A Race to the Bottom

The Kansas City area made big news, but not in a good way. According to the latest data, the Kansas City area lost more than 12,000 jobs during the past year. That’s the second-largest job loss in any metropolitan area in the entire country. Only Atlanta lost more jobs.

There has been a lot of talk from legislators and others about how tax subsidies are an important policy tool that states can use to keep jobs within their boundaries. In recent weeks, both AMC Theaters and Jack Stack Barbeque made news because the companies moved from Kansas City, Mo., to nearby locations in the state of Kansas.

Previously, Missouri’s Department of Economic Development (DED) used the promise of more than $12.5 million in tax credits to lure the corporate headquarters of Applebee’s across state lines into Missouri.

But to what end? Jobs in the region are down, and the loss is nearly the worst in the country.

I was curious to see how the Missouri and Kansas bidding war fit within the job loss news. So, I looked at the Kansas City core metropolitan statistical area (the area that lost more than 12,000 jobs). I then checked the three companies that made news when they moved across state lines to see from where they moved and where they relocated. These three companies’ relocations resulted in elected officials calling for the use of tax incentives to lure companies from one state to another.

Jack Stack Barbeque: The company is located in downtown Kansas City, Mo., and announced plans to move just across the state line to Overland Park, Kan. It is not clear whether tax incentives will be awarded to the company. Both locations are in the Kansas City metro area.

AMC Theaters: The company announced that it was moving from downtown Kansas City, Mo., to Leawood, Kan., also just a short few miles. The state of Kansas reportedly offered about $47 million in tax incentives, or more than $100,000 for each job. Both locations are in the Kansas City metro area.

Applebee’s: The company moved its headquarters from Lenexa, Kan., to Kansas City, Mo., just across state lines. The state of Missouri offered about $12.5 million in tax incentives, or about $35,000 per job. Both locations are in the Kansas City metro area.

In the grand scheme of things, all of the taxpayer money used to lure one company or another a few miles doesn’t really matter when it comes to the health of the region. The Kansas City metro area still lost more than 12,000 jobs, including those jobs that moved across state lines. Moving companies a short distance merely rearranges the deck chairs, it doesn’t accomplish anything productive.

In fact, given the administrative costs of running tax incentive programs, the Kansas City metropolitan area actually loses when the states attempt to lure companies away. We take tax dollars from the private sector to give to bureaucrats in the public sector whose job it is to figure out (i.e., use discredited economic modeling to guess at) which companies to attempt to lure across state lines. The money certainly could be put to better use, especially in light of some of the DED’s recent failures.

It’s time to stop playing petty economic development games and work instead on implementing public policies that have been shown to encourage economic growth, rather than shuffle it around.

I know it’s September, but a good place for us to start would be the list of New Year’s Resolutions for Missouri Public Policy that Policy Analyst Christine Harbin put together last year. Maybe there’s still some time to get started.