Restarting Missouri’s Low-Income Housing Tax Credit Program Is Still a Bad Idea

Posted on by Elias Tsapelas

Ever hear the phrase “throwing good money after bad?” That’s what Missouri lawmakers are considering doing with the proposal to revive the state’s low-income housing tax credit (LIHTC) program. With little more than a week remaining in this year’s legislative session, and with so many policy priorities outstanding, it’s easy to wonder why time is being devoted to a program that has been shown to be a bad investment for Missouri taxpayers. Are lawmakers really trying to help low-income Missourians find affordable housing, or are they simply underwriting the interests of the state’s well-connected real estate developers?

Proponents of Missouri’s LIHTC program often cite the claim that there are an estimated 100,000 people on waiting lists for low-income housing as a rationale for reviving the program that was halted in 2017. I agree that affordable housing for low-income Missourians is important, but I disagree that the LIHTC is an effective way to address the problem. Missouri already receives over $160 million per year from the federal government for the same low-income housing projects.

The bottom line is that the program doesn’t work, and policymakers know it. Just last week, Missouri’s own state treasurer, who sits on the board responsible for issuing the low-income housing tax credits, criticized the program for being wasteful and inefficient. Missouri’s three previous state auditors have concluded that for each dollar of tax credit awarded, only a little more than $0.40 is spent on building affordable housing. The remainder goes to developers, investors, and government. It should go without saying that Missourians deserve a better investment of their tax dollars.

With so little of each state dollar going toward building more housing, it shouldn’t be surprising that the program doesn’t result in a significant increase in the amount of available affordable housing across the state. This result aligns with academic research on the federal program, which has illustrated why the structure of the LIHTC and surrounding regulations inflates building costs and results in poor returns on investment.

It is important to reiterate that the discussion in Jefferson City is only regarding whether Missouri should resume devoting funds on top of what the federal government already provides. Even without any new credits being authorized since 2017, as of last report, the state is potentially on the hook for around $1 billion in state low-income housing tax credits As lawmakers continue to struggle to balance the state’s budget each year as a result of the increasing cost of other spending priorities’ (education, Medicaid, public safety, etc.), shouldn’t all tax dollars go toward programs where they can be expected to stretch a little further?

Supporters offer a false choice when arguing that reauthorizing Missouri’s LIHTC program is the only way to address the state’s affordable housing needs. How could this be true when Missouri is one of only 15 states that even have programs matching the federal government’s LIHTC funds each year? Why don’t lawmakers look to the other 35 states to see how they address this issue?

The cost of restoring Missouri’s LIHTC program would be equivalent to $105 per month for each low-income individual currently on the waiting list. The value received by those individuals would be the equivalent to $44 per month. Deciding where to use taxpayer dollars is all about priorities; the question is whose priorities are more important: low-income Missourians in need of affordable housing or the developers who profit from that spending?

Are Mileage-Based User Fees Good For Missourians?

Posted on by Patrick Tuohey

The Information Technology and Innovation Foundation (ITIF) just released a paper about “road user charges,” which would change the way governments fund roads. Instead of per-gallon fuel taxes, drivers would pay mileage-based user fees (MBUF). As Missouri policymakers wrestle with how to fund infrastructure, this report is a welcome read.

Bob Poole of the Reason Foundation, a libertarian free-market organization, wrote of the study in a recent newsletter and addressed two concerns likely to be raised in Missouri:

One of the most important is the idea that a system using GPS would “track” everywhere the vehicle goes. He [the author of the study] points out, correctly, that GPS is a one-way system: it enables the car to know where it is at all times, but the GPS satellite and its operators do not know. The basic concept is that an on-board unit on the vehicle would total up the miles driven (and which states those miles occurred in) and transmit the totals to the relevant jurisdictions (e.g., New York and New Jersey) so each can levy per-mile charges.

Another oft-heard concern is that because rural residents drive longer distances, they would be made worse off by a miles-charged system. Drawing on research from Rand Corporation and others, Rob’s report explains that rural residents tend to own older, gas-guzzling vehicles compared with urban residents, so most of them would be better off paying by the mile rather than by the gallon. Detailed TRB research papers bear this out. Similar data call into question the equity argument; Rob reminds us that lower-income households tend to drive older, less fuel-efficient vehicles compared with wealthier people. Like rural residents, most low-income urban-area residents would be better off paying by miles driven than by gallons used.

Former Show-Me Institute analyst Joe Miller addressed the issues facing the Missouri Department of Transportation in a 2016 paper, which included consideration of user fees such as mileage-based fees. As Poole points out, the ITIF policy paper is too heavy on top-down federal and state mandates. Instead, he urges states to experiment with ways for drivers to track their mileage and report it to private-sector service providers rather than state or federal agencies—as drivers will likely view it a violation of privacy.

Advances in technology such as more fuel-efficient cars pose a challenge to the old ways of raising infrastructure funds. Technology also permits us many more ways of addressing policy needs. It should be no surprise that there are likely more efficient ways for governments to collect the revenue necessary to provide for basic services. Policymakers should be open to considering those opportunities.

 

Is General Motors Going to Get a Tax Cut Instead of Missouri Taxpayers?

Posted on by Patrick Ishmael

We’re in the twilight of the legislative session here in Missouri, and as tends to happen, it looks like there’s going to be a legislative twist at the end. General Motors, the American car conglomerate, is reportedly considering a $1 billion expansion at its Wentzville auto production facility in the suburbs of St. Louis. The first the public heard about the proposal was on May 1, meaning that if the legislature passes a tax incentive plan of any kind for the company, General Motors will have gone from nothing to likely millions of dollars in hand in the course of only about 18 days.

That’s absurd.

To be clear: the Missouri Senate has put the brakes on all manner of tax relief for Missouri taxpayers—while pulling out all the stops for corporate welfare like the Low-Income Housing Tax Credit—for the last five months. Now that another corporate crony has come with arms outstretched and “jobs” on its lips, the folks in Jefferson City have snapped back to life and are ready to let the money pour from public coffers like they just backed over a fire hydrant with a truck.

Here’s a proposal: Permanently end the Low-Income Housing Tax Credit and save $180 million per year. Dramatically reduce and reform the historic preservation tax credit and save tens of millions of dollars per year. Drastically reduce and eventually end the corporate income tax.

Stop being such an easy mark. Stop just giving away other peoples’ money. And if General Motors needs a tax break, perhaps the people who would be forced to subsidize the company need one too.

 

Good News-Criminal Justice Reform Headed in the Right Direction in Missouri

Posted on by Emily Stahly

A few years ago, Missouri was on track to need two new prisons, potentially costing the state hundreds of millions in tax dollars. But not any longer. From 2017 to 2018, Missouri’s incarceration rate decreased by 7.1 percent, the largest drop in the country according to the Vera Institute for Justice.

This decrease follows some recent reforms, including improving parole and probation practices, expanding community-based treatment for mental health and substance abuse, and raising the age of criminal responsibility from 17 to 18 years. Now, the legislature is considering other reforms. One would amend sentencing guidelines to allow judges the discretion to give an alternative sentence to imprisonment for certain non-violent crimes when appropriate. Additionally, lawmakers are examining regulations regarding occupational licenses for ex-offenders that can shut them out of jobs and increase the likelihood they return to prison. Reforms like these can provide taxpayers with the best public safety return on their investment make a lot of sense.

 

It’s a Head-Scratcher

Posted on by Susan Pendergrass

I just don’t get it. A recent article in The 74 describes how the vibrant charter school sector and strong authorizers have led to a rising tide for both charter public school students and traditional public school students in Washington, D.C. It makes me scratch my head. Why don’t we want that in Missouri?

The article, which cites the dramatic rise in scores on the National Assessment of Educational Progress (NAEP) for both groups of students, concludes with three takeaways that other cities can learn from DC:

  • Cities should embrace charter schools while limiting authorizers to one or two “strong” ones.
  • Cities should welcome the potential positive effects of competition. It’s been a force for positive change across the country.
  • If cities allow that to happen, middle-class families will stay.

This dynamic of charters having a broad, positive impact for everyone is playing out in big cities—Chicago, Indianapolis, Denver, Nashville, Boston—and in small cities.  While we haven’t seen dramatic results in St. Louis or Kansas City, we also haven’t embraced charter schools. There continues to be this odd notion in Missouri that charter schools are an intervention for low performance. Everywhere else they’re an option—often sponsored by local school boards—that parents across all types of communities and backgrounds are choosing.

Here’s the more important point—Missouri has a lot of other cities that would benefit from school choice. The school districts in Springfield, Joplin, Jefferson City, and Cape Girardeau are not exactly thriving. And yet, school boards and state legislators in these cities continue to fear public school choice. This year, the Missouri Senate filibustered a bill that would have made it much easier for charter schools to open in these cities. The Senate floor was held hostage for hours to ensure that the traditional public school monopoly wasn’t threatened by parents who want something else.

How long will Missouri continue to cross its arms and staunchly defend the status quo of thirty years ago? How long will the positive stories about what’s working when it comes to improving public education only be about other states?

 

Missouri’s Municipal Failure

Posted on by Patrick Tuohey

According to the Brookings Institution Metro Monitor 2019, per data from 2016–2017, Kansas City ranked 78th in economic growth out of the 100 largest metro areas in the United States. St. Louis fared a little better at 69th. Kansas City ranked 84th in prosperity (measured by productivity, standard of living, and wage growth); St. Louis ranked 52nd. Missouri’s cities are underperforming.

The Kansas City metro area, despite all the talk about innovation and tech jobs, scored 81st in percentage change in jobs at young firms—one of the worst performances in the United States.

Missouri’s top cities spend hundreds of millions of dollars on incentives and subsidies each year in an effort to improve the economy. Exactly what have we gotten in return for all this spending?

Report after report details exactly how St. Louis and Kansas City have given away such a huge amount in incentives. We’ve rebuilt downtown Kansas City, yet haven’t grown or created jobs in any meaningful way. In fact, it appears we’ve actually overbuilt Kansas City. The population of St. Louis is actually shrinking despite all the investment.

Any reasonable person would look at this and conclude that while these incentives and subsidies may make wealthy developers wealthier, they aren’t actually creating very many jobs or doing much to increase investment. That is certainly what the research says.

So why are we still doing it?

 

 

Charter Schools Can Exist in Rural Areas, Too

Posted on by Abigail Burrola

There are 1,300 charter schools in rural and township areas nationwide. Exactly zero of them are in Missouri, and that’s a problem. There are plenty of examples of charter schools serving rural areas very effectively. A recent article from the 74 Million highlights the story of a charter school serving rural, low-income students in Gaston, North Carolina.

KIPP Gaston College Prep opened in 2005. Six years after graduation, 61 percent of graduates from the 2009 class had earned college degrees. The degree-earning rate after six years was 48 percent for the class of 2010, and 62 percent for the class of 2011. The graduating class sizes are small, with 48 graduates in 2009 and 568 alumni so far, but the early returns are very encouraging. These rates are impressive considering only 11 percent of children raised in the lowest-income quartile (annual family income of $37,564 or less) earn bachelor’s degrees within six years. Gaston KIPP families mostly fall toward the bottom end of that lowest quartile.

In the 2016–17 school year, the National Center for Education Statistics reported that over 225,600 Missouri students that attended a public school in a rural or township area qualified for free and reduced-price lunch (representative of a low family income but not necessarily the lowest income quartile)—roughly a quarter of all Missouri public school students. As the achievement gap between high- and low-income students persists, successful efforts to support rural, low-income students should be encouraged.

KIPP Gaston College Prep is just one example of how educational choice can benefit students beyond urban areas. Isn’t it time Missouri expands charter schools to better serve its low-income, rural students?

 

Film Tax Credits Still a Bad Idea

Posted on by Patrick Tuohey

It is appropriate that in the St. Louis Post-Dispatch story on an effort to reinstate film tax credits, the newspaper chose a scene from the movie “Three Billboards Outside Ebbing, Missouri.” The town of Ebbing does not exist; neither do the benefits of film tax credits.

Back in 2010, Missouri’s own Tax Credit Review Commission wrote in their report that the film tax credit should be cut because it “serves too narrow of an industry and fails to provide a positive return on investment to the state.” As my colleagues wrote in 2015, “according to data gathered by the Bureau of Labor Statistics, jobs related to film production decreased during the time the film tax credit program was in place.” What has changed since then that justifies a change in policy? No one is saying.

Instead, the sponsor of the effort to offer yet another state tax credit sings paeans about the work ethic of Missourians, telling the Post-Dispatch:

If given the opportunity for a production company to select anywhere they would choose without having the tax credits being part of the equation, they would certainly choose Missouri more often than other states that don’t have the work ethic and the pride that we have as Missourians.

The characters portrayed in “Three Billboards” and the Netflix show “Ozark” aren’t the examples of work ethic for which any state would want to be known. Furthermore, wasting money on investments that fail to provide a positive return isn’t a good work ethic; it’s careless.

What’s worse, governments don’t even do a good job of picking films anyone will see. A study from the Beacon Center of Tennessee found that “using available box office data, over 40 percent of films that receive grants made less at the box office than they received in incentives.” If we want to promote a good work ethic, let’s stick with rewarding filmmakers who apply their craft well, rather than filmmakers who merely apply for handouts.

It would be laudable if supporters of this proposal argued that Missouri’s taxes are too high, and that there would be more private investment if we lowered them. Instead, they are effectively saying “taxes are too high, and we’d like to lower them for one particular industry that we favor.” That is wrong; government should not be picking winners and losers. It’s just bad policy.

 

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