Governor Should Veto Data Center Tax Exemption Legislation

Posted on by Patrick Ishmael

The legislative session may be over but that doesn’t mean the lawmaking is done. Missouri Gov. Jay Nixon has a plethora of bills before him at this writing that he can either veto, sign, or let pass into law without his signature. Among them is a battery of sales tax exemption changes that deserve the additional scrutiny the governor is giving them.

When the legislative session started, talk about sales tax exemption changes generally focused on a problem the legislature actually needed to address — whether personal training services should constitute “entertainment” for sales tax purposes. Unfortunately, that evolved into a package of legislation (encompassing several bills) that also included sales tax exemptions for manufactured homes, data centers, electricity transmission, and more. The governor is predicting that the cost to the state for the bills could be upwards of $400 million, with hundreds of millions more in costs at the local level.

Whether that top-line total is exactly correct, it is clear that many of these sales tax carve-outs look a great deal like special interest income tax credits when it comes to the narrowness of the benefits and the political considerations that went into extending them. Indeed, legislators have been trying to direct tax credits to data centers in the state for years now. That the legislature decided to throw money at the industry through a different section of the tax laws comes, unfortunately, as little surprise.

The legislature is right to cut taxes for Missourians, but cutting big special deals for favored industries, whether through tax credits or exemptions, should be a non-starter. More to the point, the governor should veto the data center legislation even though doing so would mean better tax policies — which were bound to the fate of the questionable exemptions — will have to be reintroduced next session. If he does, next year, the legislature should take what the state would have foregone with the business exemptions and apply much of it instead to broad tax cuts for businesses. If the state can do without the millions in revenue assigned to many of these special exemptions, it can continue to do without that revenue — but this time through broad tax cuts. That would be a better policy.

When It Comes To Privatization In Education, We Say Opaa!

Posted on by James V. Shuls

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My colleague David Stokes has a terrific paper about the privatization of public services in which he highlights many examples of public/private partnerships that benefit society. I thought of his paper when I read this story about a Kansas school district that recently announced it is privatizing its food service:

A decision made Friday morning by the USD 382 Board of Education will result in some changes in the school cafeteria next August — a greater variety of food, more made-from-scratch items, and a possible reconfiguration of space to enhance food presentation and improve efficiency.

A change more visible to the board and administrators will be a hoped-for move of the food service budget out of the red and into the black.

At a special meeting, the Board approved a contract with Opaa!, a Missouri-based company, to manage food service for the district.

The contract is projected to save the district between $30,000 and $60,000.

Opaa! is a family-owned and operated company located in Chesterfield, Mo. The company is partnering with more than 100 public school districts to provide nutritious meals.

This is another example of how private companies can provide services that public entities once provided. It also goes to show that “privatization” need not be such a scary word in education.

A Student Is More Than Five Numbers

Posted on by Brittany Wagner

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On my first day of student teaching in a low-income community, one child cursed at me; another jumped out of her seat, fell flat on her face, and had to be sent to the nurse’s office with a bloody nose; and a third knocked an iPad out of my hands, cracking the screen. I wanted to cry, or quit, or yell and stomp my feet, but I didn’t do these things. I became a teacher to make a difference, so instead, I explained my classroom expectations, wrote the nurse’s pass, and picked the shattered glass off the floor.

Over the next few months, homework completion increased, behavior improved, and I felt like I was accomplishing something. However, one day, I noticed a child staring out the window at the construction site adjacent to the building.  The student mumbled to himself, “if only school was doing construction work, then I’d have an A-plus.” I was disappointed. How much pedagogy had I applied to the classroom? Flipped instruction, technology-based learning, Socratic circles, multiple intelligences — had these research-based methods not worked?

The truth is that this child, like many in Saint Louis, is a victim: a victim of poverty, a victim of bad teachers, a victim of a weak system, where a child’s future relies on five numbers.

Maybe this student wouldn’t have done better had he been born to a family from the 63017 ZIP code. But what if he had a choice to go to Shining Rivers Waldorf School, where students are encouraged to learn through hands-on activities, or Construction Careers Center, where students prepare for technical careers, while pursuing academic excellence?  If he had a choice, he would have a chance.

Just as I became a teacher to make a difference, I joined the Show-Me Institute team to make a difference. During my time in the classroom, I realized that many of the problems students and teachers face cannot be fixed by a single individual. Many of the problems require us to rethink how we operate our public school system. That is why I am excited to be part of the Show-Me Institute policy team. Our mission is clear — to expand opportunities for students.

I invite you to engage with us and share your ideas. Together, we can build a system that ensures that all students, regardless of the five numbers of their ZIP codes, have access to great schools that meet their needs.

 

Sweetness And Power & Light

Posted on by Patrick Ishmael

I want to follow up briefly on the pieces recently published in The American Spectator and here on the blog about entertainment district subsidies in the Show-Me State. Michael Rathbone’s review of Saint Louis’ Ballpark Village is worth your time if you haven’t read it yet. But I want to highlight again Kansas City’s own tax incentive sinkhole, the Power & Light District. The Wall Street Journal video below is an oldie but goodie that captures how expensive the city’s entertainment district gamble has been — and how expensive it will continue to be in the years ahead.

The cost of the city’s plan has actually gotten worse since the Journal published this video in 2012. Just a few months ago, the Kansas City Council actually voted to refinance the district’s debt to help pay for pensions, extending the term of the repayment period and adding tens of millions of dollars to the district’s cost.

The refinancing calls for adding seven years to the Power & Light entertainment district’s debt payments, from 2033 to 2040. It lowers the payments from 2015 through 2019 and frees up cash to help pay for pension reform, especially in the 2014-15 budget. But it bumps up the debt payments between 2020 and 2040, a net increase in overall debt of $36 million.

Who’s going to pay for all of these costs? Kansas Citians, of course, most likely through higher taxes, lower services, or a combination of the two. Businesses that have to compete with the newly subsidized competitors will also be paying for it not only in tax dollars but in customers, too, as their clientele are diverted to new taxpayer-funded developments. If these massive projects were going to work, they should be able to make it on their own, and as the Spectator observed:

The forbidding economics of these projects should be evident from the start, since their need for subsidies shows that they have inadequate market demand. Yet they continue to open, representing the fallout that occurs when officials speculate with public money.

That chronic speculatory impulse of Missouri’s public officials must stop. If our local and state governments can afford to massively cut taxes for some, they can afford to cut taxes for all. That’s the direction in which tax policy in this state must continue to move.

Saint Louis City To Waste Sales Tax Monies On Streetcars, Transit-Oriented Development

Posted on by Joseph Miller

Saint Louis City officials released their wish list for the anticipated $260 million from the proposed 0.75 cent statewide transportation sales tax. Many of the projects on the list propose reasonable improvements to streets, bike routes, and pedestrian paths. However, two of the largest ticket items, namely, a Downtown-Central West End Streetcar and Transit Oriented Development (TOD) at the Forest Park-DeBaliviere MetroLink station, are examples of government waste in the extreme.

We have written many times about the boondoggle that is the modern streetcar movement. Streetcars are incredibly expensive, often with a price tag of more than $50 million per mile, and do little to improve mobility. Claims that streetcars induce economic development are anecdotal at best, as streetcar lines are always paired with significant subsidies for developers and related investment.

Despite the very real costs of streetcars and their dubious benefits, Saint Louis City officials propose spending $35 million on Phase I of a streetcar from downtown to the Central West End. If the whole downtown to CWE Streetcar could actually be built for that amount, perhaps my objection would be less vehement. However, the total cost of the plan is estimated to be $540 million. That makes this Phase I investment less than 7 percent of the plan’s total costs. Even if the city can convince the federal government to unwisely pay for half of the total, the city still has to raise another $235 million. If the experience of other cities is any guide, Saint Louisans are in store for higher sales taxes, property taxes, and parking fees to pay the balance.

Another wasteful request is a plan to make “improvements” to the Forest Park-DeBaliviere and Delmar MetroLink stops. These improvements will waste taxpayer dollars to subsidize Transit-Oriented Development near MetroLink stations and accompanying aesthetic improvements. We have written about the empty promises of TOD, and this project is no exception. TOD often is nothing more than corporate welfare enabled by urban planners, succeeding only in diverting development at taxpayer expense.

TOD rarely succeeds in greatly increasing transit ridership, even if it can attract residents in the first place (not a given). If the MetroLink and the planned Loop Trolley are not enough incentive to bring more housing or new businesses near MetroLink stations, there is little reason spend $14 million of transportation sales tax money to make it happen.

Saint Louis City’s transportation wish list is just another example of why the proposed 0.75 cent sales tax is not good policy. Supposedly necessary because the Missouri Department of Transportation (MoDOT) cannot fund necessary highway improvements, the money instead will be spent on projects (or 7 percent of a project) with political support, not transportation merit.

Show-Me Institute Presents: Missouri’s Economic Record In The 21st Century

Posted on by Michael Rathbone

During good times and bad, Missouri is failing to keep up economically with its neighbors. In the Show-Me Institute’s new essay, “Missouri’s Economic Record In The 21st Century,” by Rik Hafer and me, see why we give Missouri’s economic performance during the current century a grade of “D” and how such a record could mean serious trouble for future Missouri residents. Please give it a look.

Kansas City’s War On The Future

Posted on by Patrick Tuohey

With all the political rhetoric floating around Kansas City, one would think the city is embracing high technology and forward-looking, well, everything. A closer examination reveals just the opposite. The city is using 19th-century politics and policymaking, and hoping for 21st-century results. It is as anachronistic as those future-looking movies of the past.

width= What old-timey look at the past would be complete without a monorail light trail streetcar? Kansas City politicians are determined to employ 19th-century fixed rail transit, thinking wrongly that it will solve our problems. We’ve written extensively about why rail is bad for Kansas City. You can read about it here.

The most jaw-droppingly insipid claim is that such policies will draw the creative class. Never mind that there is no research to back up this claim — Kansas City already is rapidly becoming a fact-free city. In fact, a vocal proponent of streetcars who claimed to speak for millennials just announced that he is leaving Kansas City for the East Coast to seek greater opportunities. This supports the writings of my Show-Me Institute colleague: the so-called creative class goes where the jobs are, not to streetcars or airports.

Meanwhile, city officials view actual future-looking technologies such as those that Lyft and Uber provide with hostility because officials are mired in 19th-century protectionist cronyism. How are Kansas City officials going to react to the inevitable arrival of driver-less Google cars? Demand that cars undergo a background check? Require that each one contain a detailed street map? This is not forward-thinking; in fact, it’s not thinking.

Speaking of Google, Kansas City Mayor Sly James and others love to extol Google Fiber, as if Kansas City, Mo., won that national bidding war to bring them here a few years ago. We didn’t. We lost to Kansas City, Kan. We were just lucky enough to be next door. Kansas City, Kan., won because they demonstrated small and efficient government, not heavy-handed regulation and federal money.

In looking to create density downtown, city officials are falling over themselves to offer up any sort of taxpayer subsidy, handout, or corporate welfare package to bring density — sometimes just to move jobs two blocks. Yet they are unable or unwilling to deliver basic services to the rest of the city. This is not forward-thinking, it is urban cannibalism.

If Kansas City officials are serious about building a brighter future, they need to shed the city’s knee-jerk tax-and-regulate policies and start doing the few things a city can do well: maintain the streets and parks, fight crime, provide quality education, and do so while keeping taxes low. Then the city won’t need to pick winners — because the winners will come to the city on their own.

Should Conservatives Support School Choice?

Posted on by James V. Shuls

Photo: We respond to a few claims you might not have heard from #schoolchoice opponents. Check them out here: http://s.chool.ch/1oGETAZ

Recently, an opponent of school choice wrote a piece arguing that conservatives should not support school choice. His arguments were vapid and lacked evidence. I wrote a full response on the Friedman Foundation for Educational Choice’s blog. Here is my response to his claim that school choice is less efficient than the current system:

When you examine the evidence it is clear that cost savings are almost universally realized through school choice programs.

A recent study by the School Choice Demonstration Project at the University of Arkansas found that the “average public charter school student in the U.S. is receiving $3,814 less in funding than the average traditional public school student.” Despite that fact, public charter schools perform just as well as, if not better, than their traditional public school counterparts. This isn’t rocket science: less funding + equal (or better) outcomes = cost savings and improved efficiency.

The same can be said for private school choice programs. In a comprehensive study for the Friedman Foundation, Greg Forster reviewed the empirical literature on the fiscal effects of private school choice programs. All six studies on the subject found significant savings for taxpayers. In Washington, D.C., for example, it is estimated the Opportunity Scholarship Program saved taxpayers $135 million.

Of course, school choice programs were specifically designed to provide cost-savings. It is possible the savings could disappear over time as choice programs grow in popularity and become more generous. This is not new to publicly financed education systems. Traditional public schools have faced growing costs for decades. Over the past 40 years, inflation-adjusted education spending has increased by more than 180 percent. During that time, the traditional system has offered no hope of reigning in costs; school choice has. They are called education savings accounts (ESAs).

ESAs allow individuals to direct their education dollars to one or multiple schools and service providers. Unspent money remains in the account for parents to use on a host of educational expenses or to be saved for higher education purposes. That ability to save money from year to year puts a downward pressure on prices because it empowers parents to shop cost-consciously and it encourages schools to keep prices competitively low.

You can read my full response on the Friedman Foundation’s blog.

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