State Audit Recommends Sunset Of Low-Income Housing Tax Credit

Posted on by Patrick Ishmael

A new state audit recommends a sunset of the state’s low-income housing tax credit. It’s a great recommendation that we have supported in the past. You can find the full audit here and the “citizen summary” here. The audit highlights a broad set of problems with the current program — not the least of which being that nearly $1.5 billion worth of Low-Income Housing Tax Credits (LIHTC) are outstanding and have not been redeemed. This paragraph from the auditor’s press release is indispensable (emphasis mine):

Currently, only 42 cents of every dollar issued actually goes toward the construction of low income housing; the remainder goes to the federal government in the form of increased federal income taxes, to syndication firms, and to investors. State law allows claiming the same project costs under two or more tax credit programs. This “stacking” of tax credits can be lucrative for developers, but it generates no additional economic activity or state benefit.

To reiterate: Less than half of the money spent through the LIHTC program… actually goes toward the building of low-income housing. Page 16 of the audit goes through all of the auditor’s recommendations, including the idea of adding substantive spending caps to the LIHTC. That’s an excellent idea. When you have a billion-dollar budget-buster like this sitting out there, a strong cap is an obvious and common sense reform, though the Missouri House’s track record on tax credit reform issues has been abysmal.

Either way, the auditor’s report recognizes the need for reform to the LIHTC. It’s an open question whether the legislature will also recognize the problem.

Where Are The Metro Buses We Paid For?

Posted on by Joseph Miller

Local news outlets recently reported about the lack of spaces on buses in Saint Louis, specifically pointing out overcrowding on the 70-Grand Ave. line. Commenters decried the situation, stating that a tax increase three years ago should have handled the issue. One report asked why the last tax increase did not get the city new buses for busy routes, stating “after all, you paid for them.”

But what did Saint Louis area residents pay for? According to data from Metro, they did not pay for more buses on Grand Ave.

As of October 2013, Metro operated 73 bus routes, of which 70-Grand Ave. was the busiest, with 9,256 passengers on an average day. It is also Metro’s best-performing bus route financially, with 80 percent of the operating costs coming from fares (for comparison, fares pay for 27 percent of the Metrolink lines).

To deal with the demand for this route, at peak periods, Metro devoted 12 buses. Those buses make 127 daily trips. But what are those numbers in perspective? Metro runs many other routes as well, some of a magnitude less popular than 70-Grand. In fact, 70-Grand has as many passengers per day as 31 of Metro’s poorer-performing bus routes. The resources designated for those routes? Seventy-eight buses at any peak period and a total of 1,203 daily bus trips. As for money, most of these routes make back less 20 percent of their operating costs in fares and some make less than 5 percent. Those buses need far more financial support than 70-Grand. While 70-Grand requires approximately $2,500 per day in subsidies to cover its operating expenses, the least-frequented 31 routes require a combined $54,000 per day.

Saint Louis area residents did not pay more to improve 70-Grand, they paid higher taxes to operate an entire bus system. While buses are crowded in the high population centers in the city, most of the tax dollars and buses in the Metro system are needed to maintain underutilized service in Saint Louis and St. Clair Counties. The bright yellow lines represent those low-passenger routes on the map below.MT

Maintaining those routes, not pushing more buses onto high demand routes (in blue), was the main purpose of the tax increase.

If Saint Louis area residents want to improve service for crowded bus routes without raising taxes further, they need to re-think Metro’s priorities. Metro’s policy to maintain underutilized routes throughout the Saint Louis region hampers its ability to provide frequent service on high-demand routes.

To be fair, those residents of underutilized transit areas in Saint Louis County pay just as much in taxes to support Metro as city residents do. (St. Clair County funds transit differently, so we will leave them aside for now.) I understand the need to keep offering some transit services to areas that do not use it very much, but Metro needs far greater flexibility to offer that service in a more cost-effective way. More on that to come.

Lust For Licensure

Posted on by David Stokes

I honestly think that one of these days someone is going to propose requiring a Missouri license to hypnotize chickens. During this year’s legislative session in Jefferson City, the quest to unnecessarily license new occupations continues. Next up: home health care agencies, electricians statewide, and expanded licensing rules for landscape workers. None of these new or expanded regulations are justified.

Did you know that areas with stricter electrician licensing actually have higher rates of electrocution? It’s true. Licensing increases costs, increased costs lead to more do-it-yourself work, and that leads to more accidents. Similarly, is there a current crisis in Missouri regarding landscaping that I am oblivious to?

Missouri has fewer licensed occupations than other states. We should be proud of that. Simply put, all of the occupations that have some sort of legitimate role for licensing are already licensed at the state or local level. We need to be removing unnecessary licenses and making it more difficult to implement new ones. When it comes to licensing rules in Missouri, we need to pass rules setting demonstrated needs and benefits before new occupations can be licensed. We don’t need to add new occupations to an already too-long list.

Policy Presentation: A Public Discussion About Kansas City International Airport

Posted on by Patrick Tuohey

The Kansas City Aviation Department has proposed building a new terminal at Kansas City International Airport (MCI) that could cost $1.2 billion or more. While the city has attempted to collect information on the project independently, most of the data comes from the very people who support the project. In this discussion, the Show-Me Institute will share the results of its own research on the costs, challenges, and likely results of such an endeavor.

Read more of the Show-Me Institute's research into Kansas City International Airport at ShowMeDaily.org.

 

‘Right To Try’ Bill Heard In Missouri House

Posted on by Patrick Ishmael

Last week, I testified on Missouri House Bill 1685, known as “Right to Try” (or as Garrett Haake of KSHB 41 in Kansas City calls it, “the Missouri Buyers Club bill.”) This legislation would allow terminally ill patients to use experimental medications that have not yet completed Food and Drug Administration (FDA) testing, but have passed “Phase One” of the FDA’s approval process. As KSHB explained:

Phase one refers to the first phase of FDA approval in which a drug has been proven to be safe for human consumption, but not thoroughly tested for overall efficacy, appropriate doses or possible side effects – a process that could take years.

Not every investigational drug is effective, and it takes time for new drugs to complete the FDA trials. But for terminally ill patients, unfortunately, that’s time they do not have. HB 1685 stands for the proposition that terminally ill patients should have the opportunity to try all reasonable means to fight for their health and their lives.

I do realize there are FDA obstacles to the implementation of this reform. Missouri can institute a law that conflicts with the federal law, but the federal law will still take precedence. That doesn’t mean, however, that Missouri can’t change its law to anticipate movement at the federal level, whether those changes would come in the way of statutory revisions, waivers, or non-enforcement.

I think HB 1685 is a compassionate and reasonable response to a very real problem that American families and their loved ones face today. It’s time to talk about how we can give those families hope by making more treatment opportunities available where that’s possible; I’m glad Missouri is discussing it.

The Effects Of A Minimum Wage Increase

Posted on by Michael Rathbone

On Tuesday, the St. Louis Post-Dispatch published a letter from scholars at the Show-Me Institute arguing that raising the minimum wage to $10 would hurt Missouri. They write that by unilaterally raising the minimum wage, Missouri would lose jobs to other states.

Except for Illinois, where the minimum wage is $8.25 an hour, the states surrounding Missouri have a minimum wage of $7.25 an hour. Many current and future businesses in Missouri, especially those near the state’s borders, would have a large incentive to relocate to surrounding states if Missouri raises its minimum wage all the way up to $10 an hour.

One reader who responded to the letter on the Post-Dispatch website asked what the effect on jobs was when Missouri increased its minimum wage in January from $7.35 to $7.50 an hour. First, it is too early to start making judgments about the effect of the recent minimum wage hike because it is only early March. Second, even if there isn’t much of an impact with this minimum wage hike, we must consider the degree of the increase. Going from $7.35 to $7.50 an hour represents a 2 percent increase in the minimum wage. A business might be able to absorb that increased cost and not feel compelled to move. However, the proposal in question would raise the minimum wage by 33 percent.

There are only so many additional costs a business can absorb before going out of business. Do we really want to risk these businesses leaving the state and taking the jobs they provide with them for something that even proponents say is a “blunt instrument” for helping poor people?

We all want to help the poor and truly disadvantaged, but there are better ways to do it. One thing to consider would be to follow the lead of 20 other states and establish a state Earned Income Tax Credit (EITC) to supplement the federal one. Both David Neumark, in his Show-Me Institute policy study examining the effects of the minimum wage, and the Congressional Budget Office’s analysis of federal minimum wage proposals acknowledge the EITC as a more cost-efficient way to help the working poor.

When Did You Stop Beating Your Wife? – Common Core Edition

Posted on by James V. Shuls

Loaded questions are a great way of winning an argument. It puts your opponent on the defensive and frames the discussion in a way that makes it almost impossible for him or her to win. Supporters of the Common Core State Standards have used this tactic time and again. They ask, “Why don’t you like rigorous standards?”

Most recently, the Missouri Department of Elementary and Secondary Education posted a video using this tactic – “What Would You Say to a Critic of Higher Standards?” In the video, a few of Missouri’s teachers of the year answer the question. How can someone argue with them? How can you argue against higher standards?

There is just one problem, I don’t know of anyone who argues against the Common Core State Standards because they are too rigorous. In fact, most arguments against the standards call into question the quality of the standards. Take, for instance, Sandy Stotsky. She was a member of the Common Core validation team and refused to sign off on the standards.

“Everyone was willing to believe that the Common Core standards are ‘rigorous,’ ‘competitive,’ ‘internationally benchmarked,’ and ‘research-based.’ They are not,” Stotsky said.

But according to DESE, it is not possible to question the quality of the standards. What’s more, apparently we are supposed to be in awe of the standards as well. In the video, Robert Becker, the 2010-11 Missouri Teacher of the Year, says, “If you actually sit down and read them, they’re beautiful. There’s no way you could object to them. You could do nothing but admire them.”

Really?

Let’s try it out. Here are a couple of standards:

CCSS.Math.Content.1.MD.A.2 Express the length of an object as a whole number of length units, by laying multiple copies of a shorter object (the length unit) end to end; understand that the length measurement of an object is the number of same-size length units that span it with no gaps or overlaps.

CCSS.ELA-Literacy.SL.3.3 Ask and answer questions about information from a speaker, offering appropriate elaboration and detail.

Are they beautiful? Do you want to sit back and admire them?

We cannot have a serious discussion about the Common Core until proponents recognize that questions of their “rigor” and their “beauty” are debatable. Reputable scholars disagree on the matter. Instead of asking the loaded question, “Why don’t you like rigorous standards?” Common Core supporters should open up to real dialogue. They could start by asking, “Could the standards be improved?”

Kansas City Republicans’ Absurd Claims

Posted on by Patrick Tuohey

Last Wednesday, FOX 4 News asked us our thoughts about Kansas City refusing to release details on the use of tax dollars to support the city’s bid for the 2016 Republican Convention. It mirrored a similar story that the Kansas City Star published earlier. In both, the Show-Me Institute advocated for transparency. In a city as cash-strapped as Kansas City, voters should be told where their tax dollars are being spent. One would think Republicans would agree.

FOX 4 reporter Macradee Aegerter also asked about the claims of economic development that come from such conventions. I said in the interview that such claims are speculative, the bid committee often employs the economists that make the claims, and that the real impact rarely lives up to the hype. (This segment aired in the 6 p.m. version of the story, which is not yet online.) In the segment, a member of the bid committee claimed that the convention would have an economic impact of $250,000,000. That’s a quarter-billion dollars.

We don’t believe it. (Or, perhaps more delicately, we want to verify those numbers before we believe it.)

Certainly, having such a convention in Kansas City is a good thing, and not just for the money it will bring to the area. As a matter of pride, I would love to see Kansas City host again on the 40th anniversary of our last convention. But the idea that having the convention here amounts to a net gain of $250 million is absurd, and it casts a light on how calculating the economic impact of other items is the economic equivalent of alchemy.

The host committee is likely assuming that without the convention, hotel occupancy would be zero. Spending downtown would be zero. Travel in and out of Kansas City would be zero. Then it still probably over-estimates what will be spent here because of the convention. In reality, a hotel that would have had 70 percent occupancy without the convention may have 95 percent occupancy because of the convention. One can claim the difference as “economic impact” but not all of it. But we won’t know how the committee reached the quarter-billion number until it reveals how it calculated a $250,000,000 impact. (If the committee releases the estimate and it proves to be legitimate economic analysis with a multiplier effect below two, we will gladly admit we are wrong.)

As written in the Daily Beast story about the recent Super Bowl in New Jersey:

So, there’s no economically sound way to predict a Super Bowl’s impact before the event and those that try have been proven wrong again and again. But don’t expect that to stop the cheering from the few with the most to gain. When asked for a more detailed analysis of Super Bowl XLVIII, the host committee demurred, but assured in a statement, “Super Bowl XLVIII is expected to be an economic boom [sic] for the region.”

We’re not asking the committee to reveal anything legitimately embargoed about its bid. We just want to know how the committee arrived at that estimate for the impact should the convention occur in Kansas City. Certainly, Republicans would agree that the sound economic policies they advocate require sound economic assumptions — otherwise, how are they supposed to be any more responsible with taxpayer money?

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