A Chapter 353 Tax Abatement Plan is the Last Thing Charleston Needs
Supporters of a plan to “revitalize” Charleston, a city in southeast Missouri just a bit north of the Bootheel, are acting like they have struck gold with the idea of a chapter 353 tax abatement plan for the city.
“We have gone from about 80 properties to about 480 properties,” Hulshof explained. “My cup runneth over.”
Like supporters of government-managed economic development programs everywhere, backers of the plan in Charleston think that if the government approves the right plan here, with the right subsidy there, with the right government agency approval soon, that government plans can magically turn a struggling city into a boomtown. As economist Dick Netzer once mocked these eco devo officials, “Who needs oil wells, when a state can be another Kuwait just by increasing the budget of a tiny agency?”
A Chapter 353 plan with mass property tax abatements would not help Charleston. It would, in fact, almost certainly hurt it more. If property taxes are too high for businesses in Charleston (which I doubt, to be honest), then the city, school district, county, etc. should lower the rate for everyone, not give some property owners in downtown Charleston a big tax abatement that will almost certainly force tax increases on everyone else to make up the difference.
There are a multitude of studies that demonstrate the fallacy of believing that government economic development agencies can successfully engineer economic growth through various subsidies. Here is one simple summary from two economists who have looked at the question thoroughly: “The best case is that incentives work about 10% of the time and are simply a waste of money the other 90%.”
There are other economists who wouldn’t even agree they work 10 percent of the time. As one economist said after he reviewed a similar tax-subsidy laden plan for north St. Louis:
Among the most vocal critics of the NorthSide plan was the chair of Washington University’s Department of Economics, Prof. Michele Boldrin, who testified at the trial that the benefits promised by McKee such as new jobs and increases in property value were “dreamy,” “out of thin air,” “unreasonable,” and “completely arbitrary” and further stated that “if an MBA student came up with it, I’d throw him out of my office.”
St. Louis and other cities in Missouri have been using tax incentives as a prop for politicians to claim they are “doing something” for decades. How has it worked out for St. Louis? As author Colin Gordon wrote in him study on that precise question in his book, “Mapping Decline”:
The overarching irony, in Saint Louis and elsewhere, is that efforts to save the city from such practices and patterns almost always made things worse. In setting after setting, both the diagnosis (blight) and its prescription (urban renewal) were shaped by — and compromised by — the same assumptions and expectations and prejudices that had created the condition in the first place.
If you think the results in Charleston are going to be any different, I have a bridge over the Mississippi to sell you. A Chapter 353 plan for Charleston will allow politicians and planners to claim they are doing something, it will benefit the politically connected and the lucky, and it will empower city government to get more involved in the local economy. All of these things are, by the way, bad things. What a 353 plan won’t do for Charleston is help revitalize the city or grow the economy.
