Yesterday the Missouri House of Representatives passed SB 182, the Senate version of project labor agreement (PLA) reform. PLA reform was a top issue this year for the Show-Me Institute that we featured in our Blueprint and testified on earlier this year. We have written about the issue on the blog, and spoken about it on the airwaves and elsewhere, so I won’t rehash the importance of PLA reform. Suffice to say, I am happy to see progress on this labor legislation and hope that it will be just one of many market-oriented successes we’ll see this year.
Show-Me Now! TDDs: Public Money, Private Gain
The truth is out: special taxing districts have been receiving billions of public dollars under the taxpayers’ radar for decades. A new report by Missouri’s State Auditor sheds much-needed light on the abuse of transportation development districts (TDDs) and offers some ideas for protecting taxpayers. Click above to watch.
WRONG WAY: Anti-Tolling Group Gets It Wrong
Some of Missouri’s roadways are in critical condition. Interstate 70 is half a century old in many places and needs to be rebuilt from the ground up. Other roadways aren’t far behind. But even with an improving economy, the Missouri Department of Transportation (MoDOT) doesn’t have the funding to take on the multi-billion-dollar task of reconstructing I-70.
Show-Me Institute researchers have analyzed numerous roadway funding policies, ranging from general revenue diversions to fuel taxes to tolls. We’ve concluded that the best policies are those that let the free market work and impose the costs of roadways on those who use them. That means tolling and fuel taxes should be the way forward for funding Missouri’s road system.
Not everyone agrees. An anti-tolling group is calling for a constitutional ban on tolling in Missouri, claiming that tolls are unfair and economically pernicious. The group claims to be committed to “solving Missouri’s transportation crisis,” but I can find nothing on their website about how the rebuilding of Missouri’s interstates should be funded. The group offers an abundance of negatives about tolling, but many of their claims are incorrect or misguided. Let’s break some of them down here and set the record straight.
- Tolling is double taxation. We already pay for roads with fuel taxes, so we shouldn’t have to pay tolls, too.
MoDOT cannot cut its way to a new I-70. Over the past six years, it has reduced costs by $605 million, but that’s not money for new projects—that’s money to keep shop open. So, for I-70 to get the attention it needs, new revenues will need to be generated. Whether those revenues come from tolls, fuel taxes, general taxes, or some other source, they will be new; they will be on top of existing taxes. One might worry that tolls constitute double taxation, but do tolls differ that much from a higher fuel tax or higher (or diverted) sales taxes? Is paying two taxes, $1 and $1 each, really any different or worse than paying a single $2 tax?
Important to note too is that discussions about tolling I-70 have mostly focused on tolling only new, additional lanes, not the existing lanes. That means only the drivers who use the new lanes would be tolled, so if you didn’t want to pay a toll, you wouldn’t have to.
- Tolling will hurt businesses near tollbooths and hamper the freight industry’s growth.
This argument is another way of complaining that businesses near interstates will not be subsidized. When driving is made artificially cheap through general taxation (e.g., through sales taxes as opposed to fuel taxes or tolls), land near interstates becomes more valuable because of the higher consumer traffic. On the other hand, if drivers must pay to use the roads, the consumer traffic on interstates could be lower, reducing the value of nearby land. In short, a toll-free road means all Missourians are paying to create demand for a select few businesses along the interstate.
Some worry that tolling, which would show drivers the true cost of driving, would deter consumers from businesses along the interstate. While it’s true that tolling may hurt some businesses near interstates, it does so only by unburdening taxpayers in general. If roads are paid for with tolls, that means other taxes previously dedicated to roads can either stay in taxpayers’ pockets or be spent on other public services.
And just as taxpayers shouldn’t have to subsidize businesses near interstates, they shouldn’t have to subsidize trucking companies (many of which do not employ Missourians). Heavy trucks do well over 90% of the damage to our roads, so why shouldn’t they should pay for rebuilding them (via tolls)?
- Toll roads are poor investments, and when they fail, taxpayers are on the hook.
Some proposals to toll I-70 call for private firms to invest in the roadway in exchange for tolling concessions. Such an arrangement would let firms try to make a profit from tolls, but only by assuming the risk of major capital investment. Like other enterprises, toll roads run the risk of going under. But contrary to what anti-toll crusaders claim, taxpayers do not bear the risk of toll roads. Firms are required to invest in the roadway before collecting tolls, so the public gets a new road regardless of whether the company makes a profit. If a firm goes under, its assets are repossessed, but that just means a different firm owns the road—the new road the public gets to enjoy.
Tolling is by no means the only way forward, but it is a way forward. Dozens of states across the country have successful toll roads and bridges, and Missouri can, too. Banning toll roads won’t solve Missouri’s transportation woes; in fact, given policymakers’ reluctance to increase fuel taxes, it would cut off yet another free-market policy solution.
Penny Wise and Pound Foolish?
The Missouri House voted earlier this month to reject, by an overwhelming majority (51-103), the latest proposal to raise the state’s gas tax. The plan, which originated in the Senate last year, would have sought voter approval for about a six-cent increase to the current tax (which is about 17 cents per gallon—one of the lowest gas taxes in the nation). This decision is fiscal responsibility at its worst.
Why the defeat? As stated in the Post-Dispatch, “opponents to the bill said it was up to the state to better manage the money in its coffers and not expect Missourians to cough up more out of their paychecks.”
Just how much would the average Missourian have coughed up if the tax actually passed? Using national figures, a rough estimate is that the average family—two adults and two driving children—put about 45,000 miles a year on their automobile(s). With a reasonable assumption that the cars used would get 25 miles per gallon, the average family uses about 1,800 gallons of gas a year. The six-cent, one-time increase would increase the family’s annual cost of driving by a paltry $2 a week. So the House’s vote protected the public from a decision about whether to increase our tax burden by less than the cost of a cheap coffee a week.
The case for increasing the fuel tax has been made many times before by Show-me Institute writers. Such a tax increase is a sound method for funding the repair and upkeep of Missouri’s deteriorating highways and bridges. Unlike the ill-conceived sales-tax approach suggested in the past, at least raising the tax on fuel levies the tax on those who actually use state roads.
The inability to raise funds needed by the Missouri Department of Transportation for maintenance and improvements of the state’s roadways will not enhance economic growth in the state. This most recent decision by political leaders is instead likely to solidify Missouri’s position as one of the slowest-growing states in the nation.
HB 130 a Win for Transportation and Economic Freedoms
Yesterday, Governor Eric Greitens signed HB 130 into law. HB 130, colloquially known as the ‘Uber Bill’, creates statewide regulations for transportation network companies (TNC) such as Uber and Lyft. By streamlining TNC regulations across all of Missouri, the law reduces regulatory uncertainty and eliminates anti-competitive red tape at the local level. Show-Me Institute analysts, myself included, have testified in favor of HB 130 and similar legislation in the past, and we’re delighted to see it become law.
HB 130’s passage means that Missouri will be an easier place to earn an extra income and get around. Rather than navigate a patchwork of rules and regulations—or none at all—TNC drivers and riders across the state will now all follow the same, reasonable rules. In some cities, like Kansas City, St. Louis, and Columbia, bureaucrats and special interests have attempted to regulate TNCs out of existence, killing jobs, slowing economic progress, and reducing consumer choice. HB 130 eliminates unnecessary barriers to market entry, thereby expanding economic opportunity (especially for the disadvantaged) and efficient transportation choices.
I commend the Legislature and Governor for advancing liberty and economic freedom by making HB 130 law. (The law’s swift progression has even prompted ossified and cartelized taxi firms to call for deregulation.) We’re hopeful this is just one of many free-market transportation reforms to become law over the next few years.
Brace Yourselves: Another Single Terminal Sales Pitch Is Coming
Kansas Citians have been hearing about the supposed need for a new airport terminal for four years or more. We’ve been subjected to misleading political proclamations, overwrought editorials, public show trials, listening tours, and town hall meetings. Yet the people of Kansas City have made it clear they do not favor a new terminal.
It appears that some people can’t take No for an answer. The Aviation Department has announced what it calls “listening sessions” on its webpage, stating:
The listening sessions will be an open forum for residents to discuss their thoughts and concerns about the airport with Aviation Department leadership, and will include a short presentation to bring everyone up-to-date on previous planning efforts. Information gathered through community listening sessions will directly influence the terminal facility planning process and will be shared with City Council members. [Emphasis added.]
If the past is any indication, I question how much listening will occur. Will Aviation Department officials hear and understand the great risk to Kansas City travelers of spending over $1 billion and passing those costs onto airlines? Or will attendees be told that all the options have been considered, that mere renovation is just too expensive, and that the airlines have agreed to pay for everything? And while proponents probably won’t say that if we build a new terminal we’ll get more flights, but they will likely leave you with that impression. If it all sounds too good to be true, be on guard.
Who supports the new terminal? We can expect most members of the City Council to support a new terminal, as will the Chamber of Commerce. The usual pundits will weigh in with their usual opinions. The Kansas City Star will likely endorse a new terminal, as it has in the past. Not to be outdone, The Kansas City Business Journal has already weighed in with an underresearched story and editorial on security check point wait times.
Stiffen your resolve, Kansas City. The proposal, the arguments and the supporters will likely be the same. They say they are listening—but who are they listening to?
Private School Choice Provides More Options Close to Home
“School choice may work in Saint Louis and Kansas City, but it won’t impact most students in the rest of Missouri.” I hear that a lot. On its face, the argument seems reasonable. There just aren’t that many private schools. They’re too far away. Missouri is not populated densely enough to support a substantial supply of private schools outside of Saint Louis and Kansas City.
The only problem with that interpretation is that it isn’t true.
So says a new report from the Brookings Institution that analyzes the percentage of students in each state who might reasonably benefit from a school choice program. For their analysis, the authors of the study map out where students live relative to schools and report the percentage of students with one or more school options (traditional public, public charter, or private school) within a five-mile and ten-mile radius.
The authors found that 73 percent of Missouri students have one or more private schools within five miles of where they live. The authors argue that these students could potentially benefit from a private school choice program. By contrast, only 65 percent of students have multiple options operated by their district within five miles (and thus could benefit from an intra-district choice program) and only 54 percent of students have non-district options within that radius (and could thus benefit from an inter-district program.)
As we think about the students in Normandy and Riverview Gardens who ride buses more than 30 miles as part of the inter-district transfer program, it is easy to see how a private option would allow these students to remain closer to home during the school day.
But it’s not just there that school choice can help. As the cold hard numbers tell us, there are many more students within reasonable reach of private schools than most people think. These options should not be dismissed out of hand.
Private school choice programs may not provide choices to all students, but they will expand options for a great many. From a policy standpoint and from a moral standpoint, they are worth exploring.
Nebraska Pressing Hard for Historic Income Tax Relief
This week Nebaraska legislators rolled out a significant tax reform package that should get the attention of development-minded Missouri legislators—a reform that I would characterize as comprehensive tax relief. The Nebraska proposal touches on several areas of the state’s tax code, but its main focus is ultimately on the income tax. The Platte Institute’s got the details.
For the first time in many years, the Revenue Committee has advanced a comprehensive vision for tax reform in Nebraska. Legislative Bill 461,[i] the Nebraska Taxpayer Reform Act, reins in high property and income taxes on families, farmers, and businesses across the state.
While a reduction in personal and corporate income tax rates and an increase in the Earned Income Tax Credit would come as a relief for many, opponents are concerned whether the state will have the revenue to pay for core government functions such as education, criminal justice, and road maintenance. However, through the use of revenue “triggers,” LB461 is designed to prevent tax cuts from taking place unless ample revenue is also available to fund government services.
There are a lot of details to unpack here, but the short version is still pretty short.
- As Platte highlights, the bill here makes liberal use of revenue triggers for tax cuts to become effective. If that sounds familiar to longtime readers, it’s because Missouri adopted a similar apporach when it passed its tax cut three years ago. Legislators’ decision to simultaneously reform some tax incentives to help pay for the cuts deserves particular recognition, given our longstanding support of such innovations here in Missouri.
- When fully phased in, Nebraska’s top personal income tax rate would drop to 5.99% from 6.84%. Importantly, the overall tax rate for income below $29,000 would fall as well, further reducing taxpayers’ exposure. The bill would also increase the state’s earned income tax credit, a policy idea we have talked about many times before.
- The bill would reduce Nebraska’s top corporate income tax rate from 7.81% to 5.99%. Missouri’s current corporate rate is 6.25%.
- Finally, the bill would also change elements of the state’s property tax practices, including how agricultural land is valued. You can find some of our longstanding research on property tax issues here.
When discussing objectives of tax reform, there are obviously lots of approaches and ends that one could promote. But if growth is the objective, then going after income taxes has to be front and center in any reform plan. The approach being taken in Nebraska is an appropriate and gradual one to promote economic growth—an approach that could probably be taken good deal further and still be eminently responsible.
Nebraska’s tax reform push should give Missouri’s state legislators some pause as they generally twiddle their thumbs in 2017. Kudos to the Cornhuskers for spending the political capital necessary to advance these important reforms.
Trinity Lutheran Has Its Day in Court
The U.S. Supreme Court heard oral arguments in Trinity Lutheran v. Comer yesterday. We’ve covered this case extensively, and even though on April 13 the governor reversed the policy that sparked the case, arguments went forward as planned.
It is usually ill-advised to try to divine the ultimate outcome from oral arguments, but it was hard not to see a majority of the justices making arguments and asking questions favorable to Trinity.
Justice Kagan, in particular, seemed to articulate a position in favor of Trinity multiple times. First, she remarked:
But here’s the thing. There’s a constitutional principle. It’s as strong as any constitutional principle that there is, that when we have a program of funding—and here we’re funding playground surfaces—that everybody is entitled to—to that particular funding, whether or not they exercise a constitutional right; in other words, here, whether or not they are a religious institution doing religious things. As long as you’re using the money for playground services, you’re not disentitled from that program because you’re a religious institution doing religious things. And I would have thought that that’s a pretty strong principle in our constitutional law.
Later, she even went further, responding to the state’s attorney’s argument that reimbursing Trinity would amount to an endorsement of or entanglement with the school:
I don’t mean to say that those are not valid interests. But it does seem as though this is a clear burden—looked at that way, this is a clear burden on a constitutional right. And then your interests have to rise to an extremely high level.
She continued,
It’s a burden on a constitutional right, in other words, because people of a certain religious status are being prevented from competing in the same way everybody else is for a neutral benefit.
These statements, along with tough lines of questioning to the attorney representing the state from Justices Alito, Breyer, Gorsuch, Kennedy, and Chief Justice Roberts, showed just how difficult it might be for the state to show that reimbursing a religious preschool for scrap tires for their playground would excessively entangle it with a religion. If that is excessive entanglement, several justices pointed out, just about anything that the state would do, from providing police and fire protection to administering public health programs to students, would be illegal in Missouri.
Again, we don’t want to read too much into yesterday’s arguments, but the questions were encouraging. We will know the ultimate opinion of the court by the time it recesses at the end of June.
