Lowering the Boom: Louisiana Looks to End Its Corporate and Personal Income Taxes

Posted on by Patrick Ishmael

Big news breaking in the Big Easy. Last night, Louisiana Gov. Bobby Jindal announced that he will pursue tax reform in the next session that includes the elimination of the state’s personal and corporate income taxes.

Republican Governor Bobby Jindal said on Thursday he wants to eliminate all Louisiana personal and corporate income taxes to simplify the state’s tax code and make it more friendly to business.

The governor did not release details of his proposal, but his office released a statement confirming that the taxes are targets of a broader tax reform plan.

“Our goal is to eliminate all personal income tax and all corporate income tax in a revenue neutral manner,” Jindal said in the statement. . . .

Political analyst John Maginnis, who on Thursday reported in his email newsletter LaPolitics Weekly that Jindal will propose balancing the tax loss by raising the sales tax, now at 4 percent, said the strategy fits with the governor’s interest in keeping a high national profile.

My colleague Michael Rathbone and I have beaten the drum consistently about eliminating the corporate income tax in Missouri, which is a light lift compared to Jindal’s plan. Income taxes are among the most destructive in terms of economic growth, and the corporate income tax is arguably the worst. Instead of nickel ante reforms, Jindal is going full boat here and pursuing a policy that will make Louisiana a haven for workers and companies. Paired with Jindal’s school reforms, which include some of the same school vouchers James Shuls has discussed on our blog, Louisiana is emerging as a leader in the battle for forward-looking, pro-market reform.

Talk is cheap, even in Jindal’s case — we will see soon enough if something actually gets passed — but I think there is reason to believe we are seeing a sort of “American Growth Corridor” developing here that is extending from the Gulf of Mexico to the Great Lakes. But for Jindal’s huge announcement, this blog post probably would have been about Wisconsin Gov. Scott Walker’s own announcement yesterday that he will propose phased-in personal income tax cuts this year for his state. Last month, Nebraska Gov. Dave Heineman told business leaders that he wants to eliminate the state’s corporate income tax, just a year after modestly lowering the state’s personal income tax. Last year, Kansas eliminated its taxation on pass-through income. And Oklahoma is still looking to cut its tax on personal income this year.

So, Missouri policymakers . . . what are we going to do here? Bueller? Bueller?

Shrewsbury TIF Is Dead – For Now

Posted on by David Stokes

Last night, I testified before the St. Louis County TIF (Tax Increment Financing) Commission about the proposed TIF plan for a Walmart in Shrewsbury. There was a very large turnout and numerous people chose to speak. The majority of the speakers were opposed to the TIF (and opposed to the Walmart, though I am just against the TIF), but there is no denying there were plenty of speakers in favor of it. (My guess is 60 percent opposed to 40 percent in favor, unlike Ellisville last year, where it was probably 80-20 against that TIF.)

This is not meant to sound corny, but no matter how you feel about the TIF, it was impressive to see so many people at the meeting participating in their local government.

After all the testimony, the commission rejected (via a tied 6-6 vote) a compromise proposal from the Affton School District that would have capped the property tax funds that the TIF captures at 50 percent — the same as sales taxes. That is not a bad idea, and I commend the school district’s reps for trying to find common ground. However, my guess is that the rest of the board voted it down because that change would have only been advisory to the city while the full TIF would have gone forward with a “yes” recommendation. That means the Shrewsbury Board of Aldermen could have ignored the change and then passed the TIF anyway with just a simple majority.

Next, the commission voted on the primary TIF proposal to give the developer a $15 million subsidy ($11.25 million in TIF and $3.75 million in Transportation Development District or Community Improvement District funding). The commission voted this down 9-3, with only the Shrewsbury-appointed commissioners in favor. Now, in order to pass the TIF, the Shrewsbury Board of Aldermen needs a two-thirds majority vote in favor, which by all accounts, it has. So it goes.

The TIF is dead. Long live the TIF!

It was a good night to see a bad idea defeated. Unfortunately, the celebration is short-lived, as it will likely pass the next test.

P.S. Thanks to McGraw Milhaven for posting the testimony video to YouTube.

Missouri Shall Cut No Tax Credit Before Its Time

Posted on by Michael Rathbone

My attempts to seem cultured and refined — and to impress my betters — often lead me to resort to pretending that I am some kind of amateur sommelier. Now, I know almost nothing about wine. It comes from grapes, right? However, I do know that no matter how much I might actually like wine — and given current events, I tend to like wine a lot — the state should not be subsidizing the industry.

This is not the first time I have written about the state subsidizing the wine industry. My first (self-given) award-winning post dealt with the Missouri Wine & Grape Board. Now, I am training my attention on the Wine Producers and Grape Growers Tax Credit. In fiscal year 2012, the state issued more than $100,000 in these credits and wine producers are worried that lawmakers will cut the program due to state revenue shortages.

I am all for a flourishing wine industry in the state. I love going to Hermann for Oktoberfest. However, I do not think a tax credit is necessary for wineries to succeed. Mount Pleasant Winery, St. James Winery, and Stone Hill Winery are among the largest wineries in the state. Mount Pleasant reopened in 1966, St. James was founded in 1970, and Stone Hill has been in the hands of its current owners since 1965. The Wine and Grape Tax Credit was created in 1999. These wineries managed to stay in business for decades without the assistance of this tax credit. Going even further back, Missouri had the second-largest wine industry in the country before Prohibition.

I truly want the wine industry in Missouri to succeed yet I do not want the government to subsidize it. Let wine consumers support our wine industry, not taxpayers.

January Book Club Recap – The Cambist and Lord Iron

Posted on by Josh Smith

Last night, the Show-Me Institute hosted our first book club meeting of the new year. The reading we discussed was a short story by Daniel Abraham called “The Cambist and Lord Iron: A Fairy Tale of Economics.” The story is available free online and conveys some important economics lessons that are not often covered in fiction, such as the idea that valuation is determined by exchange, and that trade creates wealth. It is a short and fun read, and because of our recent changes in book club, I wanted to pick something that had both of those qualities for our first meeting.

Our discussion started with introductions around the table. Among our 10 attendees, some have been attending book club regularly for years, some have come in the past and had not attended in a while, and one person had never attended. Former Show-Me Institute intern Mary Chism gave a synopsis of the story for the few people who had not read it. Next, I gave a brief summary of the history of intellectuals’ views on the concept of value, from Aristotle’s “value for use”/”value for exchange” dichotomy, to the Labor Theory of Value, to the modern marginalist conception of value, attributable to Alfred Marshall.

We then started addressing the discussion questions I had prepared in advance (with Mary’s help). Leading from those questions, here are some of the topics we discussed:

  • Whether anything can be exchanged for anything else

  • The how and why of international currency exchange

  • Government policy relating to the supply of money and exchange rates

  • Whether sweatshop laborers, especially children, are making a free choice to work where they do

  • The opportunity cost of reckless behavior

  • Risk aversion and diminishing marginal utility of income

  • A question from one attendee: “When a participant in a market has more resources, how does that affect that party’s ability to make beneficial exchanges?”

Some topics were discussed on an introductory level and others on a very high level. Many questions were asked and much knowledge shared. In addition to the lively discussion of economics and such, we talked about what our next reading selection should be and when we should meet again. The respective decisions were Hayek’s “The Road to Serfdom” and Wed., Feb. 20. If you are interested in the book or related topics, stop by our office at 7 p.m. on that evening for pizza, soda, and interesting discussion. See ya there!

Bait And Tackle

Posted on by Michael Rathbone

When Saint Louis hosted the Major League Baseball All-Star Game in 2009, it was the center of the sports universe. You could watch Mike and Mike in the Morning broadcasting live from downtown or hear Chris Berman during the Home Run Derby yelling his signature “back, back, back . . . gone!” from Busch Stadium. The same was true when the city hosted the Final Four. That is why I understand the desire to use any and all (legal) means to keep attracting major sporting events to Missouri.

I have written a lot about public subsidies that are given to sports teams, especially for sports stadiums. Now the state is looking to go even further and start subsidizing amateur sporting events with a $3 million tax credit. The reasoning behind this is that these large events bring in a lot of tourists who will boost the economy. A new tax credit, it is argued, would make it easier for Missouri to attract these events, such as a Final Four.

However, I do not see how the state can justify this tax credit. According to Victor Matheson, a sports economist from Holy Cross, as quoted in a St. Louis Post-Dispatch article about the proposed tax credit, “the overwhelming majority of independent academic studies of these events have shown that their economic impact appears to be limited.”  Yet, despite this, some in the state believe these events are worth subsidizing. What, in the state’s history of economic development projects, would give you the confidence to believe that this time, the state is making a wise investment?

I am not immune to the emotional arguments based on civic pride or other intangible measures. However, considering that the state issued close to half a billion dollars in economic development tax credits already, the state should not add to that amount. There are better ways to stimulate the state’s economy; another tax credit is not one of those ways.

2013: A TIF Odyssey

Posted on by David Stokes

Tax Increment Financing (TIF) is marching onward in Missouri. Today’s Kansas City Star has a great editorial on a proposed TIF in the Raytown School District that the schools are fighting. I hope the district wins this battle.

Tomorrow night, the Saint Louis County TIF Commission holds a public hearing about a new proposed TIF in Shrewsbury. The new development is highly likely to involve a new Walmart. It will be hard to stop this proposal, even if the county commission votes against it. Shrewsbury can override the vote of the county TIF commission with a two-thirds vote of its board of aldermen. That is exactly what happened in Ellisville. This TIF, by the way, is completely unnecessary, in my opinion.

Joplin is also moving forward with an enormous TIF. I am happy the school district received a larger up-front payment in the process, but I do not think the TIF will benefit Joplin in the long run, as its supporters are claiming. (We can all admit Joplin is a different situation than the other Missouri TIFs I have discussed.)

I think it is time for people to get serious about expanding the sales tax pool to include all of Saint Louis County (and perhaps the city), and taking the pooling concept over to Jackson County as well. Cities in the sales tax pool put all their general sales taxes into a pool that is then distributed by formula back to the cities. Those cities benefit from growth wherever it occurs in the county. Cities within the sales tax pool in Saint Louis County use TIF far less often than point-of-sale cities, and that is worth incentivizing and expanding.

Five New Year’s Resolutions for Enhancing Liberty – And Pulling Back from the ‘Fiscal Cliff’

Posted on by Andrew B. Wilson

In past years, the Show-Me Institute proposed New Year’s resolutions aimed at Missouri policymakers. This time, our New Year’s resolutions go out to all Missourians worried about the state of the state and the state of the nation. Is there no stopping the drift toward more spending and higher taxes, along with ever-increasing debt, heavier regulation, stunted growth, and greater and greater dependence on government? Are we about to barrel-roll over a Niagara-like “cliff” into a financial panic and a hard recession?

These are our resolutions for 2013:

  1. Ask not what government can do for you; ask what you can do for yourself — without being a burden to others. Recognize, and encourage others to recognize, the grave danger that is posed by a supposedly “caring” government which is in the habit of making promises it cannot keep.
  2. Do not go quietly into the dark night of buying into arguments about “fairness” and “social justice” as an excuse for the limitless expansion of government. You will be accused of being heartless, cruel, just plain stupid, or worse. But do not let others define you, or dismiss you — when they are the ones who press ahead in ignoring the lessons of history, common sense, and genuine humanity.
  3. Always keep in mind that our history and form of government (unlike many other hopeful but fleeting “democracies”) were not built on the proposition of One Man, One Vote, One Time. The great debate in the U.S.A. about the size and scope of government did not end with the 2012 elections. But the proponents of big government are seeking cloture — attempting to discredit and marginalize those who continue to believe in liberty, limited government, and individual responsibility as the essential pillars of democratic self-rule and human progress.
  4. Write out — and be prepared to defend — your own Declaration of Independence against the prevailing orthodoxies of the Hollywood/academic/media elite, who favor every kind of “free lunch” — whether it is universal, “free” health care or universal, “free” college education even if it means severely limiting individual choice, undermining quality, and raising the real costs of health care and higher education.
  5. Do not shy away from the battle of ideas as it continues to evolve inside your own family, your circle of friends and acquaintances, your community, and the state of Missouri. Ideas have consequences, and it is time to consider the catastrophic consequences of thinking it is possible to expand government spending and mandates without destroying jobs and economic growth — and condemning young people to the bleakest of futures. You only have to look at the extraordinarily high rates of unemployment and under-employment among young people in much of Europe (the nations teetering on the brink of bankruptcy) to appreciate the magnitude of the threat.

There is solace in the wisdom of our Founding Fathers, who looked upon anti-federalist sentiment at the state and local levels as an important bulwark in an enduring democracy. They used the words “the states” and “the people” interchangeably. Thus, the 10th Amendment, the final element in the Bill of Rights drafted in 1789 as part of the U.S. Constitution, famously states: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”

We the people can begin to reassert the principles of liberty and limited government by stopping the growth of crony capitalism (and crony unionism) at the local and state levels which occurs when officials award tax credits, Tax Increment Financing (TIF), and other subsidies to politically favored businesses and constituencies.

Along with other states, we in Missouri can say “no” both to the expansion of Medicaid in our state and to the creation of a state-run health insurance exchange that would implement the hugely expensive, deeply flawed, and greatly unpopular Affordable Care Act (aka Obamacare).
The battle for liberty, freedom, and responsible self-government continues. Indeed, it is never-ending.

Andrew B. Wilson is a resident fellow and senior writer at the Show-Me Institute, which promotes market solutions for Missouri public policy.

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