On Monday, November 20, Show-Me Opportunity’s Mike Ferguson appeared on ABC St. Louis KDNL’s The Allman Report to discuss the cuts to Missouri’s low-income housing tax credit program.
With MoDOT’s Tank Nearly Empty, a Fuel-Tax Increase Might Be the Answer
If you are younger than 36 years old, then Missouri hasn’t raised its gas tax since you started driving. But that might need to change. The Missouri Department of Transportation (MODOT) is arguably underfunded for the job it is being asked to perform. Enter the legislature, where gas tax increases may be gaining momentum as a solution to this problem.
Missouri State Representative Greg Razer, speaking about raising the gas tax, said last week, “That is absolutely, in my view, the way we have to go in the short term. . . . We have to take care of it (transportation). We have lots of state assets that we have neglected over the last 15–20 years, and it’s time that we as a state start living up to our responsibility.”
The state does have some wiggle room to keep gas taxes low even after an increase. Missouri’s fuel taxes—currently 17 cents per gallon for both regular and diesel—are the 4th and 5th lowest of all 50 states, respectively.
A policy study conducted by the Show-Me Institute’s Joe Miller in 2016 listed the following advantages to raising the gas tax:
- It would raise revenue that is constitutionally appropriated towards roads.
- It would have a low implementation cost.
- The money raised would benefit the entire state highway system, along with local road and bridge projects.
- It could be enacted without amendments to Missouri’s constitution.
But this is not a perfect solution, as the same policy study found the following disadvantages to a gas tax hike:
- The revenue base would decline over the long term as cars become more fuel efficient and/or battery powered.
- Fuel taxes are regressive.
- The tax an individual pays is proportional to the amount of gasoline that they purchase, not to the number of miles driven on the state highway system.
Ideally, I would like any gas tax increase to be revenue-neutral. While our transportation system may need more money, that doesn’t necessarily mean that more money overall should go to government.
Regardless, the sooner we decide how to fund our infrastructure for the next century, the better. In addition to other measures such as toll roads, a gas tax may be an appropriate way to keep Missouri moving.
Political Courage: LIHTC Program Cut to Zero by MHDC
The details are still trickling out, but news is now breaking that the Missouri Housing Development Commission (MHDC) voted 6-2 today to reduce state tax credit spending on the Low Income Housing Tax Credit (LIHTC) to $0 for the coming year. The MHDC is made up of a variety of elected officials and appointees, among them the governor, but to my understanding, Missouri governors have not typically participated in MHDC deliberations. Today, however, Governor Eric Greitens called into the meeting and cast what turned out to be the deciding 6th vote—curbing a tax credit program that regularly costs the state about $150 million annually. Another vote will take place in about a month to reaffirm this decision, but the result is expected to be the same.
It is difficult to describe how important, and courageous, the MHDC’s decision is. Those who profit from tax credits make up a powerful and well-organized lobby that has been successful in protecting its interests in the past, even when the evidence against a given corporate handout is overwhelming. That most members of the MHDC stood firm in protecting the interests of taxpayers is a leap forward for the tax credit reform movement—and a credit to those who took a hard vote on behalf of the public interest. Tax money saved from a program like the LIHTC can be used to better fund existing state services and to cut taxes more generally, but so long as a program like the LIHTC was taking tax dollars and depositing them back with special interests, advancement on those two fronts was always going to be more difficult. Instead, the MHDC’s decision primes the pump for wider and substantive tax reforms in 2018, should the Legislature choose to capitalize on the opportunity.
We’ll talk more about this, and at greater depth, later. In the meantime, congratulations to the committee members, and congratulations to taxpayers. Today is a very good day for policy reform.
Show-Me Now! Justice and the Future: Is It Time to Raise the Age?
Did you know Missouri is one of only five states where 17-year-olds are still automatically prosecuted as adults? As Missouri looks at ways to improve and reform the criminal justice system, should the state consider raising the age?
Learn more About Raising The Age:
Fixing a Blight on Missouri Statutes
We’ve written for years about the failure of Missouri municipalities to focus their development efforts on reviving the moribund parts of their inner cities. Across the state, it seems, leaders in Kansas City and Saint Louis are eager to throw taxpayer cash at developers only to have them build in already-viable neighborhoods. What’s more, studies in Missouri and across the country have noted that these programs do not help create jobs or spur neighborhood investment in the aggregate. Often they simply enrich political cronies. It is time for that to change.
One reform that might make a great deal of difference is in the state’s legislative definition of blight. For the purposes of tax-increment financing, the blight definition is so broad as to be meaningless. One library executive said that under the existing definition, the governor’s mansion could be blighted. There are opportunities for improvement, and we need not look far.
The easiest option is to look at previously considered reforms. In 2002, Missouri Senator Wayne Goode introduced a bill that would have gone a long way in curbing abuses in blight findings. Specifically, Goode’s bill would require that any area subject to a redevelopment plan could only qualify if:
- The host municipality—or, for unincorporated areas, the host school district—has low fiscal capacity; or
- The census block group or groups (as defined in the most recent decennial census) containing the proposed redevelopment area had high unemployment; or
- The municipality, census block group or groups, as defined in the most recent decennial census, containing the proposed redevelopment area was characterized by moderate income.
Goode’s bill defined such terms as “low fiscal capacity,” “high unemployment,” and “moderate income” in ways that were aimed at making sure that development projects only took place in the communities requiring taxpayer assistance and that effectively placed limits on crony capitalism.
Earlier, in January 1999, the Washington University Law Review published a piece by Julie A. Goshorn titled “In a TIF: Why Missouri Needs Tax Increment Financing Reform.” At the end Goshorn advocated for a new definition of blight that, like Goode’s, incorporated requirements for unemployment and poverty. While Goshorn’s reform dealt specifically with the definition of blight—a move favored by this author—she allowed wiggle room by permitting a blight finding if a building in the area was merely unsanitary. Given the lengths that developers, economic development staffers, TIF commissions, and city leaders have gone to broaden the standards of blight, it is likely that they will continue doing so in the future. Based on Goshorn’s original suggestion, the following terms and definitions might be considered for use in statutes and regulations:
(1) “Blighted area,” is an area that satisfies both (a) and (b) below:
(a) Buildings in the area are:
1. Unsanitary, unsafe for living or working;
2. Substantially vacant; or
3. Subject to a crime rate significantly higher than that in other surrounding areas; and
(b) The area in general is characterized by:
1. Pervasive poverty, unemployment, and general distress, as evidenced by
a. At least seventy-five percent of the residents living in the area have incomes below eighty percent of the median income of all residents within the state of Missouri; and,
b. The level of unemployment of persons within the area exceeds one and one-half times the average rate of unemployment for the state of Missouri over the previous twelve months.
Legislators will undoubtedly wrangle over definitions and thresholds for income and unemployment. That debate is welcome. But legislators, whether conservative or liberal, urban or out-state, should recognize by now that the lax language in Missouri statutes regarding blight is draining municipalities of much-needed resources and providing little if any economic benefit.
Restoring Trust through Transparency
On Tuesday, the voters in Boone County, Columbia, Ashland, and Harrisburg went to the polls to decide whether or not to impose new use taxes to fund more government services. As you can see here, voters rejected each proposed tax.
Those decisions are newsworthy on their own, but there was an interesting quote from a Columbia council member regarding the failed proposals. Councilman Matt Pitzer said voters have a natural tendency to reject use-tax measures because voters don’t trust government to spend their tax dollars responsibly. How might trust be restored? According to Pitzer,
We do that by making smart financial and fiscal decisions . . . and being open and transparent in our spending and where the citizens’ tax dollars are going.
I could not agree more, which is why we started the Checkbook Project, which is intended to track the expenditures of each Missouri municipality over the past five years. Notably, when we requested data for the project from Columbia, the city was more than accommodating in providing the data we requested. At no cost to us, we got the information in an easily searchable Excel file. Also notable is that when we made the request of Ashland, the city was going to charge $20.00 for their records—still a pretty reasonable figure, in stark contrast to some of the responses from other municipalities we’ve received to date. (More on those interactions in a later blog post.)
When government asks for more money out of our pockets, we have every right to know what that money will be spent on. Even when policymakers are conscientious in their management of tax dollars, we should remember (per H.L. Mencken) that conscience is merely “the inner voice that warns us that someone might be looking.” When municipalities commit to transparency, they introduce that very possibility, and the expectation of public scrutiny should result in better policy.
Patrick Tuohey Discusses KCI Airport Vote on Ruckus
On Thursday, November 9, the Show-Me Institute’s Patrick Tuohey appeared on KCPT’s Ruckus to discuss Kansas City voters’ approval of a new single terminal for KCI and other events from the past week.
Think Parents Won’t Get the Information They Need To Choose Between Schools? Think Again.
A common concern about school choice is that parents, especially low-income parents, will not have enough information to pick the school that is the best fit for their child. Perhaps this is true in the absence of school choice programs—after all, what’s the point in seeking out information when your only option is the neighborhood school?
New research confirms, however, that school choice gives parents an incentive to become more knowledgeable about different schooling options. A study by Michael F. Lovenheim and Patrick Walsh found “clear evidence that the availability of public school-choice options under NCLB [No Child Left Behind] increased demand for information on school quality.” When parents had the option to transfer their child to another school, internet searches about the schools in their area increased; conversely, when there was no longer a transfer option, searches dropped.
When people say that parents are not informed enough decide among school options, they fail to recognize that school choice can actually encourage parents to gather information and shop around for the best school.
Moreover, state agencies and third-party organizations can help make information on school quality more accessible. Louisiana’s Department of Education launched a website that allows families to compare schools and child care centers via customizable searches.
Show Me KC Schools is a nonprofit organization that helps parents navigate all of their options—public, charter, and private schools—in Kansas City and provides them with the information they need. In an article for US News & World Report last month, Mike McShane described what the organization does to assist parents:
They have an online school finder that allows users to compare and contrast the offerings and performance of different schools. They host a school fair that had over 700 attendees last year. They offer guided school tours that begin with a discussion of what parents are looking for and end with a debrief and conversation with other parents whose children attend the various schools they have visited.
Sure, there will be a learning curve if new school choice programs are introduced, but organizations like Show Me KC Schools can help with the transition.
The bottom line is that school choice empowers parents—it creates an incentive to find out which school will meet their child’s needs and it provides parents with an opportunity to send their child to that school. We should not underestimate parents’ desire to give their kids a better education or the time they are willing to devote to that effort if given the opportunity.
“Lucky Lindy” vs. Jeff Bezos: Who Is the Better Bet for Missouri?
It may be the biggest and most closely watched competition since Charles Lindbergh – backed by a group of Saint Louis businessmen – won the $25,000 Orteig Prize as the first pilot to cross the Atlantic Ocean. That was 90 years ago, in 1927.
Will Saint Louis (or Kansas City) surprise the business world in winning the Amazon Prize? I speak, of course, of the bidding war to decide what city, suburb, or close-in town – out of 238 contestants – will be selected as the site of Amazon’s second headquarters. In every important way, “HQ2” is supposed to equal its existing headquarters in Seattle. Amazon will announce its choice in the spring of next year. Both of our two biggest metro areas are in the bidding – with enthusiastic support from Gov. Eric Greitens and his team.
The potential payout dwarfs the Orteig prize, but so too do the costs to the cities and states doing the bidding. Amazon says it is prepared to invest about $5 billion of its own money at its new site and create up 50,000 jobs with an average annual compensation of more than $100,000 per job.
In Lindbergh’s case, Saint Louis businessmen put up $15,000 (to his $2,000) to underwrite the cost of building his airplane. As for HQ2, it seems clear that the costs to local and state taxpayers over a period of 15 to 20 years will run into the billions of dollars.
It’s a big and potentially wildly uneven trade-off, beginning with the fact that Amazon cannot guarantee 50,000 sustainable jobs – or even 5,000 jobs or 1,000 jobs. Who is to say Amazon will continue to grow at the same phenomenal pace that it has maintained over the past two decades? In the tech world, many once-hot companies have either fallen into bankruptcy (think Wang Laboratories and Digital Equipment Corporation) or stopped growing and faded into insignificance (think AOL and Yahoo).
Remember that the initial build-out of HQ2 is supposed to take 15 years. That is a long time, and it makes this competition a very different proposition than the Lindbergh flight. Less than three months after getting his final go-ahead from Major Albert B. Lambert (after whom Saint Louis’s airport is named) and other backers, Lindbergh had designed and built his Spirit of St. Louis monoplane and completed his historic flight from New York to Paris.
It is disturbing that city and state officials in Missouri have responded with such rapturous glee to the Amazon bidding – while maintaining that they must, in deference to Amazon’s wishes, remain mum about what they have offered in the way of tax breaks and other subsidies.
Nobody knows what Amazon will look like in 15 or 20 years. In that sense, HQ2 is a multi-billion-dollar pig in a poke. Whatever city wins the Amazon Prize, you may be sure that local and state taxpayers will, for a long time, be deeply in hock to trying to make a go of it.
