Patrick Ishmael, Susan Pendergrass and Elias Tsapelas join Zach Lawhorn to discuss the Missouri budget, a massive tax incentive deal in KC, the possibility of the Chiefs moving to Kansas, and more.
In Another Grinding Legislative Session, Missourians’ Priorities Getting Ignored Again
After countless hours of debate and filibuster, the Missouri Senate finally passed a version of a redistricted Congressional map—a regular and expected exercise required of legislatures after each Census. That redistricting debate is still not over, but the slow and plodding pace on this relatively simple piece of legislation is indicative of both the House and Senate’s failure to get much done this year. Coming into 2022, a lot of leading Missouri politicians talked a good game about getting freedom-enhancing priorities passed for the public, but so far that talk has amounted to just spending billions of dollars of federal money. Not much extra freedom there.
What’s the cost of this legislative inaction been so far? From failing to establish a parents’ bill of rights to making no progress on reforming taxes, priorities of all sorts are increasingly in peril as the end of the session draws ever nearer with each passing fruitless legislative day.
Congressional maps are only part of the problem, of course. The main problem is that the Senate supermajority, bizarrely, cannot agree among themselves on what major legislative priorities to pass and when to test the commitment of the minority to a filibuster of the majority’s plans. Bills are filibustered. Resolutions are filibustered. The journal (!) is filibustered. And economic freedom and school choice and transparency and tax reform go by the wayside.
The result is that instead of fending off just one faction of filibusterers, the Senate now has two sizable filibustering factions: the liberal minority and, now, the conservative caucus.
It’s easy to dust off the old saw that this is just how the Missouri Legislature operates, but years of rewarding filibusters in the Senate has invited more of them and made filibusters the norm rather than the exception to managing legislative business. You’d be forgiven if you thought the legislative priorities of Missouri’s conservative supermajority were a bit unclear, especially in contrast to states like Arizona and Florida that committed to transparency in curricula and acted at the first opportunity. If not getting things done in 2022 is the intent of representatives and senators, well, mission accomplished. But I don’t think that was the deal taxpayers thought they were making with their elected officials when they put them in office.
Whatever the majority’s objectives might be for 2022, the clock is winding down on them. Missourians deserve far more than has been delivered by the legislature, and so far, the session has been a giant disappointment.
“Sunrise” Study Questions Legitimacy of Occupational Licenses
If occupational licenses are meant to protect consumers, should licenses be created at the behest of lobbyists instead of consumers? And should these licenses get created despite initial reviews that recommend against the creation of a new license?
A new study from the Institute for Justice finds that even though these things shouldn’t be the case, they are. Institute for Justice researchers studied 397 sunshine reviews (reports used by legislators that evaluate the need for new occupational regulations) from 15 states conducted from 1985 to 2017. They found that occupational licensing lobbies have driven the push for 84 percent of sunrise reviews and about 80 percent of these reviews declined to recommend licensing. What’s problematic is that legislators enacted licensing more often than recommended—twice as often as recommended in the reviews. These stats don’t instill confidence that occupational licenses were enacted to protect consumers, as is often claimed.
Missouri doesn’t require sunrise reviews and therefore wasn’t included in this study, but it does make one question whether Missouri’s occupational licenses were created under similar circumstances. Were Missouri’s various occupational licenses truly created to protect consumers? And are they still serving that purpose? We should have the answers to these questions.
A five-year sunset for all occupational licenses would give lawmakers new opportunities to assess the validity and necessity of occupational licenses. These licenses make it harder to get a job, which reduces supply and raises prices for consumers. Through a sunset process, unnecessary regulations (or even unnecessary licenses) that do not serve the purpose of protecting consumers can be identified and eliminated. A sunset provision would go a long way in supporting workers and consumers.
LISTEN: Are The Chiefs on the Move?
Patrick Ishmael joined The Heidi Glaus Show with Josh Gilbert on The BIG 550 KTRS to discuss the Kansas City Chiefs looking to perhaps move out of the state of Missouri and into Kansas, how would this affect the state of Missouri financially, and much more.
Hail to the Chiefs! And Pay for Your Own Stadium
If you thought Tyreek Hill getting traded to Miami was going to be the last surprise Chiefs fans got this offseason, you may need to sit down for this. Yesterday the Chiefs organization made news again when its president suggested that the team is considering moving from its current digs in Kansas City, Missouri, to a location in Kansas:
While the team appreciates its history with Arrowhead, Chiefs president Mark Donovan acknowledged on Tuesday that the franchise has considered other options for when their lease expires in 2031. Donovan said that the team has specifically considered options in Kansas, as it has been pitched stadium offers [by] developers in the state, via Kevin Clark of The Ringer.
Upon seeing what Donovan said, Kansas City mayor Quinton Lucas quickly issued a response via Twitter.
“Kansas City has proudly hosted the Chiefs since the early 1960s,” Lucas said. “We look forward to working with the Chiefs, our state of Missouri partners, and local officials to ensure the Chiefs remain home in Kansas City and Missouri for generations to come.”
As a Chiefs fan, the idea of the team leaving the place they’ve called home for 50 years is disappointing. While only Lambeau Field and Soldier Field are older, Arrowhead Stadium is nonetheless an updated and modern (publicly owned) facility that could easily serve fans and the region for many decades to come. But that may be my sentimentality speaking. I was also aghast when the New York Yankees tore down the House That Ruth Built in 2010 and replaced it with the new Yankee Stadium. Old habits die hard.
The good news for Chiefs fans is that the alternate site being discussed is also in the region, albeit across the state line in Kansas. And while public money and tax incentives didn’t come up in the original story, you can rest assured that if the Chiefs made such a move, the package from Kansas would be worth billions. Like I told Pete Mundo the other day, teams wouldn’t threaten to leave if threats didn’t get them more money from taxpayers. It’s certainly the Chiefs’ right to try to get as much money from the public as they can get.
But that doesn’t mean the Kansas City and Missouri governments need to acquiesce. Even if the Chiefs moved to Kansas, the team would continue to be a regional asset and, likely, would still be easily accessible by Interstate 70—in this case, 15 minutes west of downtown in Kansas rather than 15 minutes east of downtown in Missouri. Simultaneously, the Royals have also started talking about a stadium in downtown Kansas City—a good business idea and a bad tax incentive idea! If that’s coming and it gets taxpayer support, it’d put the city on the hook for potentially two new stadiums in the span of about a decade should it keep the Chiefs on Missouri soil, too.
If Kansas wants to spend money to help carry the cost of the region’s professional sports franchises, more power to them. It’s bad policy, of course, but my focus is on Missouri policy and decision making.
As far as Missouri policy is concerned, my perspective for the Chiefs is straightforward: if you want a new stadium in Missouri, build it yourself, as any other business would. I’ll be cheering the Chiefs on wherever they are in the region, and even for a traditionalist like me, I’ll admit that a new stadium may add some excitement to an already exciting team. But there’s no reason to force single moms paying the earnings tax, or frankly any city taxpayer paying any tax, to underwrite such an amenity.
Hail to the Chiefs . . . but with all due respect, pay for the stadium yourself.
Only Days Left to Replenish Unemployment Insurance Trust Fund
The April 1st deadline is fast approaching.
As a reminder, states have the option of using stimulus funds to replenish their Unemployment Insurance Trust Fund. However, if the funds are replenished after April 1st, 2022, states will be subject to a maintenance of effort requirement for unemployment benefits through 2024. On its face, such language could limit the ability of states to take any action to reduce weekly unemployment benefits or reduce the number of weeks of benefits available until after 2024.
This is quite the string to attach. Who knows what the next two years will hold and whether states will want to adjust their unemployment benefits? There’s still time for lawmakers to act and avoid having their hands tied by this rule.
Read more about this issue here.
Missouri Use Taxes Should Expand the Tax Base, Not the Size of Government
Use taxes in Missouri are simply sales taxes on goods delivered to your home from out-of-state sellers. Local governments have been authorized to collect use taxes for a long time—predating the internet, even—but they have not been widely adopted. Collecting sales taxes on Sears catalog purchases was a lot of work for little revenue. The internet has changed that. The recent Supreme Court decision in the “Wayfair” case, changes to state legislation, and, most obviously, the tremendous increase in e-commerce during the pandemic have all combined to greatly increase the need or desire for governments to tax online sales.
For purposes of comparison, e-commerce now makes up over 12% of total sales in the United States according to the U.S. Department of Commerce. For cities and counties in Missouri, 12% is a lot of sales not to tax. To address that, at least four counties and dozens of cities have placed use taxes on the April 5, 2022, ballot. Expanding the tax base with a use tax, if done in conjunction with a reduction of other, more harmful taxes, could be a beneficial change. But let’s be clear: if there is no corresponding reduction in other taxes, this is a tax increase on residents.
It is a central tenet of tax policy that a tax base should be as broad as possible. The more expansive the tax base, the lower the rate that must be imposed to fund the functions of government. Exact use tax revenue amounts are hard to predict, but the revenues for each city will not be insignificant. Local governments have received federal COVID-relief and stimulus funds, home values have risen substantially, and tax collections during the pandemic were not down as much as initially feared. As a result, many of these cities and counties do not need this new tax revenue to meet vital needs. The use tax could be approved by voters to responsibly expand the tax base and equalize the competition between online and physical stores, but it should not be approved simply to grow government revenues. Imposing a use tax in a revenue-neutral manner is not a new idea. It is exactly how the Missouri Legislature addressed this issue with the state’s new use tax law in 2021. St. Francois County officials have publicly stated they will lower their county property tax if the use tax is approved.
For cities and counties in Missouri proposing to impose their own use taxes, the simplest way for them to offset the revenue increases from the use tax would be to lower their property taxes in a revenue-neutral manner. Other options for various local governments if the use taxes are approved include eliminating more harmful taxes, such as the paradoxical local sales tax for economic development. Reducing the local utility tax rates would be another good exchange for cities that do not levy property taxes.
The imposition of a use tax for these Missouri cities and counties could be a positive policy change. It could also be an easy way for politicians to just raise taxes one more time. By having various city officials pledge to enact offsetting revenue reductions, local officials can amplify the public benefits while curtailing the tax impact on residents and businesses. That is a plan I think most taxpayers and voters could support. Without such a commitment, though, the use tax is just another tax increase.
Honey, I Shrunk the City
It’s not exactly news that the City of St. Louis and the region as a whole have been losing population for decades. But it’s still jarring to read paragraphs like these from a recent St. Louis Post-Dispatch story:
The number of people who live in the city of St. Louis fell below 300,000 in 2021 and the metropolitan area also saw a decline in population as the region for the first time recorded more deaths than births. That puts it among just a handful of large urban areas hit by outmigration and a negative birth rate. . . .
As of July 1, the Census Bureau estimated that just 293,310 people resided in the region’s core city of St. Louis, down from the 301,578 people counted in the 2020 census.
St. Louis City had a population of more than 850,000 in the 1950 census. That means today’s population is about a third of what it once was. Deaths outpacing births for the first time in recorded history does not seem like great news, either.
Not all of this is the fault of the city’s leadership. Structural factors are certainly at play here; there are many reasons St. Louis’s population has been in precipitous freefall for more than half a century. And COVID deaths across the country did depress population gains. But that does not mean decline is inevitable.
As noted in the Post-Dispatch article, several peer cities in the Midwest, including Kansas City, Indianapolis, and Cincinnati, experienced population increases over this period. Those cities have many similarities to St. Louis. And St. Louis retains many key advantages, including its central location as a transportation hub and a low cost of living. To quote the late Charles Krauthammer: Decline is a choice.
So what now? A few quotes from the Post-Dispatch article hint at one possible way forward:
The numbers drew another call from the St. Louis metro’s new business and civic booster group for regional unity and a redoubling of efforts by area leaders to draw residents and focus on “inclusive economic growth.” . . .
“At the start of last year, we established Greater St. Louis Inc. out of the core belief that growth must be a top civic priority for the St. Louis metro,” said Greater St. Louis Inc. CEO Jason Hall. “These numbers tell us what we expected and underscore the urgency of focusing this metro on growth and more opportunities for all. Stagnation is the existential threat to everything we love about the place we call home.”
I’m not exactly certain what “inclusive growth” means—I would think that a region that has been hemorrhaging population since the Eisenhower administration should just be focusing on any growth, absent qualifiers. I am not mentioning this phrase just to be snarky, but instead because it is indicative of how St. Louis leaders have approached this problem.
Greater St. Louis, to much fanfare, introduced a plan at the end of 2020 (revised and improved in early 2021, but without significant changes) that was intended to fix what ailed the St. Louis region. Show-Me Institute analysts pointed out the inadequacies of that plan at the time. One of the major problems with the report is that it’s long on buzzwords and jargon like “inclusive growth” and short on actual concrete policy prescriptions or solutions.
I don’t want to belabor the shortcomings of this one report from two years ago. But that report illustrates how many civic leaders in the St. Louis region think, and it represents a well-trod path: Use taxpayer dollars to bribe companies to move here, use even more taxpayer dollars to pay for splashy but economically dubious projects like aquariums or soccer stadiums or trolleys, and bend to the whims and demands of social justice activists when making key decisions.
It’s not that hard to think of a better way to try and make St. Louis a more attractive place to live and work. St. Louis City still has an economically destructive earnings tax. The city also has massive problems with crime. The city could also focus on reducing regulations to improve its ease-of-doing-business rankings. The region as a whole could stop giving away tax subsidies at every available opportunity and use some of that money to fund critical public services or cut taxes.
It would be easy to keep listing examples of what the St. Louis region could or should be doing. But maybe the best argument for trying something else is a simple one: The old approach is what got St. Louis into its current atrophied state. If we keep trying the same things, why would anyone expect things to change?
So Meta: New KC Data Center Heavy on Tax Incentives, Light on Jobs
Three years ago, I wrote in The Federalist about Amazon’s decision not to establish a New York City headquarters in the face of strong opposition from Alexandria Ocasio-Cortez and many liberal groups. Opposition mainly stemmed from the $3 billion tax incentive package that was prepared for the company.
My conclusion was simple: AOC was right to oppose the tax giveaway.
The question of whether, or to what extent, incentives are necessary isn’t just an issue in the case of Amazon, either, and research into the incentives that include or imply “but for” language—“but for the incentive, the project won’t happen”—[is] helpful here. For example, a study by the W.E. Upjohn Institute published last year reveals that the vast majority of businesses that receive tax incentives under a “but-for” rubric likely would have pursued their projects even without the incentive. . . .
This failure of stewardship from governments across the country costs state and local taxpayers billions of dollars annually. That affects not only government services, including roads and education, but also a government’s ability to reduce taxes for everyone, if it so desired. The city of Kansas City, Missouri, where I’m from, redirects $90 million annually from its budget through tax incentives, but that doesn’t include the additional $42.5 million those decisions redirect from the city’s public schools and other taxing districts, who rely on these tax streams but have relatively little say in their diversions.
When a government incentive package is worth billions of dollars, it has truly reached the outer frontier of questionable economic interventions. At $3 billion, New York’s Amazon package was prodigious, but what if I told you last year Kansas City put together an incentive package worth up to $8.2 billion for a nondescript data center development? What if I told you the state of Missouri was also kicking in potentially millions of dollars?
And what if I told you that last week, Facebook—I mean, “Meta”—accepted their offers?
The data center, set to open in 2024, will support up to 100 permanent jobs and is the first of its kind in Missouri. During construction, the job will bring in an additional 1,300 jobs. . . .
The $800 [million] facility will come to Golden Plains Technology Park, a 5.5-million-square-foot land development in Kansas City’s Northland.
Tax incentives are always a dicey proposition because they substitute government decision making for the market. But tax incentives for data centers are especially dicey because the number of permanent jobs they generate is almost always paltry, with the “cost per job” of these packages often landing over $1 million. Although the final accepted package remains to be published, the KC Meta data center project seems likely to far exceed that already absurd baseline of cost per job.
Economic development policy that is determined by the number of ribbons that get to be cut and hard hats that get to be donned by politicians is inherently fraught with perverse incentives that force every other taxpayer to carry the weight of government on behalf of an increasingly select group of developers and corporations. Local government should be reducing taxes on everyone rather than just for some of the wealthiest companies in the world, especially in an era of historic inflation.
That Facebook gets priority over every other individual and company in Missouri is infuriating—but unfortunately, it is not surprising.
