Tax Incentive Reform Getting a Fresh Look from Legislators, Too
My colleague David Stokes wrote recently in the The Star about Kansas City’s pivot toward local incentive reform, a move that the Institute has called for over a decade. Specifically, the city ordinance considered by the Kansas City Council:
. . . would tighten limits on the amount of tax subsidies included in the many types of economic development incentives used by Kansas City. The proposal would cap the maximum subsidy at 70 percent of the tax otherwise owed. This would guarantee that, at a minimum, the person or entity who received the incentive would pay at least 30 percent of their taxes
As David often reiterates, there are many reforms that cities across the state could and should implement to rein in their tax incentive programs, which divert money from critical public services. Indeed, tax incentives help to create the illusion that there “isn’t enough” tax revenue for government services, perversely (albeit quietly) acting as a pretense for even more tax incentives and, eventually, tax increases on the taxpayers left holding the bag.
Getting a handle on tax incentives is as much a good governance issue as it is a tax issue, and eventually Kansas City’s reforms will need to go further in limiting how tax incentives are used if city services are going to be provided reliably and equitably. With that in mind, like any journey, the journey toward tax incentive reform must start with a step, and this is as good a step as any with which to lead.
If we’re lucky, Kansas City won’t be taking that journey alone this year. Several Missouri legislators have already filed bills that would address issues in a variety of tax incentive programs, including state tax credits that, for decades, have drained state coffers to the tune of hundreds of millions of dollars annually. There’s also renewed interest in getting a handle on the statutory definition of “blight.” Liberal definitions of what falls under the definition of blight can open the door to millions of dollars of taxpayer support for private development projects. Suffice it to say, it’s madness to consider a gated parking lot in a ritzy part of town “blighted,” but that’s a common story in the tale of tax incentive excess across the state.
But unlike incentives, talk is cheap. While the appetite for tax incentive reform does seem to grow stronger every year, we have yet to see substantial reform at either the state or local levels of government. Here’s to hoping these proposals are just the appetizer for a much larger reform meal; taxpayers are certainly hungry for it.