Another Crack at the Income Tax

Posted on by Scott Tanner

Are you ready for spring? It appears members of Missouri’s general assembly certainly are. Before lawmakers left Jefferson City for spring break a couple of weeks ago, they passed a flurry of bills, including an income tax cut. If enacted, House Bill (HB) 798 would, among other things, eventually lower Missouri’s top individual income tax rate to 3.7% (from 4.7% today).

Going into the 2025 legislative session, it was clear that income tax reform was going to be a hot topic. Not only was it a top priority listed in the Institute’s 2025 blueprint, but numerous bills were also filed before the session began both to incrementally lower the income tax rate and to eliminate the tax altogether. Then, during his first State of the State address, Governor Kehoe officially stated his support for eliminating the individual income tax.

As my colleagues and I have written for many years, there are many good reasons for Missouri to abandon its reliance on the income tax. Decades of economic research have shown that the income tax is one of the most economically damaging forms of taxation, penalizing workers for their productive pursuits. But in recent years, 25 states (not counting Missouri) have lowered their income taxes, including many of Missouri’s neighbors, which should only increase our state’s urgency for meaningful income tax reform.

It’s no coincidence that year after year the fastest-growing states across the country are those without income taxes. If Missouri is serious about joining those states—and we should be—bold action in Jefferson City is necessary. While Missouri’s elected officials have been successful at lowering the state’s top individual income tax rate by 1.3% since 2014 (from 6% to 4.7% today), Missouri is still one of the states most reliant on income tax revenue.

Eliminating the income tax in a fiscally responsible way will not necessarily be easy given that Missouri’s budget has nearly doubled in size in recent years. But the process must start with a single step, and lowering the rate incrementally to 3.7% (what HB 798 proposes) is a great place to start. As lawmakers enter the home stretch of this year’s legislative session, there’s still a lot of work to be done if eliminating the income tax is truly the goal. Time will tell if their actions match their stated priorities.

A Sweet Deal for Sugar Creek

Posted on by Mike Ederer

The following letter appeared in the Kansas City Star.

There is a proposal to sell the Sugar Creek water and sewer systems to Missouri-American Water on the April 8th ballot. The company is offering Sugar Creek $5 million for the systems and guaranteeing an $8 million investment into improvements.

Sugar Creek needs to make improvements to its water and sewer systems. Sewer rates just went up this month, and water rates will likely increase, too. The question for voters is whether the city will fund those improvements via debt or whether Missouri-American will pay the city for the asset and fund the improvements itself.

Studies have shown that private utilities generally operate more efficiently than public utilities. Privatization of these two systems could result in a substantial infusion of money for the city, and placing the water and sewer facilities on the tax rolls would expand the tax base. That large payment plus the broader tax base could lead to tax cuts elsewhere in Sugar Creek.

The residents of Sugar Creek currently receive their gas and electricity from private utilities closely regulated by Missouri’s public service commission. Getting their water from Missouri-American Water would be no different, and this sale would greatly benefit the people of Sugar Creek.

Weighing Consumer Regulated Electricity to Meet Energy Demand Growth

Posted on by Scott Tanner

The Missouri Legislature recently passed Senate Bill 4 to address concerns about the state’s energy future. Much of the bill is about ensuring Missouri has sufficient energy sources in the future, as there is a lot anxiety about the rapid growth of large energy consumers, such as data centers and industrial manufacturers.

Managing this problem in the current system that is dominated by monopolies is difficult. But what if market forces could be infused into our current system to help address new demand?

An Introduction to Consumer Regulated Electricity (CRE)

One potential policy solution that could complement Missouri’s current system is consumer regulated electricity (CRE). While still a developing idea, CRE is worth considering as Missouri navigates an uncertain and potentially very costly energy future.

In theory, CRE would allow private investors to create new, independent electric power systems (both generation and transmission) using their own capital. These private grids would be scaled to specifically meet new demand growth from large consumers. In order for a CRE entity to operate appropriately, it would need to be free from restrictions placed by the Missouri Public Service Commission (MPSC). That means CREs would need to be unconnected to the regular grid and only serve new industrial and large commercial customers.

It should be noted that these CRE entities would still be subject to federal regulations, such as the Nuclear Regulatory Commission for nuclear projects. These entities would still need to meet federal safety standards.

Considering the Benefits of CRE in Missouri

Travis Fisher of the CATO Institute argues that these private grids—partly free of the massive regulatory red tape for utilities—could be developed more quickly, infusing needed competition and innovation into the energy sector. As “private energy islands” for new, large energy consumers, CREs could potentially relieve strain on the primary grid and ratepayers. Rather than relying on ratepayers to fund new power plants to accommodate rising industrial demand, the market could provide that solution.

This idea aligns with growing momentum in the private sector to pair small modular reactors with corporations (Google, Microsoft, Meta) urgently seeking energy sources tailored to their needs. CRE could allow the free market to guide this practice, and potentially, more quickly match demand with supply as companies would not be subject to current MPSC regulations that limit competition. This could be a boon for economic development in Missouri.

In theory, CRE would not tear down Missouri’s existing framework, but rather, complement it and allow private developers to target growing energy demand from the largest consumers, which are causing the most concern about reliability.

How Could We Potentially Bring this to Missouri?

Bringing CRE to the Show-Me State would likely require a modification of state statute to declare that CRE entities—if they are not connected to existing infrastructure and only serve large, industrial customers—are not subject to state regulation. New Hampshire is one state considering this concept. While further study is needed, CRE is a compelling idea that our lawmakers ought to consider.

Kansas City’s Data Center Boom: Another Costly Gamble

Posted on by Scott Tanner

Kansas City has offered billions in incentives to attract massive data centers from Meta and Google, hoping to secure long-term economic benefits. But as Thomas Friestad of the Kansas City Business Journal has reported in a two-part series, these projects come with significant costs and uncertainties​​. While city leaders tout them as major wins, questions remain about who truly benefits—and who foots the bill.

Spoiler alert: It’s taxpayers. Taxpayers foot the bill.

The scale of these data centers is staggering. As Friestad reports, the energy demand from these facilities is equivalent to 100 Walmarts or 40 hospitals​. Their massive electricity needs—driven in part by artificial intelligence—have led Evergy, the regional utility provider, to plan two new natural gas plants and expand renewable energy production by 3,000 megawatts over the next decade​.

While Evergy insists that existing customers won’t subsidize these projects, some experts aren’t convinced. The Missouri Office of Public Counsel warns that the increased demand could drive up energy prices across the region​. Even if Evergy builds enough capacity, ratepayers may still bear the costs of maintaining infrastructure that primarily benefits tech giants.

Kansas City approved up to $8.2 billion in tax incentives for Meta alone, a package more than three times the city’s annual budget​. Google has also secured generous tax benefits, though the full scope is still unclear​.

These incentives were pitched as a way to boost local schools and communities. But as Friestad’s reporting shows, and as regular readers of this blog have come to expect, the expected windfalls have been slow to materialize. The Smithville School District, which was promised rising tax revenues, has instead seen a fraction of what was projected. In 2024, Meta paid just $86,839 in property taxes to the district—far short of the more than $1 million in annual payments initially forecast​. Construction delays and city permitting issues have further postponed expected revenues.

The pieces highlight an important debate: Did Kansas City need to offer such massive subsidies at all? Economic development officials argue that data centers wouldn’t come without them, but others suggest that factors like cheap land, energy access, and infrastructure play a much bigger role​.

A broader trend is at play. At least 36 states now offer incentives for data centers, creating a nationwide bidding war​. Critics like Good Jobs First director Greg LeRoy argue that these subsidies often do little to sway a company’s decision, while shifting tax burdens onto residents​.

And while data centers bring major investments, they don’t create many full-time jobs—typically around 100 per facility, despite requiring billions in public support​.

As they have with entertainment districts, hotels, and sports stadia, Kansas City leaders are making a massive bet on data centers, banking on future economic gains. But as the Kansas City Business Journal’s reporting makes clear, the immediate costs are real, and the benefits remain uncertain. Will the promised revenues materialize? Will taxpayers ultimately bear the burden of subsidizing these projects?

The people of Kansas City should demand answers. If policymakers want to keep handing out billions in incentives, they owe the public clear, transparent explanations of when—and if—the promised returns will actually arrive.

Lawless: The Miseducation of America’s Elites with Ilya Shapiro on April 10

Posted on by Show-Me Institute Staff

In partnership with the WashULaw Federalist Society, the Show-Me Institute is pleased to present Ilya Shapiro, senior fellow and director of constitutional studies at the Manhattan Institute, for a discussion of his new book, Lawless: The Miseducation of America’s Elites.

RSVP for This Complimentary Event Here

Thursday, April 10, 2025

12:00 noon

Washington University in St. Louis Law School

Anheuser-Busch Hall, Room 305

One Brookings Drive

St. Louis, MO 63130

About the Book – Lawless: The Miseducation of America’s Elites

Law schools used to teach students how to think critically, advance logical arguments, and respect oppo­nents. Now those students cannot tolerate disagreement and reject the validity of the law itself. Rioting Ivy Leaguers are the same people who will soon:

  • Be America’s judges, DAs, and prosecutors
  • File and fight constitutional lawsuits
  • Advise Fortune 500 companies
  • Hire other left-wing diversity candidates to staff law firms and government offices
  • Run for higher office with an agenda of only enforcing laws that suit left-wing whims

Ilya Shapiro will discuss how we got here and what we can do about it. The problem is bigger than radical students and biased faculty—it’s institu­tional weakness.

About the Speaker

Ilya Shapiro is a senior fellow and director of constitutional studies at the Manhattan Institute. Previously he was executive director and senior lecturer at the Georgetown Center for the Constitution, and before that a vice president of the Cato Institute and director of Cato’s Robert A. Levy Center for Constitutional Studies.

Read full bio here.

This event is brought to you by: Show-Me Institute, WashULaw Federalist Society, Sinquefield Charitable Foundation, and Show-Me Opportunity.

Preventing a De Facto Ban of Charter Schools

Posted on by Scott Tanner

The passage of Senate Bill (SB) 727 last year was an important step toward expanding charter access in Missouri, increasing educational options, fostering competition, and driving innovation in our state. However, this year, there are some efforts to reverse that progress, including the proposal of SB 177.

If passed, SB 177 would require any new charter school to receive a certificate of need from the governing board of the local school district or the governing body of the city or county in which it intends to operate. This added hurdle would not only create an unnecessary extra step, but it would also give existing public school districts—which are historically opposed to charter schools—more power to block competition.

The Problem with SB 177’s Requirements

The rationale for certificate of need (CON) laws is that the number of providers in a particular market must be controlled in order to prevent market oversaturation. Such laws are inherently anti-market, as they give regulators, rather than entrepreneurs and families, the ability to determine need and to select who may participate in the market.

SB 177 would require a “governing board of the [local] school district or governing body of the city or county in which the proposed charter school would be located” to affirm that the following conditions apply to the school district in which the charter is proposed:

  1. Consumer demand for alternative educational options exceeds supply;
  2. The school district’s attendance area contains sufficient economies of scale to ensure both an adequate supply of high-quality teachers and potential students in order for the proposed charter school to succeed without hurting the school district; and
  3. The proposed charter school is likely to:
    • Alleviate economic and racial inequities
    • Improve students’ academic outcomes
    • Reduce student–teacher ratios
    • Result in a more efficient education service without duplication of services
    • Limit the number of schooling disruptions
    • Address family priorities including safety, convenience, transportation time, neighborhood walkability, and school culture.

These conditions range from things that are too vague and open to interpretation to things that shouldn’t be considered to begin with.

Little Incentive to Allow Competition

For incumbent school districts, there is little incentive to allow competitors to challenge their market share. In fact, no local school board in Missouri has ever sponsored a charter school in its district, despite having the ability to do so. It seems unlikely then that any district would grant CON approval to a charter school.

What Missouri Should Pass Instead

Rather than passing legislation that stifles charter school expansion, Missouri should focus on removing barriers to entry for charters. SB 398 and House Bill 1044 would expand charter access to additional districts, including those in charter counties or municipalities with more than 30,000 residents. These bills would move Missouri in the right direction. Of course, if Missouri wanted to remove all barriers to access it should allow charter expansion without regard to population requirements. It is a sad note that of the 43 states with charter schools, Missouri is the only state without a rural charter.

Limiting competition and restricting opportunities for students across our state is not how to improve education in Missouri. SB 117 would represent a big step backward in Missouri education policy. We need to continue moving forward.

Reporting on Housing Fails to Ask Basic Question

Posted on by Scott Tanner

The Kansas City Star recently published a piece on investor-owned housing that seeks to raise the alarm on corporate landlords, claiming, “large corporations buying single-family homes have contributed to rising prices.”

The story is similar to a piece published almost a year ago by Flatland, an online news source operated by Kansas City PBS that claims to be “committed to providing context” to the region’s challenges. The breathless piece was titled: “5 Companies Own 8,000 Kansas City Area Homes, Creating Intense Competition for Residents.” That claim comes from a 2023 study from the Mid-America Regional Council (MARC), which states: “Nearly 14,000 single-family homes in the region are owned by 33 companies. Of these, five companies own nearly 8,000 homes.”

Okay. Is that a lot? How many single-family homes are there in the region? The MARC report doesn’t say. Flatland, despite its commitment to context, provides none. Neither does the Star.

I’ve reached out to MARC for these data, but while I’m waiting, I did some basic calculations. The Census estimates there are 969,534 housing units in the Kansas City Metropolitan Statistical Area. Nationwide, about 74% of housing units are single-family residences. Data provided by the Greater Kansas City Regional Housing Partnership indicate there are 682,546 single-family homes in the region. If 14,000 are owned by institutional investors, that amounts to 2% of the market.

Are we being asked to believe that large firms and investors owning 2% of the housing market is “contributing to rising prices” or “creating intense competition?” Really?

The worst part is that, according to the Star, Missouri legislators are considering an effort to bar corporations from buying residential real estate.

While it may be ideologically satisfying to cast corporate landlords or institutional investors as the real enemy, it does nothing to actually solve the problem. The truth is that housing affordability is driven more by restrictive government regulations that impede the ability of the free market to meet demand. Zoning restrictions, burdensome regulations, neighborhood NIMBYism, and slow permitting and approval processes are the actual drivers of housing costs. Addressing those problems requires real policy work.

Using legislation to tinker with who is permitted to buy homes may feel like progress, but it is more likely to reinforce the problematic status quo in housing—too many rules and not enough houses.

Jackson County Assessment Disputes Will (Hopefully) Lead to Real Change This Time

Posted on by Mike Ederer

A version of this commentary appeared in the Examiner.

It’s an obscure state law that every article about government and politics in Kansas City has to include a quote from Harry Truman. As I follow the controversy over the reassessment process in Jackson County, I flash back to my own time working for St. Louis County government during the 2001 “drive-by assessment” scandal. That, in turn, reminds me of this quote from our 33rd President: “The only thing new in the world is the history you do not know.”

In the Spring of 2001, the St. Louis County Assessor had a problem. An enormous number of homes were coming back with a reassessment appraisal increase greater than 17 percent, meaning that a physical (in-person) inspection would be required. The problem was that the assessor had neither the time, the staff, nor (apparently) the desire to schedule in-person inspections of tens of thousands of properties. The solution? Quietly redefine what “physical inspection” meant. The assessor’s office plotted tens of thousands of properties with large valuation increases on maps (probably using Mapquest; Google maps hadn’t been designed yet) and sent assessors off driving around the county. Driving past a house and looking at it was considered a physical inspection. Problem solved, right?

Wrong. Assessments ballooned throughout the county. Taxpayers were livid. They called their council members screaming. A few of them, including my soon-to-be boss, started to investigate. They asked for the filed inspection reports. Once it became clear that individual assessors had somehow been doing several hundred “physical inspections” per day, the scheme was exposed and the scandal exploded.

Huge valuation increases. A poorly managed assessor’s office. Angry taxpayers. Politicians trading blame. Does this sound familiar to residents of Jackson County?

If you look at the property valuations in Jackson County from a decade ago and compare them to valuations in St. Louis, it is hard to dispute that Jackson County property, overall, was underassessed. That is the only partial defense I’ll give to the Jackson County executive and assessor. But for multiple cycles now, especially in 2019 and 2023, the assessor’s office has done a shockingly poor job of managing the reassessment and adhering to the rules of the process. Nobody likes seeing their valuations go up at tax time, but 113 other counties in Missouri seem to be able to reassess property without the process failures that have plagued Jackson County. Taxpayers in Jackson County have every right to be angry.

Taxpayers in St. Louis were angry in 2001, too. Almost immediately, the assessor and revenue director were fired. While it took a few more years, that demand for reforms to the reassessment process led to real change locally and statewide. The law was clarified to define a physical inspection as just that, and the trigger point for an inspection (with homeowner consent, of course) was reduced to the present 15 percent increase in value. Requirements for tax-rate rollbacks by governments were enhanced. Eventually, the St. Louis County charter was changed to make the assessor an elected position. While the present process is far from perfect in the rest of Missouri, the changes that emerged from that 2001 scandal have benefited the entire state.

Which brings us back to Jackson County. Voters and taxpayers need to demand reform. There is already an effort to change the law to elect the assessor, which seems like an obvious improvement. Another change that is needed is to end the tax-rate rollback exemption for the Kansas City School District. Despite its substantial increase in assessed values in 2023 (which is still being contested in court), the district voted once again to keep its tax rate the same. Every other taxing body in Missouri has to roll its tax rate back to at least partially offset assessment increases, but the Kansas City School District gets to enjoy its windfall on the backs of taxpayers. Finally, Jackson County could consider using variable property tax rates, as St. Louis County does, to allow for greater ability to adjust rates by property type in response to future changes.

Other changes would be easier and don’t require amending the law. Why the Jackson County assessor still has her job after all this mismanagement is a mystery to me.

The 2001 reassessment disaster in St. Louis led to improvements to the overall process that are still in place today, at least everywhere but in Jackson County. Hopefully, the ongoing controversy over the 2023 reassessments in Jackson County can lead to similar, lasting reforms. Jackson County taxpayers deserve nothing less.

Hey Elon, Here Are Some Cost Savings for You in St. Louis . . .

Posted on by Scott Tanner

I am a big fan of DOGE, MOGE, and whatever else they want to call any office that attempts to cut government spending at all levels. The United States is $36 trillion in debt, and someone is finally trying to start doing something about it.

So here is my contribution to the effort. Just tell St. Louis’s Bi-State Development Agency (also known as Metro) “no” on its application for around $700 million in federal funds for the ludicrous Green Line (formerly known as the North-South Line) proposal. Like Nancy Reagan said to Arnold on Diff’rent Strokes, “Just say no.”

The new leadership in the federal Department of Transportation (DOT) has instituted major changes in how the DOT is going to make decisions. This doesn’t look good for the Green Line, as the St. Louis Business Journal wrote about this week. The new DOT guidelines state that, among many other things, the DOT isn’t funding projects for local political purposes or social justice reasons. The new DOT leadership is focused on moving people and goods, and actually moving people is one thing the Green Line isn’t going to do. Metro’s own estimates—which based on history are probably inflated—claim that the Green Line will have only 5,000 boardings (so, about 2,500 people) per day. That is for a billion-dollar project. That’s absurd.

Whether you call it the “Green Line” or the “North-South Route,” I call it an inevitable failure and a huge waste of tax dollars. Even if you support MetroLink, there is no reasonable argument for the Green Line project. The federal government ought to reject this plan and many other similar, though not quite as bad, applications from around the country.

You’re welcome, Elon.

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