Not Nebraska, Too

Posted on by Michael Rathbone

When thinking of Nebraska, what immediately comes to mind? Some people would say football and some would say corn(husking). Cardinals fans would say it is the birthplace of Bob Gibson. But for policy-focused people such as me, it is an ambitious tax cut proposal.

Recently, Nebraska Gov. Dave Heineman proposed eliminating Nebraska’s individual and corporate income taxes. He also proposed eliminating $2.4 billion in sales tax exemptions (hat tip: Hot Air). This follows on the heels of Gov. Bobby Jindal’s proposal to eliminate Louisiana’s personal and corporate income taxes.

Not all proposals actually become law (case in point: Aerotropolis, thank heaven), but can Missouri really afford to sit back and hope these states, along with Wisconsin and Oklahoma, do not join Kansas in gaining a competitive advantage over us? Last year, my colleague Patrick Ishmael and I released an essay proposing that the state eliminate its corporate income tax. Considering the plethora of states looking at not only axing the corporate income tax, but the personal income tax as well, eliminating the corporate income tax might not be just desirable. It might be necessary.

Missouri is in a border war. It might not have chosen this fight, but it is in it nonetheless. It can respond by doing what it has been doing, issuing development tax credits and hoping for the best, or it can engage in serious reform to help make the state more competitive with its neighbors. The gauntlet(s) has been thrown down, how will Missouri respond?

Kansas City’s Financial Plan: There Is No Plan

Posted on by Patrick Tuohey

Since 2003, Kansas City’s spending has increased by 42 percent, raising the city’s debt to a whopping $1.6 billion (from $517 million in 2003). The city’s population has grown just 4.2 percent in that same time. But there appears to be no plan to halt the spending.

Instead, it appears officials are willing to consider spending even more of the citizens’ taxpayer dollars, not on necessary services, but on items such as sidewalks, bike lanes, and light rail.

Kansas City’s Citizens’ Association, self-described as the city’s oldest non-partisan community organization, presented the astonishing numbers and an analysis of the city’s long-term financial future at a forum on Thursday. Association Chairman Dan Cofran developed a daunting, two-page primer on city finances.

The Association reported that Fitch Ratings downgraded its outlook on Kansas City’s credit to negative. That downgrade does not include the recent Kansas City taxes or the impending 15 percent annual water rate increase to cover a mandated sewer renovation.

Something needs to be done but officials do not appear to know how or where to start, and did not present any concrete plans to address the situation.

Panelists such as Kansas City Councilwoman Jan Marcason and City Manager Troy Schulte only agreed that the city must make the tough decisions that it has failed to do in the past, such as revamping the sewers. However, what those tough decisions might be were barely discussed. Marcason also declined to cite examples of spending that the City Council has rejected.

Even worse, Kansas City seems to have no serious plan for responding to Kansas’ recent tax reductions and eliminations. In fact, Schulte said Kansas City should not “race to the bottom” on taxation and suspected that Kansans would grow to regret the cuts. Again, no plan was introduced to counter Kansas’ recent business-friendly actions.

Panelists did share the view that limits voters have placed on them — such as term limits and requiring approval of the earnings tax every five years — are burdensome. The panel failed to recognize that taxpayers took those steps to try to rein in spending and approvals for every project seeking tax incentives.

Cofran continuously asked how citizens might enforce any long-term strategic plan. Marcason suggested only “working together.” If past actions and this event are any indication, few city elected officials are willing to work together, develop a plan, or make any tough decisions.

Choice, Not Early Childhood Education, Is A ‘Smart Investment’

Posted on by James V. Shuls

What do Missouri Gov. Jay Nixon and Commissioner of Education Chris Nicastro have in common?

Regarding early childhood education, both are absolutely wrong. The governor has made early childhood education part of his platform. Nicastro has stated she is “very encouraged” about this because “the research is very clear” that early childhood education improves educational outcomes.

There is just one problem with that, the research is not very clear. In fact, as the Wall Street Journal just pointed out, “since its creation as part of the War on Poverty in 1965, nearly 30 million children have participated in Head Start at a taxpayer cost of more than $180 billion. The problem is that by the government’s own reckoning the program has never achieved what it promises.”

In the most recent, rigorous federally funded evaluation of Head Start, they found that any positive gains had disappeared by third grade.

If the governor and commissioner really want to follow the research and improve educational outcomes for students, I suggest they look at another federally funded evaluation. The Evaluation of the DC Opportunity Scholarship Program, a voucher program, found that students who used a voucher were significantly more likely to graduate from high school.

Other studies have found similar results. An evaluation of a New York City voucher program declared that “using a voucher to attend a private school increased the overall college enrollment rate among African Americans by 24%.”

Add these to a growing list of rigorous voucher evaluations that have shown positive results. Moreover, not a single study of vouchers has found significant negative effects.

Gov. Nixon called investing in early childhood education a “smart investment.” The real smart investment would be to provide families with more educational options, including private schools.

Part Two: ‘Responsible Bidder’ Does Not Mean ‘Union-Only’

Posted on by Patrick Ishmael

Yesterday, I wrote about St. Louis County’s new restrictions on who could be considered a “responsible bidder” for construction contracts. The county is imposing requirements on businesses that, in substance and practice, have nothing to do with the responsibility of the bidder and everything to do with benefiting organized labor. To do so, the county had to warp the intent of the existing law. “Responsible bidder” as a form of legal art is intended to restrict bidding on a government project to those who (1) can reliably perform the services needed, and (2) can do so at the price promised. In other words, the “responsible bidder” construction is intended to ensure that government needs are met promptly and at the best price, to save and maximize taxpayer money.

The county’s apprenticeship requirement, which I discussed yesterday, is onerous enough, but the “no independent contractors for on-site work” requirement makes the intent of the ordinance — to advantage union labor — all the more explicit. In fact, Saint Louis County’s new regulations may actually hurt many small Saint Louis businesses that are not unionized. Adolphus M. Pruitt, of the St. Louis American, offered this blistering response to the ordinance late last month (the whole thing is worth reading):

Additionally, the bill forbids independent contractors from County construction worksites, specifically those who are self-employed. Most African-American truckers who own their own trucks operate as “independent contractors” and thus are forbidden from working on County worksites.

The bidding process is intended to get taxpayers the best deal for their money, not guarantee a special interest seller special privileges over another interest. Union and non-union labor should have to compete on even terms with one another, and the St. Louis County Council was wrong to give unions this sort of preferential treatment in a process meant to protect the buyer’s interests, not a seller’s. Taxpayers deserve better than this.

Gotta Spend Money To Make Money?

Posted on by Kacie Barnes (Galbraith)

My mom and I went to Las Vegas not long after I turned 21. I cannot remember why we chose Vegas, as neither of us are the nonchalant, carefree type to throw money on a table without an intense fear that we may never see it again. In fact, I do not remember much of that trip. But the most common advice I heard leading up to it was that I needed to play big to win big. (What they do not tell you is that you also can play big and lose big.)

Apparently, in other circumstances, you can play big and always win big if you know the right people and have enough money. Especially if your name is Paul McKee.

I recently wrote about the lack of progress on McKee’s NorthSide Regeneration project in North Saint Louis, despite the $40 million he has already received in tax credits.

One specific state tax credit, that only McKee is eligible for, is set to expire in April. But not if he can help it. Seventeen lobbyists registered on Monday to represent the NorthSide project, which the St. Louis Post-Dispatch notes is the same amount that represents Ameren Corp. and Anheuser –Busch, combined.

When will McKee end his relentless pursuit of tax credits?

Unfortunately, priorities shift when business becomes intertwined with the government. Relying on the government often incentivizes companies to hire people with the ability to work with government, not the ability to complete projects.

Ludwig Von Mises discusses this problem in Bureaucracy (pages 76-77, if you are interested). He writes, “Why bother about bringing out better and cheaper products if one can rely on support on the part of the government? For them [corporate executives] government contracts … and other government favors [are] the main concern.”

This reliance on government favors is not necessarily McKee’s fault; he did not create the system. But this is not an excuse to let it continue. We need to change the system that encourages businesses to spend significant resources on government lobbying instead of investing efforts into their business. It is time for Missouri to cease “business as usual” and put an end to corporate welfare.

Comin’ Down the Tracks: School Choice

Posted on by Administrator

On January 25th, 2013 National School Choice Week will begin their coast-to-coast Whistle-Stop Train Tour. Along the way, the historic train will stop in 14 cities at school choice rallies. The Show-Me Institute is proud to partner with NSCW in hosting the event at the train’s fourth stop in Kansas City.

School choice is an issue that impacts all people and one that all should be able to support. The basic principal is that families should have the ability to choose the best educational option for their child. From a practical perspective, we see that giving families options improves educational outcomes for students. In short, school choice works.

We hope you will join us in Kansas City as we celebrate all forms of school choice.

Part One: ‘Responsible Bidder’ Does Not Mean ‘Union-Only’

Posted on by Patrick Ishmael

Just before the Christmas break, the St. Louis County Council passed a new ordinance that changed the definition of what a “responsible bidder” is with respect to county construction projects. The idea of having a government choose the “lowest responsible bidder” for construction projects is to ensure that taxpayers get a conforming product at the best possible price. I think we would all come up with fairly similar definitions of what a “responsible bidder” looks like. But from a legal perspective, the term is intended to capture the idea that those bidding on a government project (1) can reliably perform the services needed, and (2) can do so at the price promised.

As articulated in the legal treatise Antieau on Local Government:

[L]ocal government officials are not limited to the quality and suitability of the article to be provided but can consider the bidder’s experience, skill, ability, business judgment, financial situation, integrity, honesty, possession of the facilities necessary to perform the contract, previous conduct in similar contracts, reputation and record for reliability, as well as any other factors reasonably relevant to a bidder’s successful performance if awarded the contract.

Antieau notes that at least one court has found that “discretion exercised in choosing the lowest responsible bidder must be based upon substantial difference in quality or adaptability.” Taken altogether, these observations make clear that contractors of similar talent, reliability and quality should be considered on basically even terms in a “responsible bidder” legal construction. If a contractor can do a job reliably and well, the real distinguishing mark should be the price.

But in Saint Louis County, this may no longer be the case. The county’s new ordinance requires that for a construction contractor to qualify as a “responsible bidder,” he or she must “participate in or maintain their own Department of Labor-approved apprentice program for each craft which the firm employs and have active, registered apprentices for each program.” The law further requires that “all on-site employees on the project will be employees and that there will be no use of independent contractors or ‘leased employees’ for on-site work.”

“Apprenticeship programs” are almost always an artifact of union membership. Very few non-union shops “participate in or maintain” such programs, let alone always have “active, registered apprentices for each program.” The latter requirement of “active apprentices” has nothing to do with responsible bids, but it does have everything to do with keeping non-union contractors out. Which, of course, is why it was included. The county’s move will affect all sorts of small businesses, as the St. Louis American‘s Adolphus M. Pruitt noted last month.

The bill restricts non-union contractors from bidding on County projects, thus prohibiting any minority-owned general or prime contractor from County construction work. The bill restricts contractors who don’t have active apprentices. The strange thing about this is that most unions will profess that they are not accepting apprentices. … And the number of minority apprentices active in their programs is dismal.

That is especially bad news in today’s terrible economy. I will explore the “independent contractor” aspect in Part Two tomorrow.

Join Us For National School Choice Week

Posted on by James V. Shuls

On January 25, 2013, National School Choice Week (NSCW) begins its coast-to-coast Whistle-Stop Train Tour. Along the way, the historic train will stop in 14 cities at school choice rallies. The Show-Me Institute is proud to partner with NSCW in hosting the event at the train’s fourth stop in Kansas City.

School choice is an issue that impacts all people and one that all should be able to support. The basic principle is that families should have the ability to choose the best educational option for their child. From a practical perspective, we see that giving families options improves educational outcomes for students. In short, school choice works.

We hope you will join us in Kansas City as we celebrate all forms of school choice.

Cigarette Smuggling On The Rise

Posted on by Kacie Barnes (Galbraith)

The Mackinac Center updated an interesting report about the prevalence of cigarette smuggling within the United States. It turns out, cigarette tax rates and smuggling rates have a lot in common. As tax rates and the price of cigarettes increase in a state, so does the amount of smuggling.

We have written a ton about the adverse effects of raising cigarette tax rates in Missouri (and even produced a video). Missourians voted against a rate increase last November.

For many people, this was a disappointment. It can be counter-intuitive to think that raising the cigarette tax would be a bad thing. After all, don’t we want to discourage smoking, particularly among teens?

My personal opinion is yes, we should discourage smoking among teens. We all know how bad it is for our health; we have seen (and turned away from) the graphic anti-smoking TV advertisements.

But as we see in the cigarette smuggling study, increasing the cigarette tax is not a guarantee that there will be a reduction in smoking. It does, however, correspond with increased black market activity. Indeed, in Kansas City, federal authorities uncovered a conspiracy to illegally traffic tens of millions of dollars worth of cigarettes. Mackinac’s report details all the destructive effects of cigarette smuggling, including “corruption of government officials, violence, theft, counterfeiting and dangerous, adulterated products.”

The high occurrence of cigarette smuggling reminds us of the unintended consequences that can arise from government activity. Raising taxes is not a surefire way to solve problems, even when it may appear as straightforward as people buying less because cigarettes cost more. If only it were that simple.

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