Taxing Smokers Does Not Show Support of Education

Posted on by James V. Shuls

As first appearing in the Columbia Daily Tribune:

These days there are a lot of calls to make people pay their “fair share,” and no, we are not referring to the 1 percent. We are talking about smokers. The argument for raising the tax on cigarettes is straightforward—smoking is harmful to individuals, and though smoking is an individual decision, it impacts each of us. We all bear the brunt of additional health care costs incurred by smokers. These are what economists call negative externalities. They are, in theory, why smokers should be taxed more for their behavior—to offset their costs to society. Most proposals to raise the cigarette tax, however, seek to tax smokers to pay for unrelated programs, such as education.

For example, Erin Brower of Raise Your Hand for Kids is seeking to put a 50 cent increase on the ballot to fund early childhood programs. Missouri Treasurer Clint Zweifel has proposed an increase to fund college scholarships, an idea Missouri Attorney General Chris Koster supports. In a recent special to the Joplin Globe, Koster called for a 73 cent per pack increase. These are certainly not the first calls for increasing the tax. In the past 15 years, tobacco tax increases have appeared two times on the ballot. Each time Missouri voters have had the opportunity to tax smokers more, they have failed to do so. Why?

First, Missourians are leery of using “sin” taxes to fund other programs, especially education. This was the same tactic used to legalize gambling in Missouri. Lawmakers said the revenue from gambling would go to education. They did not tell voters, however, that the money would supplant not supplement existing funds to education. There are fears that the same would happen with proposals to raise tobacco taxes.

Second, using tobacco taxes to fund other programs simply does not make economic sense. Missouri’s lowest-in-the-nation tobacco taxes help draw in an untold number of shoppers across state lines, especially in Kansas City and along the Illinois border. These shoppers make it a point to buy their cigarettes in Missouri, thus creating sales for our local businesses and generating tax revenue for the state. Raising the tobacco tax would deter these shoppers.

Tobacco taxes also have the negative distinction of being one of the most regressive taxes. Smokers tend to be from lower-income households. At the same time, middle-income families would benefit from many of the programs created from increased tobacco taxes, such as college scholarships. Thus, if Zweifel and Koster’s proposal was implemented, low-income families would be subsidizing the college education of middle-income families. What is the “fair share” for smokers to pay for a middle-class student’s college education?

The truth of the matter is that smokers are an easy group to target. Few, except for other smokers, are sympathetic to their plight. At the same time, we all support better educational opportunities for Missouri students. Therefore, taxing smokers is a relatively easy way to raise taxes to fund educational programs.

If lawmakers are seriously concerned about the negative externalities causes by smokers, they should direct tobacco tax revenue directly back to smoking prevention programs and the Medicaid costs for smokers. That is the only logically and economically consistent use of the tax revenue.

James V. Shuls, Ph.D., is an assistant professor of educational leadership and policy studies at the University of Missouri–St. Louis and a fellow at the Show-Me Institute, where Michael Rathbone is a policy researcher.

Monarch Voters Choose Transparency Over Union-Backed Candidate

Posted on by John Wright

This month voters in the Monarch Fire Protection District, a fire district in western Saint Louis County, chose to keep Robin Harris on the board of directors. Harris and fellow board member Jane Cunningham were instrumental in implementing transparency policies for the district, including open collective bargaining. The fact that Monarch kept its current board in place is good news for people interested in local government accountability; however, one special interest group, the local firefighters union, may not have seen Harris’ victory in the same positive light.

Supporters of both Harris and the opposition, Kelley Miller, were standing outside the polls on election day giving out information and encouraging voters to pick their candidate. A man gave me a flier that read, “Vote for Robin Harris.” I asked him why I should vote for Harris, and he told me Robin has done a good job representing taxpayer interests. The man told me he has known Robin for six years.

Lauren, an emergency medical technician from Troy, Missouri, gave me a glossy card instructing me to choose Kelley Miller instead. I asked Lauren why I should vote for Miller, and she told me that Miller would “take politics out of the district.” While she didn’t know Miller personally, as a fellow fire district employee over in Lincoln County, she felt Miller was the right pick for voters in Saint Louis County. She told me that fire protection employees at districts across the region work together during elections.

Lincoln County Fire Protection District, where Lauren works, is a union shop. If it seems odd that an EMT from two counties away would stand outside on a rainy day and ask Chesterfield residents to vote for a candidate she has never met, then this piece of information should clear things up for you. A union’s job is to negotiate with an employer to get the best deal for its members. If the employer happens to be a local government, such as a fire protection district, then the union spends resources to elect public officials that answer to the union. Thus, the union shops in the region work together to ensure that the people elected to the boards of fire protection districts are favorable to their interests.

The union-backed candidate lost this time, but there will be other district elections. The board of the Monarch Fire Protection District may one day be packed with union-backed members. However, the transparency reforms should stay. Transparency protects both officials and the public, so when it comes to local government, everyone benefits.

Missouri Could Save Millions by Looking to Wisconsin

Posted on by John Wright

A bill is making its way through the Missouri Senate that would allow government workers to hold their union representatives accountable through regular elections. Unfortunately, the bill’s fiscal note—an estimate of how much this bill will cost—overstates the cost of these elections.

If the Department of Labor and Industrial Relations (DOLIR)—the agency tasked with managing government union elections—had examined Wisconsin, another state that has a law like this, they may have seen how the agency would have been able to conduct elections with existing resources.

voteInstead of looking to Wisconsin, where similar elections are already held at no additional cost to taxpayers, DOLIR estimated that it would have to hire at least 21 new employees and 760 temporary elections officers to physically conduct each election. According to DOLIR, these elections and new hires would cost $1.5 million to $2.7 million a year. While $2 million is not a huge portion of a multibillion-dollar budget, it is a significant amount to most of the people paying for it, especially when DOLIR could eliminate that cost altogether by following Wisconsin’s lead.

The Wisconsin Employment Relations Council (WERC) holds union elections at no cost to the taxpayer. This cost savings is possible for two reasons: First, WERC contracts out with a respected arbitration company, the American Arbitration Association, for its union elections. In these elections, workers vote through telephone or the Internet using a secure ID number, rather than a traditional paper ballot. This service has been used successfully in Wisconsin for a couple years now, providing convenient, low-cost union elections to government workers. Second, WERC charges a filing fee to a union seeking election. The filing fee is administered on a sliding-scale basis, charging more to larger unions and less to smaller unions, and is enough to cover the cost of elections. Because of these two smart moves by WERC, Wisconsin began holding elections for state workers in 2013 without increasing WERC’s staff or its impact on the state budget.

Why didn’t DOLIR look to the practices of other state agencies when estimating the cost of these elections? That seems like the first thing you’d do when estimating the cost of a new government practice. I don’t know why DOLIR screwed up so badly. I do, however, know that government union elections can be an inexpensive and reliable way to protect our government workers’ voices when it comes to their unions and professional associations.

No, Post-Dispatch, the Rams Don’t Pay Their Way

Posted on by Michael Rathbone

StadiumEarlier this week, the St. Louis Post-Dispatch published an editorial discussing whether the tax revenue brought in by the Rams is enough to cover the costs associated with building the Edward Jones Dome. Their answer: probably yes. My colleague Joe Miller and I have looked at this issue, and our answer: probably no.

Why the discrepancy? Well, let’s look at the Post-Dispatch‘s “back-of-the-envelope” calculations:

  • They assume roughly $1 million a year from taxes on the Rams’ profits. We have no problem with that.

  • The Post-Dispatch counts the total $151 million of player payroll as taxable, when it isn’t. Rams players play half of their games in other states/cities, so they pay income taxes to those states. This is double counting, since they also count visiting teams’ income taxes too. Taking this into account, Joe and I estimated the income taxes generated by players’ salaries—along with those generated by the coaches, staff, and other employees of the Rams—comes to roughly $11 million.

  • Taxes from sales of merchandise and food and beverages have to be balanced against what would have been received from local businesses had the Rams been absent. The Post-Dispatch gave no indication that they took this into account. According to our calculations, the net sales tax revenue along with ticket tax revenue amounts to roughly $3 million.

  • Add in the Rams’ rent, and you get another $250,000 in revenue.

  • Like the Post-Dispatch, we found it difficult to determine how much the city, county, and state would receive in additional hotel tax revenue.

  • Overall, we estimate the Rams generate between $15-16 million in tax revenue ($10-11 million for the state, $3-4 million to the city, and the remainder to the county). That’s a far cry from the $24 million the city, state, and county put in to finance the dome. Plus, the Post-Dispatch makes no mention of the annual maintenance costs of the dome, which totaled $7 million last year and are projected to run between $5-9 million going forward.

I like football and want the Rams to stay in Saint Louis, but the only way I want to pay for them is by buying a ticket on game day. Giving further subsidies to the Rams will not be a boon to the local economy (which the editorial board, to its credit, recognizes), and it probably will end up being a net loss for taxpayers.

What Does It Mean to “Have Health Care”?

Posted on by Patrick Ishmael

This question has come into sharp focus just five years after the Affordable Care Act’s (ACA) passage. Does it mean having insurance? Or does it mean having accessible, affordable, and fundamentally personal care?

These may sound like philosophical questions, but the answers have very real consequences, as this story in the New York Times shows.

Alison Chavez, 36, who is self-employed, signed up for a marketplace plan in October 2013 that she hoped would be an improvement on her previous plan. She had recently been given a diagnosis of breast cancer and was just beginning therapy, so she was careful to choose a policy on the Covered California marketplace that included her physicians.

But in March, while in the middle of treatment, she was notified that several of her doctors and the hospital were leaving the plan’s network. She was forced to postpone a surgery as she scrambled to buy a new commercial policy that included her doctors. “I’ve been through hell and back, but I came out alive and kicking (just broke),” she wrote in an email.

Obamacare tries to treat the symptoms of a sick American health care system—the rising cost of insurance—but it doesn’t really treat the underlying sickness, the rising cost of care. And that’s ultimately what we expect when we “have health care”: care. It’s just not necessarily what people receive under the ACA.

In that context, it’s understandable that many Americans are looking for alternative care models that meet their needs, not the needs of a government bureaucrat. The “direct care” model is one of the most promising. The direct care model is simple; for a set fee, patients and doctors can contract for health care services. These care “subscriptions” guarantee access to a doctor of the patient’s choosing, oftentimes because the doctor is limiting the number of total patients he or she will take over that period. Instead of paying for insurance and getting poor care or no care at all, patients pay for care and receive . . . care. Imagine that.

An article published in Time Magazine late last year sums up what makes direct care arrangements attractive.

The driving insight here is that primary care and specialized care have two very different missions. Americans need more of the first so they’ll need less of the second. And each requires a different business model. Primary care should be paid for directly, because that’s the easiest and most efficient way to purchase a service that everyone should be buying and using. By contrast, specialty care and hospitalizations—which would be covered by traditional insurance–are expenses we all prefer to avoid. Car insurance doesn’t cover oil changes, and homeowners’ insurance doesn’t cover house paint. So why should insurance pay for your annual checkup or your kid’s strep swab? [Emphasis mine]

You can think of it as “a la carte care” or “concierge care,” or something else, but it is indisputably care—care that the patient has chosen and can actually access. The potential for direct care extends even to more specialized care, too. At the Surgery Center of Oklahoma (SCO), the surgeons post the prices of their services online, with prices oftentimes a fraction of what other hospitals and insurance companies charge patients. This 2012 video from Reason TV explains the lower-cost, and arguably more personal, SCO model.

It is no wonder several proposals now floating around the Missouri Legislature aim not only to protect direct care arrangements, but also to facilitate them. One proposal would insulate direct care arrangements from undue bureaucratic interference; another would initiate a pilot program to make direct care available to the poor. Both are well worth the consideration of Missouri legislators, especially before the legislature’s session comes to a close next month.

Direct care has the potential to help patients like Alison find and keep the doctors they want—and not have that relationship jeopardized by some middleman insurance relationship. Amidst all the problems of America’s post-Obamacare medical system, direct care represents a bright shining possibility for a better model for our health care: one that puts the patient first, not the government.

Blame It On the MTC

Posted on by Jessica Stearns

Traveling can be stressful. I’m usually comforted when the airplane safely touches down at my final destination, especially when it’s at Lambert International Airport. Unfortunately, Saint Louis cabs can add to the stress and deplete the pocketbook.

This past week, when my flight into Saint Louis was over an hour and a half delayed, I realized I would have to catch a cab home. I usually can persuade my friends to pick me up by offering them Starbucks, but since my flight landed at 1:00 a.m. no one was able to pick me up. With MetroLink stopping service at 12:57 p.m., I was left with no other choice than to get a cab ride back to my apartment in Midtown. After collecting my bags, I went to the taxi stand to find only one company offering cab services. After a 15-mile ride to my apartment, I was stuck with a $44.14 cab fare.

Ride_RequestRidesharing companies like Uber and Lyft operate out of cities like San Francisco and Chicago at much more competitive rates. San Francisco even offers UberPool, which matches you with other riders heading in the same direction with the fare split among several riders.

However, since I live in Saint Louis, a city that is inhospitable to innovative and competitive ridesharing companies, I was unable to seek an affordable option.

The Metropolitan Taxicab Commission (MTC) is a regulatory body meant to protect the consumer. Instead, they protect the cab companies who profit from anti-competitive regulations, while consumers are left without options that are prevalent in a competitive market.

Looking through the ridiculous regulations of the MTC’s code, cab companies picking up customers from the airport must obtain a permit and give one dollar for every fare to the MTC. At this time, the MTC has only granted permits to seven cab companies. With limits on the number of permits made available, cab companies are shielded from meaningful competition and can set prices that would be too high in a market with free entry.

I hope the next time I fly into Saint Louis, UberX or Lyft will be an option because I cannot afford many more $45 cab rides.

The Fallacy of Tailgate Economics

Posted on by Joseph Miller

News flash: Saint Louis is in danger of losing its football team. City and state officials are working feverishly on plans for a new publicly financed state-of-the-art stadium, but it may be too late. The owner sees greener pastures out west, and after years of subpar play on the field, fan support is tepid. Taxpayers may rebel against the use of public dollars to finance a new domed stadium.

That’s right, this story is not about the Rams; it’s about the St. Louis Football Cardinals circa 1988. Then, as now, NFL teams still would prefer that the public subsidize new stadiums, with the possibility of leaving town as the not-so-veiled threat. Saint Louis and Missouri officials hope to oblige, presenting a plan to spend more than $400 million on a new stadium for the Rams.

Saint Louis is a great sports city with enthusiastic support for professional teams (especially the baseball Cardinals), and many local leaders and residents take pride in being an NFL city. However, government officials here and around the country argue that pro sports franchises boost regional economies and spur urban regeneration.

Unfortunately, it just isn’t so. Cities have been funding stadiums for decades. The vast majority of economic research shows little evidence that these subsidies have yielded any economic benefits or growth in tax revenue. Speaking about the plan to subsidize a new stadium for the Rams, one University of Chicago economist said, “. . . building a football stadium is probably one of the worst expenditures of taxpayer dollars there is.” As for urban regeneration, while stadiums can ride a revitalization trend, there is no evidence that they create them. The issue with stadiums is that they tend to divert entertainment dollars that were already being spent in the metro area. Unless the teams draw in many tourists, which is not the case with most teams (including the Rams), NFL stadiums do not have a significant impact on the regional economy.

In the case of Saint Louis, officials do not even need to read up on the economic literature, they can simply look at the results of the Edward Jones Dome, Saint Louis’ current stadium. Originally conceived as an effort to keep the Football Cardinals (now playing in Arizona), the Edward Jones Dome was entirely publicly financed. When it opened in 1995, it was considered state-of-the-art.

Only 20 years later, the Edward Jones Dome, on which the city still owes money, is maligned as outmoded. The arrival of the Rams had no noticeable effect on tax revenue, aside from a small increase in income tax receipts. As for urban regeneration, the area immediately north of the stadium, known as the Bottle District, is an empty lot. There has been no dome-centered growth.

Nevertheless, public officials and representatives still talk as if a new riverfront stadium will cause urban regeneration and generate hundreds of millions of dollars of new state tax revenue. If regeneration means parking lots (which will surround the stadium), then they may have a point.

Even assuming the best case—that Saint Louis is blessed with a football team that holds home-field advantage through two playoff games leading up to the Super Bowl—does anyone really believe that having 10 great tailgate parties a year outside a new riverfront stadium is the key to Saint Louis’, or any other city’s, economic revitalization?

Common sense tells us “no.” So too does past experience, along with an abundance of economic literature.

 

SEMO May Embrace All-You-Can-Eat Education

Posted on by Brittany Wagner

Funnyman Owen Wilson describes the University of Phoenix as “the Harvard of Internet colleges” during an interview with Google in the film, The Internship.

“That reputation hasn’t made it out here,” responds the Google executive.

While online universities haven’t exactly obtained an “Ivy league” status, they certainly are impacting the education market.

Massive Open Online Courses (MOOC), such as Udacity and edX, provide free access to lectures, readings, and coursework. Participants can receive a certification or credit, which may be used for educational or professional purposes. In January, San Jose State announced a partnership with Udacity to offer remedial courses to incoming freshmen.

Last week, Southeast Missouri State University (SEMO) announced it would explore another type of online model, competency-based education. The model is based on Western Governors University (WGU), which is basically “all-you-can-eat.” Students pay one flat rate per term. This allows students to skip ahead by testing out of modules. It would be possible to earn a degree in one year for under $6,000.

wgu

While the quality of these programs and the acceptance by employers is debatable, MOOCs and competency-based programs are competition for state universities like SEMO and San Jose, who have had to adapt to attract students looking for a flexible, low-cost college experience.

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