Tax reform is a key issue in the current session of the Missouri Legislature. It also is an issue that can have a profound impact on Missouri’s economy. I will submit testimony (Missouri’s Taxing Environment: Some Ideas For Reform) to the Missouri Senate Ways and Means Committee that discusses the necessity of tax reform in our state. The testimony illustrates how the revenue impact of any tax cut can be reduced by eliminating economic development tax credits. Please take a look.
Show-Me Forum: Hot Issues for 2014: Missouri Legislature and Healthcare
What can you expect from the Missouri Legislature in the 2014 session? Columbia Tribune Columnist Bob Roper detailed the key issues that he thinks lawmakers will tackle. Additionally, Show-Me Institute Policy Analyst Patrick Ishmael outlined the latest on Medicaid expansion and Obamacare.
When A Tax Break Isn’t
Democrats in the Missouri House of Representatives recently unveiled their tax reform plan. Here are some of the highlights:
- Starting in 2016, Missouri would have just three tax brackets: A 4 percent tax rate on annual incomes of $30,000 or less; 6 percent on incomes between $30,000 and $300,000; and 8 percent on incomes higher than $300,000.
- There would be an additional tax deduction for those making less than $15,000.
- The limit for the total amount of federal taxes a taxpayer can deduct from his/her income would be lowered, from $5,000 to $2,000 for singles and from $10,000 to $4,000 for combined returns.
I am glad there is growing recognition that Missouri is not a low-tax state (at least for most people). I like the fact that this proposed plan shrinks the number of tax brackets from 10 to three. I also like that many Missourians would receive some tax relief. However, raising taxes on those making more than $300,000 a year is not a good idea.
Now, it’s easy for some people who make significantly less than $300,000 to shrug their shoulders about taxes increasing on Missourians with higher incomes. “I’m getting more money, so what if some rich guy has to pay a little more. He can afford it.” The reality is that many of these “rich” people are business owners who report their business income at the individual level. If the state starts taking even more money from these business owners, that’s less money for payroll, which means less money for new workers and less money for raises. Is that going to stimulate economic activity in Missouri? I don’t think so.
If I lived in Kansas, I would love this bill. Unlike Missouri, Kansas business owners face a tax rate of zero. If this bill actually became law, Kansas businesses would have a significant tax advantage over those in Missouri, which would make Kansas an even more alluring destination for Missouri businesses. That isn’t an attractive prospect for Missouri’s economy.
Also, I don’t like this bill limiting the amount of federal taxes someone can deduct from his/her state taxes. The money I pay out in federal taxes isn’t income. I can’t go out and buy a new phone or television with it. I can’t save or invest it, either. So why would the state treat it as if it is income? Limiting this deduction without reductions elsewhere is a form of double taxation.
The sponsors of this bill are to be commended for wanting to bring tax relief to a significant number of Missourians. However, this positive does not outweigh the negatives of increased income taxes on other residents (through higher rates and limited deductions), including many business owners.
Airlines Wary Of New Airport Terminal In Kansas City
Yesterday, representatives from Southwest Airlines, on behalf of the four major airlines operating out of Kansas City International Airport (MCI), gave testimony to the Kansas City Airport Terminal Advisory Group concerning plans to build a $1.2 billion terminal. Their statements regarding the viability of the current structure, the cost of a new terminal, and the impact of the new terminal’s cost on MCI’s competitiveness should prompt Kansas City officials to go back to the drawing board.
The Show-Me Institute has written about the new terminal plan numerous times. We have questioned the need for a new terminal and the lack of reasonable alternatives to the Aviation Department’s plan. We have expressed concern about the cost of a new terminal and the impact of those costs on the airport’s financial viability and competitiveness. We pointed out that many residents like the current layout, ranking No. 1 in overall airport satisfaction in a J.D. Power & Associates survey. In response, we hear that cost per enplaned passenger does not matter, that the current terminal is falling apart, and we are simply standing in the way of a modern MCI.
But as yesterday’s Terminal Advisory Group meeting confirmed, Southwest and the other airlines that serve MCI agree with our position, and yes, costs matter in the air travel business. Their points were:
- The current system meets the airlines’ needs now and for the next 10 years. If customers need more, the airlines can pay for that in the future.
- Airlines have mobile assets and are risk adverse. They will go where they can make the most money.
- The new terminal plan will increase costs and that “higher cost can lead to less service, not more…”
- “The terminals do not generate or impact demand” for flights.
- The example of the billion dollar new terminal at Sacramento International Airport (as the Show-Me Institute publicized), and its subsequent financial and competitiveness issues, are a cautionary tale for MCI.
Essentially, the airline representatives all but said that the $1.2 billion new terminal plan is harmful and unnecessary. Apologists for the new plan are already going for damage control, stating that the airlines are just one voice among many. One Advisory Group member went as far as saying that there is tension between the airlines looking for low costs and the city looking to provide the best experience for is customers.
But the airlines are not just a voice, they are the airport’s tenants and main source of revenue. In addition, as market-driven entities, the airlines’ incentives are more in line with airline customers than city officials. Above all, travelers want cheap, convenient flights, not a shopping mall. If city officials are prudent, they will heed the warnings of the airlines and ground the new terminal plan.
It’s Not The Money
The New York Times published an op-ed titled “What’s the Matter With Kansas’ Schools?” about legislative efforts to cut funding levels and the legal action that followed. According to the article, as a result of one lawsuit, Kansas will have to increase per-pupil expenditures by 17 percent.
In addition to recycling the tired “What’s the matter with Kansas?” cliche, the piece seems to believe that school funding drives education excellence. The piece concludes:
Kansans rightfully take pride in their strong public school system. But as Kansas goes, so may go the nation. The Kansas Constitution, like those in other states, demands that every child be given the educational opportunity to meet his or her promise. This requires, at a minimum, adequate and suitable school funding. Governor Brownback and legislators must meet the constitutional command and, by so doing, advance the core American value of equal opportunity for all.
My colleague James Shuls has addressed the canard that increasing education spending increases results; it doesn’t. The “worst in the country” Kansas City (Mo.) School District spends more than $16,000 per pupil. Imagine how much better educated The New York Times must think those students are than, say, Kansas’ neighboring (and nationally renowned) Blue Valley Unified School District, which spends an offensively low $7,361 per student.
The Times point would be more effective if there was evidence that the additional spending will help Kansas schools meet the goals the state constitution sets for them. There isn’t any such evidence.
No, Kansas City Star, The Legislature Should NOT Expand Medicaid
I guess all of the big battles are the ones that are fought over and over again. In “A good year to beat low expectations in the Missouri Legislature,” the Kansas City Star editorial board renewed its call for the legislature to expand Medicaid. I could not possibly disagree with the Star more. There is growing evidence that expanding Medicaid will not improve people’s health and will stick taxpayers with even more bills to pay.
A recent study published in the New England Journal of Medicine found that people on Medicaid fared worse health-wise than people with no insurance. This study joins others from the University of Pennsylvania and University of Virginia that found that health outcomes for Medicaid patients are worse than those without health insurance.
Nor will expanding Medicaid clear up congested emergency rooms. A recent study published in Science found that after Medicaid expanded in Oregon, emergency room visits increased 40 percent. The vast majority of these visits were for procedures that could have been taken care of outside a hospital.
If it expanded Medicaid, the legislature would add billions of dollars in expenditures to a state that cannot afford it while doing little to actually improve people’s lives. It should ignore the Star’s appeals and say “no” to expanding Medicaid.
New Release: Available Seats? Our New Essay About Private School Choice
The Show-Me Institute is pleased to announce the release of our new policy paper, “Available Seats? Survey Analysis of Missouri Private School Participation in Potential State Scholarship Programs.” I surveyed private school administrators in Kansas City and Saint Louis regarding their willingness to participate in a state-sponsored scholarship program (i.e., vouchers, education savings accounts ESA, or tax credit scholarships).
Some of the key findings from this essay are:
• Seventy percent of private school leaders in Kansas City and Saint Louis indicated they are interested in a state-sponsored scholarship program.
• A relatively modest scholarship amount of $3,000 would entice more than half of the schools to participate, opening up more than 2,000 seats to new students.
• A well-designed voucher/ESA or tax credit scholarship program could save the state and local school districts millions of dollars.
I will be presenting the findings of this research project in Saint Louis on Jan. 14 and in Kansas City on Jan. 21. For more information about these events and to RSVP, visit the Show-Me Institute’s website.
There Is No Jury Better Than The Hat
I recently heard a story on NPR about government officials in Madrid, Spain, requiring street performers, mostly singers and musicians, to audition for permission to play on public streets. These new regulations also require that those approved acts remain a certain distance from one another and change locations every few hours. The piece offered:
And with more than a quarter of Spaniards out of work, more people than ever before have been crisscrossing the city with their violins and voices, for extra cash. People squeeze giant accordions onto the metro, and roll amplifiers on carts across cobblestones.
The street performers are a tourist attraction. But Madrid’s mayor, Ana Botella, says the clamor has reached its limit.
If this sounds like an idea that could only gain traction in a country known for fascist leadership, consider that Saint Louis did the exact same thing until recently. The Show-Me Institute has highlighted efforts to reform occupational licensing for things such as performers and valet parking.
It might be in the city’s best interest to regulate the activity to provide for passable sidewalks and streets, and to protect Madrid’s tourism industry. However, one such group of performers, called the Potato Omelette Band, objected to the requirement and secretly videotaped its audition, which contained lyrics critical of the city effort:
“Oh, my poor Madrid, my city. They are kicking out musicians and artists, and replacing them with police,” the song goes. “There is no jury better than the hat — the hat you put on the floor to collect donations.”
Indeed. While Americans debate whether government ought to act on an issue or whether it even has the power to act, musicians in Madrid remind us of the simple truth that nothing is better suited to solve problems than free people operating in a free market.
More Money Needed For Common Core…I’m Not Surprised
Almost a year ago, I testified before the Missouri Legislature that “Implementing the [Common Core State Standards] would lead to increased education expenses.” Guess what, I was correct. It was recently reported that the Missouri Department of Elementary and Secondary Education (DESE) has requested $30 million to cover the cost of a new Common Core-aligned achievement test. This is more than two and a half times what Missouri has spent on student assessments in the past.
In my testimony, I noted that the state could expect to incur between $67.8 million and $281 million in Common Core-related expenses. These were not my estimates; they came from proponents of Common Core at the Fordham Institute. I noted that the increased costs would come from upgrading our schools’ technological infrastructure, purchasing Common Core-aligned curriculum, and providing Common Core-specific professional development.
Proponents of Common Core disagreed with this assessment. They argued that we are already spending money on professional development and purchasing curriculum. It’s just “business as usual.” Therefore, Common Core simply shifts money that we are already spending and does not require additional spending.
As for upgrading broadband access and our technological infrastructure, well, Commissioner of Education Chris Nicastro testified that “broadband should be a Civil Right.” In other words, we ought to do these things, so increased expenditures for technology shouldn’t be blamed on Common Core.
It seemed there was an excuse for almost every expenditure. Now, however, there is no excuse. The increased costs for new student achievement tests is a direct result of Missouri dumping our standards and tests in favor of the new national curriculum standards. This was a decision that DESE, the State Board of Education, and the governor made.
Make no mistake. The Common Core State Standards will cost Missourians millions of dollars. And what will we get for all this money? An unproven, untested set of standards and a loss of local control. What a bargain!
