Tax Incentive Goose, Meet Subsidy Gander
The insantiy of Missouri’s tax incentive system is slowly becoming more apparent, though I have no confidence that, in this case, realization will lead to corrections. According to an article in Missouri Lawyer’s Weekly, the city of Saint Louis recently raised the issue of tax incentives at a board meeting of the East-West Gateway Council of Governments. (Unfortunately, we can’t link to the article, because it is subsciption-based — so you’ll have to trust us on the language.) From the article:
Slay spoke about the decision and questioned whether tax breaks and credits should be given for projects that end up attracting jobs from another Missouri city in the same region at a July 30 meeting of the East-West Gateway Council of Governments board.
The exact cause of the discussion was the move by the Armstrong Teasdale law firm from downtown to Clayton, to a development project being built with enormous subsidies by the state, county, and Clayton. But the issue is much bigger than one corporate relocation, as troubling as the move is for the downtown area. Examples in which tax money is used to help companies move from one Missouri city to another are numerous. Clayton, itself, was victimized by this game a few years ago when tax incentives helped Smutfit-Stone move its headquarters to Creve Coeur. And it seems peculiar for the city of Saint Louis to be complaining about tax incentives offered by Clayton when Saint Louis recently came very close to luring Centene to move downtown, thereby leaving Clayton, by offering significant tax incentives.
The solution is to stop handing out tax incentives entirely — no exceptions. “But, David, that would put Missouri at a disadvantage when competing with other states,” say the economic development officials. Perhaps, but if we created an overall business environment better than other states, then we would offset that. We could lower the state corporate income tax, eliminate the payroll tax in Saint Louis city, reduce occupational licensing even further, and more. We already passed tort reform, and that has been a great success. The key is to stop allowing tax dollars to be used when a government decides it wants a certain business in a certain place, rather than allowing markets to make those decisions. We have written extensively about this here at the Show-Me Institute.
Not every local government plays this game, but most do. If the city of Saint Louis really wanted to, they could follow the lead of Saint Charles County and refuse to use TIFs and other tax abatements. It is indeed insane that Sunset Hills gives tax incentives for businesses to leave Crestwood, but it happens all the time — and the city of Saint Louis has done it, too. You need to be against it when it favors you, as well as when it hurts you.