Are $500 Tax Rebates on the Way?

Posted on by Elias Tsapelas

One of the few bright spots of this year’s otherwise underwhelming legislative session was the legislature’s decision to send Missourians back some of their hard-earned tax dollars via income tax rebate. Now that the bill(s) have been sent to the governor for his signature, many taxpayers likely have questions about how the rebates will work.

What are they? Approved in House Bill (HB) 2090 with funding included in the budget, the rebates are being issued as non-refundable income tax credits for the 2021 tax year. Individual filers are eligible to receive a credit of up to $500, and couples who file jointly can receive up to $1,000.

Who will get them? There are two major criteria for determining who will receive the income tax rebate. First, the rebate is a non-refundable credit, which means recipients must have paid income taxes in 2021 to qualify to receive any rebate. Second, the legislature placed an income cap on the rebate. For individuals, the cap is $150,000, and for those filing jointly, the cap is $300,000. If you earned more than the cap in 2021, you will not qualify for the rebate.

How much will they be? Perhaps the most confusing part of the legislature’s plan is determining how much each taxpayer will receive. Since it’s a non-refundable credit, a recipient can only receive up to the amount they paid in state income taxes in 2021, and no more. So, if you paid $50 in state income taxes, your rebate would only be $50. But for individuals who paid around $800 in state income tax, the maximum they could receive is $500.

One complicating factor here is that the legislature set aside exactly $500 million to pay for these rebates. While that sounds like a lot of money, the spending plan is structured in such a way that if Missouri’s Department of Revenue (DOR) determines that more people will qualify for the $500/$1,000 credit than can be paid for with $500 million, the department is authorized to lower the rebate payments to accommodate paying all those who qualify for the maximum rebate the same amount. Preliminary estimates suggest that this downward adjustment in rebates is extremely likely and may result in maximum rebates as low as somewhere in the $300 range, but we won’t know the exact number until DOR completes its analysis of the state’s 2021 tax filings.

When will we get them? While the ultimate date remains uncertain, I’d recommend taxpayers start checking their bank accounts and/or mailboxes in late 2022 for the money. Because of the provision allowing the size of the rebates to be lowered, the DOR will need to finish processing all 2021 filings, which can’t occur until after the tax filing extension deadline of October 17th. During debate on the bill, one legislator expressed wishful thinking that the department would be able to complete the process by the end of the calendar year. The money in the budget for the rebates is approved through June 30, 2023, so the rebates will at least be distributed by then.

Taxpayers are always going to be better spenders of their tax dollars than the government, and I’m glad the legislature decided to give some money back this year. But as is often the case with the government and rebates, the process of getting your money back can be quite complicated. For now, when someone asks if they’ll be receiving $500 in tax rebates, the best I can do is answer “Maybe.”

End of the Legislative Session, Fines for Home Renovations, and The Loop Trolley Returns

Posted on by David Stokes

David Stokes, Patrick Ishmael, and Susan Pendergrass join Zach Lawhorn to recap the 2022 legislative session, discuss newly introduced legislation that aims to make it more difficult for rehabbers in many St. Louis neighborhoods, and the return of The Loop Trolley.

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Legislative Results for Licensing Compact

Posted on by Corianna Baier

In a legislative session that lacked legislative action, there was a small piece of good news tucked into a large bill concerning occupational licensing.

House Bill 2149 passed the Missouri Legislature this session and, among other things, the bill establishes Missouri as part of the Speech-Language Pathology Interstate Compact. I discussed this idea multiple times while it moved through the legislature as a part of various bills. Luckily, an early problem that I pointed out in the bill text (that the language seemed to override licensing reciprocity) was corrected in the final version that awaits the governor’s consideration.

If signed by the governor, Missourians will be able to benefit from licensing reciprocity and this license compact, expanding options for consumers and workers. Occupational licensing often creates arbitrary barriers for workers and raises prices for consumers, so it’s encouraging to see the legislature reducing these negative effects. Perhaps next year we will see even larger movement in the form of a sunset provision for other occupational licenses and reforms allowing greater use of telemedicine in Missouri.

The Kansas City Star Is Right

Posted on by Patrick Ishmael

A recent Kansas City Star piece excoriated the Missouri Senate for its behavior and failure in the recently concluded legislative session. I’ve certainly had my share of disagreements with the Star, but the Star is absolutely right about what our state Senators failed to understand in 2022—that “not doing bad things” isn’t quite the same as “doing good things.” From the Star:

Senators are not inherently wiser, or more patient, or more knowledgeable than their House counterparts. In a tweet Friday, state Sen. Lauren Arthur of Kansas City, a Democrat, defended the institution. “The Senate was designed to make it difficult to pass legislation,” she said.

Yet Arthur and her colleagues were unable to prevent the grotesque violation of Kansas Citians’ rights when the General Assembly imposed a 25% floor on police spending in its final day.

If your only goal is to prevent bad stuff, rather than pursue good stuff, failure can resemble success. But it’s still failure. [Emphasis mine]

Nebraska has a one-house state legislature. Perhaps the people skilled at gathering petition signatures can pursue a smaller Missouri General Assembly in 2023.

The Star is right about the philosophical importance of pursuing, and following through on “good stuff,” though I might disagree about what that “good stuff” would be. But for example, high among the alleged priorities of the state Senate leadership was passing a Parents’ Bill of Rights, and that priority was decidedly and bizarrely ignored throughout the session.

The Senate’s bias against its own priorities—debating key legislation last rather than first, and thus always risking its failure—isn’t new. Missouri voters have sent supermajorities to the House and Senate for a reason; it is not reasonable for the legislature to fail so emphatically and so often in enacting the reforms their constituents demand. In that, I agree with the Star.

Now, I’m not prepared to agree with the Star that Missouri should abolish the Senate entirely and adopt Nebraska’s unicameral legislature. But get back to me next year; maybe another year of failure will persuade me.

Tax Burden in Missouri’s 20 Largest Cities

Posted on by Corianna Baier

What do residents in Missouri’s largest cities pay in taxes, and what do they get for their money? This report explores these questions, breaking down various tax rates in each of the 20 cities examined in the context of the services provided to residents. Also provided is information about the fiscal soundness of each city (including pension obligations) as well as the amount of revenue each city gives up in tax abatements.

The cities covered in the report are:

  • Ballwin
  • Blue Springs
  • Cape Girardeau
  • Chesterfield
  • Columbia
  • Florissant
  • Independence
  • Jefferson City
  • Joplin
  • Kansas City
  • Lee’s Summit
  • O’Fallon
  • Springfield
  • St. Charles
  • St. Joseph
  • City of St. Louis
  • St. Peters
  • University City
  • Wentzville
  • Wildwood

Click here to read more, or download the report by clicking on the link below.

The Price of Starting a Business in St. Louis

Posted on by Corianna Baier

Would you want to open a restaurant in a city that requires 35 steps, multiple licenses, and $3,750 in fees just to get started? That’s what researchers from the Institute for Justice found it takes to open a restaurant in St. Louis. Does that sound like an inviting business environment to you?

The Institute for Justice recently released a report that analyzes the barriers to business in cities across the country. The authors used model businesses to demonstrate how difficult it would be to open a restaurant, bookstore, food truck, barbershop, and home-based tutoring business in St. Louis and other cities. The report examines three aspects of the regulatory process to evaluate the cities: cost, delays, and complexity. Here’s how St. Louis fared for each:

Cost: St. Louis doesn’t do well here because of the city’s fee structure. The city uses a graduated fee system based on the number of employees, so fees can become extremely expensive as businesses grow.

Delays: This report found that a general lack of clarity (and especially a lack of information online) leads to many delays and makes the process more complicated than it seems.

Complexity: The process of starting a business in St. Louis can be very complex, sometimes requiring dozens of steps, numerous forms, and multiple business licenses.

Can we really say that St. Louis has an inviting business environment when the city fares so poorly in all three aspects? Lawmakers say they want more opportunities for entrepreneurs and options for consumers, but actions speak louder than words. St. Louis lawmakers should make the city more appealing for businesses by lowering fees and simplifying processes. Starting a business is expensive enough without the city requiring exorbitant fees. And the fact that there is very little access to information online seems like an outdated problem that unnecessarily complicates the process.

If we want more business in St. Louis, we need to have an environment in which businesses can thrive. If the barriers are too high from the beginning, we’re not going to see entrepreneurs and new businesses coming to our city.

Better Late than Never

Posted on by Susan Pendergrass

With just one day left in the session, the Missouri Legislature is on the verge of finally making it easier for Missouri families to choose charter schools and virtual education. By an overwhelming vote of 119 to 26, House Bill 1552 is now Truly Agreed (the House has approved Senate changes) and will be sent to the governor’s desk.

This bill will broaden choices for Missouri parents in two ways. First, it fixes the funding glitch for charter school students in Kansas City and elsewhere. Because more families in Kansas City have chosen charter schools than traditional public schools, Kansas City Public Schools (KCPS) doesn’t receive enough state funding to cover what’s owed to the charter schools. This bill fixes that by having the state make up the difference. It also ensures that charter school students have access to the same sources of local funding as students who choose their neighborhood school.

Secondly, this bill improves the way full-time virtual students in the Missouri Course Access Program (MOCAP) are treated. And it ensures that schools and districts stay out of the way of families that choose this option for their children. Full-time virtual providers will now be considered their own attendance centers and report student test scores instead of being part of a local district.

Tens of thousands of Missouri families are already choosing charter schools and MOCAP. These children shouldn’t be treated as second-class citizens just because their assigned public school doesn’t work for them. Fortunately, the Missouri Legislature has agreed.

Pittsburgh, Poster Child for Sloppy Housing Policy

Posted on by Patrick Ishmael

In the weeks and months ahead, researchers at the Show-Me Institute will be taking a closer look at housing policies in Missouri, with a particular emphasis on the low-income housing tax credit (LIHTC) program. Readers of this blog are familiar with common objections —LIHTC is expensive, doesn’t live up to its promises, and is mainly a sop to developers—but Institute researchers haven’t spent as much time on the broader subject the LIHTC program supposedly addresses, housing supply and affordability. The question of housing affordability is an enormously important one and deserves more attention, especially during a period of rampant inflation.

Some policymakers are starting to deal with the challenge of housing inflation thoughtfully. But some cities, like Pittsburgh, are adopting half-baked (but trendy) policies from elsewhere to solve a problem that, practically speaking, may not exist locally. As reported in the Wall Street Journal:

On Monday the mayor signed an ordinance . . . to expand the city’s inclusionary zoning requirements. Developers building 20 or more units in the gentrifying Bloomfield and Polish Hill neighborhoods will have to set aside at least 10% for affordable housing. Under the rules, a designated studio apartment could rent for no more than $742 a month, though the average rent for one is $1,300 in Pittsburgh, according to the housing search website Rent.com. . . .

[I]nclusionary zoning forces developers to set aside affordable housing whether or not they receive government incentives, so “the other 90% of the units have to subsidize that cost,” Mr. Eichenlaub says. “They are making the developer and the owners of those units, or renters, absorb those costs. Effectively, it’s a tax on housing.”

And when you tax something, you get less of it. Portland, Ore., introduced inclusionary zoning in 2017. Permits for residential buildings with 20 or more units plummeted 64% in 25 months as developers went smaller to get around the mandate. The nonprofit Up for Growth concluded that “rather than increasing the number of affordable units,” the zoning scheme “appears to be diminishing the supply of housing at nearly all income levels.” [Emphasis mine]

My colleague Elias Tsapelas has done, and continues to do, outstanding work digging into LIHTC. The Pittsburgh “inclusionary zoning” mandate is the same sort of government burden as the LIHTC, minus the incentives. As the Wall Street Journal editorial board astutely observes, Pittsburgh’s newly mandated costs are likely to metastasize not only into higher housing prices for other renters and owners, but also into overall housing supply degradations.

But Pittsburgh’s housing policy change is notable for another reason: by one prominent metric, the city is the only major metropolitan area in America that doesn’t appear to have an affordability problem. Wendell Cox is a prominent researcher on the issue of housing affordability, and he has published his “median multiple” index for many years now, ranking metropolitan areas worldwide based on how affordable their housing markets are. His 2022 edition of the index is illuminating, not only for the other findings (which I’ll get into in another blog post) but especially for Pittsburgh—which now ranks as the only purely “affordable” housing market in the United States. In other words, Pittsburgh is trying to fix a problem it doesn’t really have.

My colleagues and I will pull apart why housing costs can be artificially inflated by government interventions and why those interventions can nonetheless be politically popular, but Pittsburgh stands as a cautionary tale that Kansas City and St. Louis policymakers must be aware of and must refuse to emulate. There are numerous reasons that housing costs have risen nationally, and the solution to that challenge is neither simple nor monolithic. In its case, Pittsburgh should go back to the drawing board and ensure it isn’t about to create a problem that doesn’t meaningfully exist. Yet.

Inflation in America: The Role of the Fed and the Risk of Recession

Posted on by Aaron Hedlund

On May 10, 2022, Aaron Hedlund, chief economist at the Show-Me Institute, and Tyler Goodspeed, Kleinheinz Fellow at the Hoover Institution at Stanford University, discussed the impact of decades-high inflation on the economy, workers, and consumers, as well as the role of the Federal Reserve in solving the problem and the risk of the next recession.

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