Another Missouri Company Leaving for Kansas, Citing, in Part, Kansas City’s Earnings Tax

Posted on by Patrick Ishmael

Tax. Policy. Matters. We make this point all the time, but if skeptics needed another real world example to hammer the point home, check out ground zero of the increasingly absurd Border War in Kansas City (emphasis mine):

Health Outcomes Sciences, a health care software firm that started recently in Kansas City, is relocating to Overland Park and plans to expand its workforce from 13 to 37 employees over the next five years. …

The firm is seeking assistance from the Kansas PEAK program, which allows employers to keep up to 95 percent of their employee state income tax for up to seven years. Fiorito also said other factors figuring into the decision included the 1 percent city earnings tax charged in Kansas City and the new office’s proximity to where most of the company employees reside in Johnson County.

The Show-Me Institute has written extensively about the damaging effects of Kansas City’s and Saint Louis’ earnings taxes. In 2006, our chief economist, Joe Haslag, explained the impact of an earnings tax with this example:

[S]uppose that City A has no earnings tax, while City B has a 1 percent earnings tax rate. Other things being equal, the regression suggests that we should expect City B’s city-to-MSA per capita ratio to be 5.1 percent lower than City A’s city-to-MSA ratio. To put that in dollar terms, the average per capita income in 1990 was $13,076. Holding MSA per capita income constant, a 1 percent increase in the earnings tax rate translates to city per capita income falling by $667.

Translation? Even a 1 percent tax can be an ample incentive for workers to move out of a higher tax jurisdiction. That is a problem, especially if a city wants to retain its talent and grow its tax base. In the case of Health Outcomes Sciences, the workers were already outside the city. The business appears to have followed them out of town. And in case you were wondering, the Show-Me Institute has published a how-to for eliminating the earnings tax in Kansas City, appropriately titled “How to Replace the Earnings Tax in Kansas City.” Worth a read, particularly today.

There are many factors that go into a business’ decision to move from one state to another, but it is pretty clear that the earnings tax is not a negligible consideration. Kansas City should do a serious review of its own tax policies.

Soon-To-Be Kansan Company Gets $5 Million to Move A Half Mile

Posted on by Patrick Ishmael

Earlier this year I told you the story of Teva Neuroscience, which announced that it would be moving fewer than 4 miles from Missouri to Kansas for what appears will be a tax incentive package worth tens of millions of dollars.

Well, meet the “half-mile move.” According to the Kansas City Star, SelectQuote Senior Insurance Services is poised to move just a couple blocks to its northwest, thanks in no small part to a multi-million dollar tax incentive package from the state of Kansas.

The latest round in the metropolitan economic border war is going for short yardage, with an insurance marketing company receiving $5 million in incentives to skip just a mile from Kansas City to Leawood.

SelectQuote Senior Insurance Services at 9200 Ward Parkway is negotiating for space at 89th Street and State Line in Leawood to consolidate its local call center operations. The Ward Parkway office is about a mile from the planned new location.

Kansas economic development officials praised the announcement, but a local civic leader who is spearheading opposition criticized it as more of the same business poaching that’s cost both states tens of millions of dollars in lost tax revenues without helping the overall metro economy.

“This is just a continuation of a policy that’s damaging taxpayers who have to pay for those who aren’t paying,” said Bill Hall, president of the Hall Family Foundation.

“It’s another example of companies that are moving to take advantage of this situation. Those of us who don’t move are paying for those who do.”

The map below shows how short a move this truly is.

View Larger Map

Taxpayers are being taken for a ride, and Bill Hall is right to criticize these handouts, which now have been taken to new levels of absurdity. Stop it. Stop picking winners and losers in the tax code. Make every business a winner.

On the Proposed Medicaid Expansion

Posted on by Patrick Ishmael

As our readers know, last Thursday, Missouri Gov. Jay Nixon announced his support for an expansion of Missouri’s Medicaid program. It is a  move that, if adopted next year, would take the state a step closer to full implementation of the Affordable Care Act (ACA), commonly known as ObamaCare. “[Expanding Medicaid is] the smart thing to do, and it’s the right thing to do,” Gov. Nixon said.

Although one could describe Gov. Nixon’s announcement in a number of ways, “smart” and “right” would not appear in the parade of appropriate adjectives. And amazingly, in a time of record deficits, budget shortfalls, and fiscal cliffs, it appears that the governor has no plan to actually pay for the new entitlement he is advocating.

So, how would the expansion work?

Like any good purveyor of smack would do, the first few hits of new federal Medicaid money will be on the house. Under ObamaCare, the federal government would cover the lion’s share of the expansion in the early years, but by 2017, Missouri would have to kick in tens of millions of dollars to support the program. Starting in 2020, new state Medicaid expenditures would top $100 million annually and into the foreseeable future. The Kaiser Family Foundation projects that the overall cost of a state Medicaid expansion under ObamaCare could top $1 billion over the next 10 years.

Of course, Gov. Nixon will be on his way out of Jefferson City when most of these new Medicaid costs would hit in earnest; indeed, the governor would never truly have to face the fiscal consequences of a fully enacted Medicaid expansion. The real pain to the state will only come after he leaves office.

While disappointing, the tactic is not altogether unexpected. For decades, American politicians have feasted on the dangerous public misconception that federal spending through the states is essentially free money.

It is not. Missouri taxpayers are also federal taxpayers, liable for the debts that the federal government incurs in their names. In the case of ObamaCare’s new Medicaid spending, it is all debt, and there is no level of government cost splitting that can change the fact that Missourians will have to account for that spending binge now and in the future through higher taxes, fewer services, and almost certainly higher debt burdens on our children and grandchildren. The governor is already having trouble admitting to this reality as he hawks his plan around the state, but this truth is inescapable.

This is not “smart” or “right.” This is “business as usual,” and Missourians cannot afford it.

Protecting Missouri Families, One Thanksgiving at a Time

Posted on by Kacie Barnes (Galbraith)

Remember that time your older brother swiped the last slice of pizza from the box (when he already had two), and you realized life is not fair?

It is an unfortunate moment, and you can pout all you want, but nothing will bring back that last slice. You might demand from your parents that they institute a rule to punish any child who takes more pizza than anyone else; they will say no, and you will pout some more.

But imposing rules when something does not seem fair to you is not a good reason to institute a rule. It is dangerous to make a decision that affects others based solely on your opinion.

The legislation proposed this week to prevent Missouri retailers from opening on Thanksgiving Day smells like it is based on personal opinion of what is “best” for others. Would some retail employees benefit from it? Absolutely. But there is no way to determine that closing retail stores on Thanksgiving is correct, or good for the state.

Missouri Rep. Jeff Roorda (D-Dist. 113), who proposed the “Thanksgiving Family Protection Act,” said that as retailers have expanded store hours on Thanksgiving, employees have less time to spend with their families. This may be true, but I would like to highlight why that is not a good reason to enact this policy.

  1. Retail employees are aware of the expectation to work some holidays and weekends when they take the job. We all have aspects to our jobs that we do not love — should we enact legislation to prevent all those things from happening?

  2. Some people may actually want to work on Thanksgiving. They may depend on that extra day of income and this bill would take that away from them. (Or, maybe they just want an excuse to avoid Aunt Esther’s squash casserole.)

  3. If people did not want to shop on Thanksgiving, stores would be closed. People have demonstrated it as enough of a priority that stores decided to be open. It is not like the Target CEO is walking into people’s dining rooms and forcing them against their will to go shop.

I have worked in retail — I know it is not fun to be stuck at work when my friends or family are all hanging out together. But as Show-Me Institute Policy Analyst David Stokes said, “It’s not the government’s role to tell businesses when they can operate.”

Why Wasn’t the Blanchette Bridge Preserved? . . . Asks the Devil’s Advocate

Posted on by Patrick Ishmael

Tuesday morning, Saint Louis social media was abuzz with news that the controlled demolition of the westbound section of the Blanchette Bridge, which connects Saint Charles and Saint Louis counties, would be broadcast live. The Missouri Department of Transportation explains on its website that the bridge was “in serious need of major repairs” and that left intact, more expensive emergency repairs would have been “required at more frequent [intervals] with longer traffic closures.”
Continue reading “Why Wasn’t the Blanchette Bridge Preserved? . . . Asks the Devil’s Advocate”

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