. This is a new way to look at how income taxes actually affect households by giving people an idea of how much they would owe if they were to live in a particular state.

So where does Missouri rank? Give our paper a look and find out.

20150814 – Compairing Income Tax Liability Accross States – Hafer_Rathbone.pdf

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You see, ever since Senate Bill 5 became law, the city has had to find new ways to fund city government other than fining motorists. Thus the city zeroed in on raising property taxes.

Raising property taxes is sometimes a necessary evil, but when a city decides to raise property taxes on only one kind of property, it just seems, if not exactly evil, definitely unfair, and what’s especially galling is that (1) commercial properties in Edmundson—and the rest of Missouri for that matter—are already assessed at a higher rate (32 percent) than residential property (19 percent); and (2) commercial properties already pay a much higher property tax rate than residential properties (who pay zero property taxes) in Edmundson.

This commercial property tax hike goes up for a vote on November 3, and I won’t be surprised if city residents vote for a tax that someone else has to pay. But that doesn’t make this proposal good policy. Businesses in Edmundson could be facing tens of thousands of dollars in additional property taxes. Some businesses might even leave if this property tax increase is enacted. Property tax rates should be uniform (or very close to it) and low for everybody. If cities don’t have the self-discipline to have uniform rates, then the state should step in and make it so.

It’s readily apparent that the passage of Senate Bill 5 has caused some municipalities to scramble for new ways to raise revenue. A general property tax increase may or may not be the right way to go. However, singling out a specific type of property for a tax increase is bad policy.

The post It Must Be Nice to Own a House in Edmundson appeared first on Show-Me Institute.

Back in 2010, in an effort to spur job creation in Columbia, the city and state combined to award a $31.2 million incentive package to IBM so that it would place a new call center in the town. In return, IBM promised to create 600 jobs at the new center by 2013.                

Fast forward to March of 2015. Instead of 600 jobs, IBM had only created 453, far short of the number promised. Since then, things at the call center have deteriorated even further. Employment now stands at 388. This has prompted the state to withhold $800,000 in additional funding for the call center.

                Again, it’s good that the city and state didn’t give away the whole $31.2 million to IBM, but they’ve already have spent a lot of money (at least $10 million) on this project. Probably the most egregious part of the incentive package is the fact that the city of Columbia actually owns the building where the call center is located. This building cost the city $3 million and IBM’s rent is a miniscule $1 every year.

We were bearish on this plan when it was first enacted, and unfortunately for taxpayers, we were proven right. Tax credits are not a good economic investment, and their failure is not isolated to Columbia.

What is happening in Columbia is just another example of the consequences that occur when government picks winners and losers. If policymakers want to create economic growth, they should work to create a business environment that is welcoming to everybody and not just Big Blue. 

The post Columbia Feeling “Blue” About IBM’s Job Numbers appeared first on Show-Me Institute.

You can read the Court’s decision here. Basically, the Court ruled that the ordinance conflicted with existing state law and thus was invalid.

Mayor Slay has promised to appeal to ruling, but assuming this ruling stands, we are left with the question of how best to help those working families who are struggling to get by on the current minimum wage.

Increasing the minimum wage, either at the local, state, or federal level, is not the way to go. Instead, the state and/or federal government should look to expand the Earned Income Tax Credit (EITC). Economists across the ideological spectrum agree that the EITC is a program that is better targeted to helping the working poor.

The EITC is a better policy than increasing the minimum wage for at least two reasons. First, it is specially targeted toward low-income households. If the minimum wage goes up, a teenager from an upper-middle class family working a minimum-wage job would get the same benefit as a single mother of two. The EITC goes only to members of low-income families who are working. Second, unlike an increase to the minimum wage, the EITC does not increase labor costs for business owners. Thus, an expansion of the EITC would not cause businesses to reduce hours or lay people off.

A lot of people might be upset by the Circuit Court’s ruling yesterday. However, this ruling provides policymakers with an opportunity to enact policies that can better help those who need it. The EITC is one such policy.

The post Saint Louis Minimum Wage Increase Put on Hold appeared first on Show-Me Institute.

Despite the Governor’s claims, Missouri is not a low-tax state. We may have low taxes on gasoline and cigarettes, but when it comes to something important like your income, there are many other states with lower taxes.

Why focus on income taxes? Economic theory—and everyday experience—tells us that if you want less of something, you should tax it. That is the thinking behind carbon taxes. But while taxing carbon emissions may reduce the levels of CO₂, taxing labor income will reduce the desire to work. That is, raise income taxes and people will work fewer hours, which will result in less output.

In the end, higher income taxes stifle economic growth—and the creation of wealth. That is why tax rates matter. There is hard evidence indicating that states (and counties) with lower income tax burdens perform better economically than states with higher tax burdens.

With that in mind, the important question becomes: How do Missouri’s income taxes stack up against those of other states?

To answer this question, Rik Hafer and I used standard tax preparation software to calculate how much a family of four earning the U.S. median income had to pay in income taxes across all 50 states This allowed us to compare the tax burden in Missouri to that in other states. (The full report is available at ShowMeInstitute.org)

Contrary to the claim that Missouri is a low-tax state, we found that this average family of four would have to pay more in income taxes in Missouri than in 27 other states. Closer to home, that family also would pay more in Missouri than in Oklahoma, Nebraska, Kansas, and Tennessee. Our results are just one indicator that Missouri’s income taxes are not among the lowest in the country.

The Tax Foundation has compiled information regarding the top marginal income rates for every state. According to their calculations, Missouri has the 22nd-highest marginal income tax rate in the country. While this does not mean Missouri has the highest tax rate, it does mean that Missouri is not one of the lower-rate states, either. This ranking can understate how Missouri’s rates compare for most people. For example, California’s top tax rate is much higher than Missouri’s. However, Missouri’s top rate kicks in after $9,000 of income, and California’s kicks in after $1 million. In fact, many Californians face lower tax rates than Missourians of similar incomes.

Taken together, these rankings suggest that there is room for Missouri to cut taxes in order to remain competitive with other states. Nine states, including Tennesse—which borders Missouri—do not tax labor income at all. Kansas, Oklahoma, and Illinois all have top marginal rates that are lower than Missouri's. There are ways to help lower income taxes for Missourians without causing large revenue shortfalls. This includes broadening the sales tax base and cutting down on issuing economic development tax credits. If Missouri wants to remain competitive with its neighbors, it needs to build on the tax cuts it has already enacted and pass more tax cuts.

People who claim Missouri is a low-tax state are ignoring the taxes that really matter, like income taxes. For Missouri to be a low-tax state, there is more work to be done.

The post Taxes Are Still Too High for Missouri appeared first on Show-Me Institute.

The measure would treat street performers like peddlers and canvassers. Performers would be required to pay a licensing fee and obtain a permit.

Along with the attempt at licensing landlords, this measure is just one of the more recent examples of a government solution in search of a problem. As someone who works near the Delmar Loop and visits there often, I can assure you that street performers are not a nuisance.

Thankfully, a couple of city council members are also skeptical of the need to license street performers. Due to their questioning of provisions within the bill, action on this measure will be delayed until later in the month. The City Council should spend that time reflecting on whether licensing a few street performers is really something that University City should be doing.

Street performers make the Delmar Loop a more vibrant and exciting place to visit. University City should not make it harder for these people to practice their craft. 

The post Licensing Street Performers: Another Example of Government Overreach appeared first on Show-Me Institute.

Last week, I wrote about how Saint Louis County was considering a bill that would require landlords in unincorporated parts of the county to apply for licenses in order to rent out property. Proponents of the measure claimed that this bill will only affect those landlords who don’t keep their property up to standards. However, due to push-back on the bill, the sponsor has made amendments to make it more palatable. Yet these changes do little to actually improve the situation for landlords in the county.

The main problem with this bill is that it still makes landlords responsible for the actions of their tenants. If a renter received a felony conviction for one of a long list of offenses (selling drugs, gambling, and prostitution are included), and if even one of these incidents happened on the rental property, the landlord would be obligated to evict the tenant. If the landlord failed to do so, his or her license would be revoked.

Such a provision harms both landlords and their tenants. It harms landlords because it denies them flexibility in dealing with tenants. For example, what if a tenant is convicted of dealing drugs, but his wife was not guilty of any felony? Is the landlord supposed to evict the entire family because of the actions of one person? The law is unclear, but it seems to me that as long as the rest of the tenants keep up their end of the lease agreement, the landlord should have the option of letting them stay.

This bill would also harm some renters because this provision encourages landlords to discriminate based on the possibility of some future illegal activity. Why enact a law that gives cover to this sort of discrimination? It doesn’t make sense.

Putting aside this provision, the fact that landlords need to jump through yet another bureaucratic hoop in order to lease property makes it less likely that landlords will enter the market, thus hurting consumer choice. Nobody wants substandard housing, but licensing landlords is not the way to address this problem in Saint Louis County.

The post The Latest with Licensing Landlords appeared first on Show-Me Institute.

The number of events matter because it factors into how the authors calculate additional sales taxes a new stadium would generate. They estimate that the new stadium development would host 123 events, including professional soccer and high-school sports. For the sake of discussion, let’s grant that a new stadium will keep the Rams here. What of these other events?

It is no sure thing that Major League Soccer (MLS) will locate a soccer team here. This is important because MLS spending makes up a quarter of the authors’ calculation. The authors should not be counting on soccer revenue without a guarantee that a new team will actually exist.

Beyond the MLS, how many concerts, high-school/college sports, and other events do the authors think are available for the stadium to host? Saint Louis is not lacking in venues. The Scottrade Center, Chaifetz Arena, and the Edward Jones Dome can all serve as hosts. How many net new events will this stadium attract? This study doesn’t say. Based on the authors’ other calculations, it’s possible that they would count any event as a net gain for the city, regardless of whether it came at the expense of another local venue.

Determining the number of events the proposed stadium development would attract is a difficult task. However, given the hundreds of millions in taxpayer dollars on the line, it would be more prudent to have conservative estimates. The region doesn’t need another development to fall short of expectations. 

The post Where Did All of These Events Come From? appeared first on Show-Me Institute.

Under the provisions of this ordinance, property owners seeking to rent to tenants will have to fill out an annual application so that they may receive this license. Proponents argue that only those who don’t keep their property up will have to worry about the contents of this ordinance. Yet, this ordinance creates many negative incentives for landlords as well as another hoop for them to jump through in order to do business.

A major issue is the provision that the license can be revoked if an occupant of the property is convicted of one of the following: selling drugs, selling alcohol, gambling, or prostitution. This encourages landlords to discriminate under the auspices of some possible future illegal activity. Even if the landlords didn’t discriminate, forcing them to evict people on the basis of committing a misdemeanor in order to keep renting property is excessive.

Even if the final ordinance lacked this provision, creating more paperwork for landlords is no way to encourage more people to enter to market. For example, this ordinance could push out people who don’t plan to be full-time landlords, but might want to rent out their house for a few months. Would renters be better off with fewer landlords out there renting out property?

Licensing requirements should be reserved for a few select professions (e.g. doctors). By requiring licensing for more and more professions—like landlords—the government closes out that profession to many new entrants and reduces consumer choice. Licensing landlords will do exactly that. 

The post The Ever-Growing Bureaucracy appeared first on Show-Me Institute.

My colleague Joe Miller and I found so many things wrong with this study that our critique required more than one blog post. In the first post, Joe addressed the study’s faulty reasoning in regards to property taxes. This post covers the authors’ overestimation of additional sales taxes the city would be set to collect due to a new stadium.

In their study, the authors’ anticipate the new stadium will generate an additional $1.4 million in sales tax revenue annually. Actually, a new stadium will most likely generate very little if any additional sales tax revenue.

The authors overestimate new sales tax revenue because they fail to take into account substitution effects. Substitution in the context of entertainment spending is when consumers spend their money on one entertainment option instead of another. For example, instead of spending $20 dollars at a bar in Washington Avenue, someone instead spends that $20 dollars at the new football stadium. Overall spending does not go up; the money is just shifted from one place to another. When the authors calculate that the stadium and the developments around it will generate $1.4 million in revenue, they do not subtract out the tax revenue lost from other businesses decreased revenues due to the stadium.

There is a lot to say about this Harvard study, and this post only scratches the surface. The key takeaway, though, is that nothing in this study challenges the conclusion held almost universally among economists: that there is no economic justification for public financing of sports stadiums.

The post Sales Taxes will Not Save the Saint Louis Stadium Plan appeared first on Show-Me Institute.

The post St. Louis City: Discouraging Business? appeared first on Show-Me Institute.

                Economists across the political spectrum have been recommending this for years. The Congressional Budget Office, David Neumark, and even Christina Romer  find the EITC is a better policy option than the minimum wage for helping low-income households.

                There a couple of reasons why the EITC is a better policy option than the minimum wage. First, it is specifically targeted to help low-income households. The minimum wage isn’t as well targeted. For example, a teen flipping burgers and making the minimum wage would benefit from a higher minimum wage even if both of her parents are surgeons. The EITC only goes to households making below a certain amount. Secondly, the EITC doesn’t increase labor costs. Increasing the minimum wage means employers will have to pay their employees more per hour. The EITC is a direct government benefit, so businesses won’t have those increased costs.

                The EITC is not a perfect program. It makes a lot of improper payments , costing taxpayers billions. Also, its complicated nature makes it necessary for many people to hire professional tax preparers so that they can receive the credit.

                Despite these drawbacks, the EITC is still a superior alternative to the minimum wage    

The post A Good Idea from the Post-Dispatch appeared first on Show-Me Institute.

Numerous studies show that the use of TIF does not lead to economic growth for the area and isn’t a financial boon to the jurisdictions that use it. For example, studies of the use of TIF in Iowa and Chicago both found that TIF does not deliver tangible economic benefits. A more recent study in Indiana found “. . . uniform negative impacts of TIFs on traditional measures of economic development such as employment, the number of business establishments, and sales tax revenue.”

So why do Phelps County and Osage Beach (which approved TIF for a senior living center earlier this year) think that their projects will be different in the face of so much evidence to the contrary? It would be a nice to know an answer to that question, but in the meantime, the proliferation of TIF districts continues.

It is easy to understand the appeal of using TIF to redevelop vacant property. If the project gets completed, a new development is in place instead of a deserted lot, and all without “costing” taxpayers. However, development can occur without TIF. It has in Olivette, and it can happen in Rolla, too. 

The post “This Time It’ll Be Different” appeared first on Show-Me Institute.

Some might see a silver lining in the fact that the minimum wage will “only” go up to $11 instead of $13 or $15 per hour. That lining, unfortunately, is hair-thin; an $11 per hour minimum wage is still likely to have serious, negative consequences for the Saint Louis labor market, hurting the very people it is meant to help. If enacted, the increase will make Saint Louis County even more attractive to businesses compared to the city, because the county will have a much lower minimum wage coupled with the lack of an earnings tax.

The timing of this proposal is significant; it was passed now so that it would be exempt from HB 722, which, if enacted, would bar cities from raising their minimum wages after August 28 of this year. However, even if the minimum wage proposal is enacted before HB 722 goes into effect, there are still legal issues with this bill. Namely, section 67.1571 of Missouri State Statutes states that “No municipality as defined in section 1, paragraph 2, subsection (9) shall establish, mandate or otherwise require a minimum wage that exceeds the state minimum wage.”

Of course, things are never as simple as we might hope with regard to state statutes. A Saint Louis Circuit Court did rule that 67.1571 is invalid on procedural grounds. However, no higher court has ruled on this, so the question of 67.1571’s constitutionality is still open.

Relying on the courts to come to the rescue is no substitute for avoiding bad legislation in the first place. Policymakers should realize that minimum wage increases are not the way to alleviate poverty—but if they don’t,  a court ruling that the increase is invalid would preserve the jobs of many low-wage workers in the city.

The post Saint Louis City Board of Aldermen Passes Saint Louis County Employment Act of 2015 appeared first on Show-Me Institute.

It seems that there are those in the city who want to get some type of minimum wage increase passed before the Legislature has a chance to override Governor Nixon’s veto of HB 722, which would forbid municipalities from raising their minimum wages after August 28. What’s interesting to note is that even if the Board of Aldermen passes a bill before the August 28 deadline or the Legislature fails to override the Governor’s veto, Saint Louis probably lacks the legal authority to raise its minimum wage above the state minimum wage. Regardless, a $13 per hour minimum wage would be disastrous for the city and its workers.

The Congressional Budget Office studied the effects of increasing the federal minimum wage to “just” $10.10 an hour and found that it would cost 500,000 jobs. Now this 500,000 figure is a national number, but the effect on jobs would be especially pronounced if the wage went up at the local level, because companies forced to pay the higher wage can just hop across the city border to escape the mandate. Even the liberal Vox.com thinks that $13 per hour (never mind $15) would be too high a minimum wage for Saint Louis.

What about the other cities that have raised their minimum wages? If the recent evidence from Seattle is any indicator, things aren’t looking good.There are also some signs out of Los Angeles that might give policymakers in Saint Louis pause.

                Momentum is building in some parts of Saint Louis City government to increase the city’s minimum wage, as evidenced by the convening of a special session to debate the issue. However, that doesn’t mean that such a move would be good policy. A large increase (and going from $7.65 to $13 or $15 per hour would certainly qualify as large), will end up costing jobs  and failing to help the working poor. 

The post The Idea That Would Not Die appeared first on Show-Me Institute.

McDonald’s’ “Create Your Taste” kiosk allows customers to fully customize their burgers by selecting different buns, cheeses, and toppings without having to interact with a real person. The automation occurring in McDonald’s and other places might be an inevitable feature of the the 21st-century economy, and this has the potential to put many people out of work.

In a purely free market, this is creative destruction. Some jobs are destroyed in the process of delivering increased efficiency. That’s not to diminish the pain of those now out of work; however, it is necessary for the economy to grow. Even though some job losses are inevitable, government should not be expediting the process through regulations. Mandating increased labor costs through a higher minimum wage will encourage employers to use less labor. They instead will substitute other inputs, such as capital, that may have a lower relative cost because of the increase in wages. In other words, if you make labor more expensive, you give employers an incentive to invest in ways to cut down on labor. Forcing employers to pay their lowest-skilled employees more is such an incentive.

Many businesses already have a financial incentive for installing more kiosks like the ones McDonald’s is introducing. According to the Harvard Business Review, “Taco Bell recently announced that orders made via their new digital app are 20% pricier than those taken by human cashiers, largely because people select additional ingredients. Chili’s, after installing self-service tablets, reported a similar increase in dessert orders. Cinemark theater’s new self-service kiosks have ‘had concession spending per person climb for 32 straight quarters.’”

The intention behind raising the minimum wage is presumably to help low-wage workers make more money. However, with this oncoming wave of automation, policymakers might just put these people out of work altogether. Government should encourage work, not mandate that people lose it. 

The post Incentivizing Unemployment appeared first on Show-Me Institute.

In June of 2014, the Seattle city council passed a new law that will increase the city’s minimum wage to $15 an hour, with the increase being phased in over a period of years. The first increase (to $11/hour) came in April of this year. The American Enterprise Institute (AEI) studied restaurant employment in Seattle for the first 6 months of 2015, and what they found falls in line with what many other studies have shown.

According to AEI, between January and June of 2015 the Seattle Metropolitan Statistical Area (MSA) saw restaurant employment fall by 1,300 jobs—the largest decline since 2009 (during the Great Recession). It’s true that this figure counts job losses in months before the city minimum wage went up. However, the state of Washington’s minimum wage increased starting in January. In fact, after its latest increase, Washington has the highest state minimum wage among all 50 states.

AEI also found that the 1,000 jobs lost during May (which followed the city minimum wage increase in April) was the largest 1-month decline since January 2009.

During this same 6-month period, restaurant employment increased nationally by 130,700, overall employment in the Seattle MSA increased by 1.2 percent, and non-Seattle MSA restaurant employment in Washington increased by 2,800 jobs.

It should be noted that the Seattle MSA includes more than just the city of Seattle. Job losses could be occurring outside the city, and that could be skewing the results. But aside from the minimum wage increase, what economic/policy differences would account for the restaurant job losses in the Seattle MSA and the restaurant job gains that occurred in the rest of Washington?

Is Seattle the canary in the coal mine for the rest of the country? More time is needed to see what the full effects of the minimum wage increase actually will be. However, if these kinds of job losses are occurring in Seattle, which is much better equipped to handle a $15 minimum wage than Saint Louis, what does such a wage floor portend for Saint Louis? Instead of rushing to pass a minimum wage increase that could cost people jobs, Saint Louis policymakers should wait for more results to come in. 

The post A Canary in the Coal Mine? appeared first on Show-Me Institute.