Exempting Childcare Facilities from Taxes Is a Bad Idea

Posted on by David Stokes

A version of this commentary ran in various newspapers across the state, including the Springfield Business Journal.

On August 6, along with voting in party primaries, Missouri voters are being asked to vote on a constitutional amendment to exempt all childcare facilities outside of homes from property taxes. While we all want more affordable childcare, this proposal is a terrible idea. Any small benefit to families with young children will be more than offset by higher property taxes on everyone else.

Many childcare companies are for-profit businesses. Nonprofit childcare facilities, like those in churches, are already tax exempt. I see no reason why for-profit childcare companies deserve a tax exemption, but for-profit auto repair shops don’t. Yes, childcare is important. So is having a functioning car to safely get to work. The argument that something should be tax exempt because, as the ballot language states, it “supports the well-being of children, families . . . and society,” is essentially meaningless. Nearly anything could be made tax exempt by that logic.

Furthermore, this proposal does nothing to restrain government spending. Any reductions in the property tax base will result in higher property taxes on other entities that don’t have the special exemption, such as your home, your farm, and other businesses. The overall effect may be small, but it will be real.

The property tax base should be set as wide as possible so that the tax rates can be as low as possible for all taxpayers. Shrinking that tax base does real harm, no matter how sympathetic the cause may be. Missouri voters should keep that in mind when they choose in August.

A Policy That Could Help Lower Missouri Electric Bills

Posted on by Avery Frank

While summer is actually my favorite time of the year, it’s also hard on my wallet. As air conditioning use ramps up around the country, so do electricity bills. But there is one policy that could help lower Missourians’ electricity bills all year round: retail competition.

Throughout the United States, retail competition has helped to lower the electricity rates for residential, commercial, and industrial consumers.

Between 2008 and 2022, the 14 states with retail competition saw an inflation-adjusted 18.3 percent decrease in average price for all sectors—whereas the 35 monopoly states saw an average price increase of 3.6% in the same time period (these numbers include Washington, D.C., but not Alaska and Hawaii).

Let’s assume you have an electric bill of $200. In a state with retail competition, that bill would have dropped to $178. In a state with total monopoly, your bill on average would have risen to $211—a $33 difference.

Of the 23 states that saw the highest price increases in the 2008–2022 period, only one of them had retail competition (New Hampshire, which was 12th). The 14 retail competition states clustered near the bottom, with seven in the bottom ten.

Here’s an example of Texas’s retail competition website. When searching for a provider, consumers can use a number of different filters, including estimated electricity use, share of renewables, fixed rate versus variable rate (a fixed-rate provides a stable rate for the duration of one’s contract, while a variable rate fluctuates with market conditions), and company rating.

powertochooseorgen-usPlanResults

 

During the period from 2008 to 2022, Missouri saw the sixth-largest percentage increase in electric prices on average. While Missouri still has relatively low electricity prices, things are moving in the wrong direction. Shouldn’t the Show-Me State consider opening up the energy sector to market forces?

The Moral High Ground and the Minimum Wage

Posted on by James V. Shuls

Proponents of raising the minimum wage like to try to take the moral high ground. “Workers deserve a living wage!” they shout. They couch their arguments in terms of fairness and justice for workers. Their high ground, however, is built on a foundation of sand, and it is slipping out from beneath them.

As free-market economists have long explained, raising the minimum wage prices the most vulnerable workers out of a job. It can lead to reduced hours, less full-time work, layoffs, and increased prices for consumers. There is nothing moral about advocating for policies that produce these results.

A new survey from the Employment Policies Institute (EPI) highlights the negative impacts of California’s recent increase in the minimum wage. California passed a law that raised the minimum wage for most fast food restaurants to $20 an hour beginning April 1, 2024. EPI surveyed 182 restaurant operators to assess the effect of the increase in wages.

Here are some of the key findings of the report:

  • A majority of restaurants say they have already raised menu prices (98%), reduced employee hours (89%), have limited employee shift pick-up or overtime opportunities, (73%) and reduced staff or consolidated positions (70%).
  • Many (75%) say the number of employees will decrease (somewhat decrease, 50%; significantly decrease, 25%).
  • Nearly all (99%) say prices will increase, with 73 percent saying they will “significantly increase.”
  • A majority (74%) say there is an increase in the likelihood of shutting their restaurants down (somewhat increase, 38%; significantly increase, 36%).

Fast food jobs are entry-level jobs. They are well suited for individuals entering the job market for the first time or individuals who struggle to gain employment elsewhere. As such, they are a stepping stone to further career advancement. I say this as someone who began his career working minimum wage fast food jobs. Raising the minimum wage may help some workers earn more per hour, but it also leads to fewer job openings, diminished hours, and fewer opportunities for less skilled workers.

 

 

Does the Minimum Wage Impact Crime Rates?

Posted on by Grace Hearne

Missourians may soon be voting on whether to increase the minimum wage from $12.30 to $15 by 2026. Before making that decision, they should consider the broader impact of such a wage increase. To begin, a minimum wage increase negatively affects low-income and low-skilled workers, causing them to suffer a disproportionate loss in hours worked or, unfortunately, the loss of their jobs. This reduction in hours worked or loss of their job not only reduces their income and makes it harder to learn skills, but may also make those affected more likely to commit crimes.

In recent years, several studies have also suggested a positive correlation between an increase in the minimum wage and property crime (such as burglary, larceny, and auto theft) committed by young adults, who are disproportionately impacted by an increase in the minimum wage. But why would a minimum wage increase lead to an increase in property crime?

The hypothesis is that when minimum wages increase, low-income and low-skilled workers experience a reduction in hours worked or increased unemployment, which often means a loss of income. The authors conclude that this decrease in earnings, reduction in hours worked, and increase in unemployment contribute to increases in property crime rates.

The effects of raising the minimum wage are particularly felt by workers who are younger, have a lower income, and are less skilled. The Journal of Economics study finds:

. . . using data from the 1998–2016 Uniform Crime Reports, we find that a 10 percent increase in the minimum wage led to increases in property crime arrests for those between the ages of 16-to-24 of approximately 2 to 3 percent.

Intuitively, this makes sense—losing your job or losing hours at your job could increase economic desperation, leading people to commit property crimes such as theft. In addition, jobs help give people structure and keep them on the right track. The Journal of Public Economics study mentions that more labor market opportunities for younger workers reduce criminal behavior because it increases the opportunity cost of crime. If you have a job, you have more to lose if you get caught committing a crime.

What does this all mean for Missourians? Raising the minimum wage can not only lead to fewer hours and jobs, but also more crime. To actually benefit low-income and low-skilled workers, shouldn’t we instead pursue policies that foster an environment enabling businesses to create more jobs, such as tax cuts or eliminating unnecessary occupational licensing?

The Chiefs and Royals Restart the Border War with Patrick Tuohey

Posted on by Susan Pendergrass

In this episode, Susan Pendergrass speaks with Patrick Tuohey, Senior Fellow at the Show-Me Institute, about the Missouri-Kansas border war over economic development incentives. They discuss how the Kansas City Chiefs and Royals reignited the subsidies battle between the states, the history of the feud, the effects on local economies, and more.

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Produced by Show-Me Opportunity

KCPS is Getting Serious About Evidence-Based Reading

Posted on by Avery Frank

These past few months, I have been trying to learn Korean—and boy, is it difficult. I feel like I am back in first grade, stumbling through sounds and symbols (the Korean word for “hello” being five syllables doesn’t make it easier). Learning a new language with a new alphabet reminds me of students beginning their educational careers. Reading is not natural to the human brain like speaking is—it is a skill that requires quality instruction to develop.

Kansas City Public Schools (KCPS) is focusing on boosting reading instruction for this upcoming school year. Specifically, KCPS is requiring all early elementary teachers, reading specialists, and other reading-adjacent teachers to learn evidence-based reading methods through LETRS. LETRS, passed in 2022, is a program designed to retrain Missouri’s K–5 teaching force in the science of reading.

The director of elementary curriculum at KCPS stated: “Teachers that are coming into the profession just don’t have the science of reading background from universities.” According to the National Council of Teacher Quality (NCTQ), this is a valid claim.

The NCTQ conducted a survey to evaluate which universities are implementing scientifically based reading instruction into their curriculum for future teachers—and the results are concerning. Per the survey, only 25 percent of higher education institutions nationally adequately address all five core components (phonemic awareness, phonics, fluency, vocabulary, and comprehension) of reading instruction. Missouri is no better, as nearly half of our participating universities received an F grade on the NCQT’s report.

There are still 70 districts and charters that are not participating at all in the LETRS program, and many more are not embracing evidence-based reading instruction. Reading achievement has improved in states that embraced this practice. If reams and reams of research support the use of evidence-based reading instruction, then why are districts ignoring it? How are our students learning instead? Why are our universities neglecting to properly educate prospective teachers? These are questions that Missouri parents deserve to have answered.

What Fiscal Cliff?

Posted on by Susan Pendergrass

Data on teachers and staff show that the number of public school district employees hit an all-time high last year, even as enrollment was down and federal funds are about to dry up. An analysis by Chad Aldeman at The 74 includes an interactive map that allows users to see which Missouri school districts staffed up, which stayed level, and which have reduced the number of employees.

But let’s pull back and look at the state as a whole.

The above table has student and staff numbers for school year 2018–19 (pre-pandemic) and 2022–23 (last year). Overall, Missouri enrollment, including pre-K, fell by over 21,000 students, a trend that has been in the works for about a decade and has been much discussed on this blog. At the same time, though, Missouri school districts added over 1,300 teachers, almost 450 district administrators and staff, and about 200 school administrators and staff. Adding teachers while enrollment declined caused the number of students per teacher to fall below 13 (to 12.8) for the first time in at least 25 years. I understand why teachers prefer smaller class sizes. But these are very expensive decisions.

We are already hearing calls for the state to make up for the federal stimulus dollars that have run out. Maybe we should be asking some questions about spending decisions at the same time.

What to Do About Empty Desks with Daniel DiSalvo

Posted on by Susan Pendergrass

In this episode, Susan Pendergrass speaks with Daniel DiSalvo, a Senior Fellow at the Manhattan Institute and a professor of political science in the Colin Powell School at the City College of New York–CUNY, about his recent report on the policy response to declining public school enrollment. They explore the causes behind the drop in student numbers, the effectiveness of current educational policies, the challenges faced by public schools in adapting to these changes, innovative approaches to address enrollment declines, and more.

Read the full report here

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Produced by Show-Me Opportunity

Charging Nothing and Liking It

Posted on by David Stokes

We all know that governments—especially the federal government—are wasteful, but it seems to be getting worse, not better. Do you remember when the Department of Defense spent half a billion dollars to create a pro-American army in Syria and trained about 5 new soldiers for it? Not 5 percent. Not 55. Just 5.

The federal government has spent billions on internet expansion and hasn’t connected a single new home. California has increased its high-speed rail budget from $33 billion to $135 billion and still hasn’t laid down any track fifteen years after the program began. It’s insanity.

Another huge federal program with local implications that has failed miserably is the program to install thousands of electric vehicle chargers across the nation. $7.5 billion was appropriated toward this goal in 2021 as part of the bloated stimulus package, and by the end of 2023, zero chargers had been installed.

2024 has witnessed the installation of a few new chargers. As of this summer, the program is up to eight. All of this for something the private sector could provide. But if you leave it to the private sector, they might not install chargers exactly how the federal government wants them to, and that’s (apparently) the problem. The federal rules are so unnecessarily yet intentionally complex that they are the cause of the delays. As Reason magazine writes:

Why so little progress? Alexander Laska of the center-left Third Way think tank told Autoweek’s Jim Motavalli that the federal cash “comes with dozens of rules and requirements around everything from reliability to interoperability, to where stations can be located, to what certifications the workers installing the chargers need to have.”

Who cares what certifications the workers have as long as the chargers work? And who cares where they are located as long as they are located somewhere a car can get to? The federal government cares, of course, because the complexity of the rules is exactly what gives bureaucrats their power and allows officials to reward supporters.

EV charging mandates, subsidies, and regulations, are all unnecessary. Where there is a demand for chargers, the private sector will supply them. This is no more complex than the gas stations that have been filling up cars for over a hundred years. (Did you know that the first gas station in America was in St. Louis? I didn’t.)

$7.5 billion for eight EV chargers in three years. So typical.

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