Kansas City Next Last Giveaway

This November, Jackson County voters will decide whether to impose a half-cent sales tax to support medical research. Officials predict the tax will generate $800 million for a handful of private groups over 20 years. We are all for investments in medical research, but should our limited local tax dollars be subsidizing it?

We have our reservations.

First, the research tax is an egregious misuse of the taxing authority. Missouri’s Constitution states (Article X, Section 3), “Taxes may be levied and collected for public purposes only….” Many benefits come from medical and academic research, but such benefits should not be misread as also satisfying the “public purpose” criteria that our Constitution sets forth.

Indeed, if this tax — explicitly intended to benefit private parties — qualifies as being “levied and collected for a public purpose,” does “public purpose” just mean anything for which we have enacted a tax? What would not be a tax for a “public purpose”? More specifically, if medical research deserves local tax support, how could anyone argue against tax subsidies for almost any other type of activity? Law firms, construction companies, and just about every other type of business provide a level of public service. Where do you draw the line on which businesses to subsidize with taxes?

Therein lies one of the core problems with top-down economic “plans” we see across Missouri today. Tax incentives and special tax deals are often, by their very nature, admissions that the overall tax system is broken and that taxes may be too high. Politicians do not have a special insight into what should and should not be subsidized with taxpayer money. Medical research is just the latest form of a long-running “public investment” scheme.

Simply because an industry may be supported by the federal government does not justify similar spending at the state and local levels. Should local sales taxes be used to make Department of Defense contracts more lucrative for aircraft manufacturers? Of course not. American government has very clear divisions of power and responsibility when it comes to spending issues. Instead of trying to emulate the spending of an oftentimes dysfunctional federal government, local governments should concentrate on not failing in their core responsibilities, including road maintenance, sewers and public safety.

Despite this, Kansas City officials have done that sort of “investment” planning for years, using taxpayer dollars to support all sorts of dubious developments. As a result, the city has some of the highest local sales taxes in the United States. The non-partisan Tax Foundation has found that Missouri has the sixth-highest average local sales tax in the country. Kansas Citians need not go far to find themselves in a shopping district with a sales tax already more than 10 percent. It is more than 12 percent at some restaurants. While a half-cent sales tax may not seem like much on its own, it is very real money as the taxes start to stack. And that is what we are seeing here.

The line needs to be drawn somewhere, and this is a good place to start. This particular sales tax will increase the price of everything you buy in Jackson County while sending the money directly to private organizations. It is as clear a case of spreading risk and privatizing gain — here through patents and profits — as you will see anywhere.

Local taxes should support public goods that the public uses each day — police, fire, streets, parks, and schools. The city and county should focus on getting it right with existing public services rather than play “investor” with other people’s money.

David Stokes and Patrick Ishmael are policy analysts at the Show-Me Institute, which promotes market solutions for Missouri public policy.

This commentary also appeared in the St. Louis Business Journal on 18 October, 2013: Kansas City mulls sales tax for research.