Page 520 – Show-Me Institute

The Name’s Bond . . . Building Bond

Posted on December 18, 2012May 5, 2026 by Michael Rathbone

After paying off the mortgage on your house, would you then take out another mortgage as part of a jobs program? The St. Louis Post Dispatch recently published an editorial calling for the state to do something just like that. Legislators are discussing a bond issue and the Post-Dispatch is urging the state to issue another series of bonds in order to create more jobs. For those not in the know, a bond is simply a loan from investors to a company or state. Like any loan, it must be repaid with interest.

I am not categorically against a state or other governing entity issuing bonds for worthwhile spending on infrastructure, but putting the state in debt just to launch a public works program looks like a mini version of the American Recovery and Reinvestment Act of 2009 (i.e., the Stimulus), which really covered itself in glory. To be fair, the Stimulus was not entirely composed of infrastructure spending, but infrastructure spending was a significant part of it.

There are other reasons to be wary of a state issuing debt, as Chris Edwards from the Cato Institute explains:

. . . debt financing is more costly than current tax financing because of the interest expenses and related charges.

The most important reason that voters should hesitate to approve bonds is that the country already faces huge government liabilities. At the state level, pension and health benefit plans for retired workers have funding shortfalls of about $2 trillion.

Again, there may be good reasons for the state to issue bonds. Transportation and higher education infrastructure are both legitimate uses of public dollars. However, before putting the state further into debt, it is important that these potential bond issuances are thoroughly examined to see which projects they would be financing.

I will write more about these potential bonds in future posts. I can see myself and others at the Show-Me Institute supporting some type of bond issuance, but I hope the primary plan is not that they will serve as some sort of jobs program.

As Expected, Kansas City’s Mail-In Streetcar Vote Wins

Posted on December 17, 2012May 5, 2026 by Patrick Ishmael

We knew this was going to happen, but let’s put this in perspective. About 550 people voted by mail on a measure to raise taxes by at least $100 million in Kansas City’s newly created streetcar district. Of those 550 people, about 350 voted for the taxes. The vote means that each “yes” vote essentially imposed about $300,000 in new taxes on property owners and shoppers along the streetcar’s route over the next couple decades, and that is a low estimate.

So, “Merry Christmas,” shop owners. You will be paying for a giant boondoggle of a toy train for the foreseeable future.

Downtown Kansas City voters gave an “all aboard” OK to streetcars in election results announced Wednesday.

Voters approved, 351 to 198, a 1-cent sales tax increase, and 344 to 206 property tax increases to help pay for a $100 million, two-mile streetcar system. It will run from River Market to Union Station, primarily on Main Street.

The tax increases, authorized for 25 years, will apply only within the defined boundaries of a downtown streetcar district. That covers roughly River Market, the Central Business District, the Crossroads and Crown Center.

Show-Me Institute Chairman Crosby Kemper was interviewed on Fox 4 last week, and his concerns about the manner of the vote and the potential for cost overruns are very much warranted here.

The outcome of the vote is an unfortunate, but expected, result. Regardless, there is reason to believe this story is not over quite yet. Stay tuned.

Celebrating Mediocrity

Posted on December 16, 2012May 5, 2026 by James V. Shuls

The 2011 results of the National Assessment of Educational Progress for vocabulary were recently released. Missouri once again ranked near the middle of the pack: 24th for fourth grade and 27th for eighth grade. In a press release from the Missouri Department of Elementary and Secondary Education (DESE), Commissioner of Education Chris Nicastro said, “”We are pleased to see that students in Missouri are maintaining their overall level of achievement on the vocabulary test.”

I have two problems with this statement.

First, I am not sure Missouri students are “maintaining their overall level of achievement.” In both fourth and eighth grades, the average scale score for Missouri students declined from 2009 to 2012. The decline in fourth grade was a noticeable 3-point drop.

Secondly, we should not be pleased with maintaining our level of achievement; our goal is to improve. Moreover, we should not simply look at national rankings because our students will have to compete for jobs in a global economy.

The George W. Bush Institute has made it easy for us to compare the performance of our local school district with the performance of students around the world with its Global Report Card, which was recently updated. Here you can visit the website and see how the average student in your local school district compares to students across the globe. You may be surprised at what you find.

The average student in the Kansas City School District outperforms only 15 percent of students in other countries in math. In the Saint Louis Public School District, it is a paltry 12 percent. But do not make the mistake of thinking only students in the “big cities” are falling behind. Here is how the average student in a few other school districts compares:

Hume: 40 percent in reading, 26 percent in math

Cape Girardeau: 48 percent in reading, 29 percent in math

Springfield: 57 percent in reading, 48 percent in math

If students in Springfield were transported to Singapore, the district would only outperform 34 percent of Singapore students while students in the high-ranking Clayton School District would be at the 46thpercentile.

It is time to stop celebrating mediocrity and expect more for our children.

An Ode to Caps

Posted on December 14, 2012May 5, 2026 by Kacie Barnes (Galbraith)

Last week, a committee of the Missouri Tax Credit Review Commission reviewed the Historic Preservation Tax Credit and the Low Income Housing Tax Credit. If your eyes have not totally glazed over after that sentence, I thank you for your dedication.

The commission agreed on reducing historic tax credit spending. Unfortunately, the power to make changes does not lay with the commission members. And, to twist the knife a little more, the suggested cut is not really much of a cut.

Policy Analyst Patrick Ishmael wrote about the revival of the Tax Credit Review Commission and questioned how it will be different this time. It is great for policymakers to suggest that the state reduce or eliminate failing credits, but after the 2010 review, there was no reform. Why should we believe that recommendations will be acted upon this time?

To be honest, tax credits make me feel like Homer Simpson when he cried that he is a rageaholic (cannot live without ‘rageahol’). We need major reform here. But if the historic credit reduction is actually enacted, I will take it as a step in the right direction. Currently, there is a $140 million cap on historic credits (with some exceptions for smaller projects). The suggested cap would reduce it to $90 million.

It appears to be a $50 million cut, but like I mentioned before, it is not. Actual issuances have averaged $111 million the past four years, which is admittedly preferable to $140 million. But what is the point of a cap if it does not help limit spending? If the cap is lowered to $90 million now, there would be a real limit imposed for the first time.

Missouri Gov. Jay Nixon claims he is committed to fiscal responsibility and wants to reduce spending on tax credits so we can focus our resources on critical priorities. We need to see real changes that are consistent with this message. There are other solutions that would help the state more effectively than issuing tax credits.

A Smaller and Smaller Piece of the (Tax) Pie, Part II

Posted on December 14, 2012May 5, 2026 by Michael Rathbone

Missouri’s general revenue collections are above what they were at the same time last year ($3.04 billion vs. $2.82 billion). The state can be thankful for the increase in personal income tax collections for that. However, corporate/franchise tax receipts are lower than they were at the same time last year ($137 million this year vs. $146 million last year).

This is not the first time I have written about how the corporate income tax makes up a small part of net general revenue receipts. According to my calculations, at no time over the past 10 years have net corporate income tax receipts comprised more than 5 percent of total net general revenue. Last year (fiscal year 2012), net corporate income tax receipts made up just 3.75 percent of total net general revenue.

Corporate/franchise taxes are small and keep decreasing, in part because the franchise tax is being phased out. We can pay for a corporate income tax reduction by eliminating so-called economic development tax credits. My colleague Patrick Ishmael and I recently released an essay that demonstrates how this cut would work.

Corporate income taxes are among the most economically harmful taxes that can be levied. Considering that net corporate tax receipts make up just 3.75 percent of general revenues, it should not be too difficult to eliminate the corporate income tax without seriously affecting state services.

The Best and Worst Run States . . . Where Missouri Ranks

Posted on December 13, 2012May 5, 2026 by Michael Rathbone

24/7 Wall St., a financial news and opinion website, recently released its latest version of the best and worst run states in the country. You will be heartened to know that we are not California, which to our surprise (not really) ranked dead last. On the other hand, neither are we North Dakota, which ranked No. 1 in 2012. Missouri ranks 25th overall (down from 20th the previous year).

Here are some key points the study found regarding Missouri:

Perfect credit rating from both Standard & Poor’s and Moody’s (ratings from ratings agencies are not always perfect, see: sub-prime mortgage crisis)

Unemployment rate for 2011: 8.6 percent (national unemployment rate: 8.9 percent)

State spending has been reduced in areas such as higher education for the past three years (fiscal years 2010-12) and Missouri residents refuse to change course.

This is not the first time the Show-Me Institute has analyzed a study that ranked Missouri in comparison to other states. These rankings depend on the weights the authors assign to the different measures they analyze. It is difficult to judge these rankings one way or another because they are partially subjective.

However, while Missouri might be in the middle of these rankings, on unfiltered measures such as real GDP (the measure of all the final goods and services that are produced within Missouri’s borders) it is among the worst economic performers in the country. In fact, based on more recent measures, Missouri is barely growing and is placed firmly in the bottom quintile of states for growth.

If it hopes to improve, Missouri should consider implementing Education Savings Accounts, eliminating the state’s corporate income tax or even eliminating the state’s income tax, and reforming occupational licensing.

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

Posted on December 12, 2012May 5, 2026 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.

What is so Common about the Common Core?

Posted on December 12, 2012May 5, 2026 by James V. Shuls

I have heard the old adage, “the plural of anecdote isn’t data.” Nevertheless, on two occasions recently I had the opportunity to speak with teachers in public schools about the Common Core. If you are unaware, the Common Core is a series of standards for K-12 education. The standards were not developed nationally, but states have been highly incentivized (read coerced) to adopt them.

When I asked these two teachers about the changes in their districts (one teacher was from the Kansas City area, the other from the Saint Louis area) I was surprised by the commonality in their responses. It seems it is not just the standards that are common, but also the criticisms.

Though they have never met and work in completely different districts, both lamented about the increased testing associated with the Common Core.

Add testing to the growing list of complaints associated with these new standards, including:

Their overall lack of rigor.

The math standards eliminate Algebra I in the eighth grade.

The tremendous costs associated with implementing the standards. Professional development, textbooks, and technology alone may cost Missouri more than $325 million.

The most interesting thing about the Common Core, in my opinion, is that our state adopted the standards with little public knowledge. Gov. Jay Nixon signed Missouri onto the initiative in August of 2009, before the standards were even drafted. Then in June of 2010, shortly after their public release, the Missouri State Board of Education adopted the standards. Thus, millions of dollars were committed and the future of Missouri’s education system was determined by a fiat rather than by the will of the people.

Bill Evers, former U.S. Assistant Secretary of Education, recently spoke with the Independence Institute’s Ben Degrow about the Common Core and provides a nice overview of the issues.

Have more Common Core stories? Feel free to share them with me at [email protected] or on Twitter @shulsie.

What is a Liberty-Loving Teacher to Do?

Posted on December 10, 2012May 5, 2026 by James V. Shuls

On a previous blog post, I explained why many teachers join a teachers’ union. In my estimation, the biggest reason is to get the liability insurance in case of a lawsuit. What many teachers do not realize is how many teachers’ unions are blatantly partisan.

On Dec. 4, the California Teacher’s Union released a video titled “Tax the Rich: An Animated Fairy Tale.”

The cartoon, which smacks of indoctrination of children, attacks rich people as the villains of most of our society’s ills. The greedy rich decided they did not want to pay taxes. So they bought politicians, paid for private schools, and private security. They basically stole all of their money from the 99 percent.

It is natural to want some liability coverage, but there must be a way to get it without supporting an organization that seeks to indoctrinate children with anti-rich propaganda, opposes school choice, balks at performance pay, and protects low-performing teachers.

One option may be the Association of American Educators (AAE).

As one AAE member says, “The AAE does not go out and lobby the government for random political issues. What they do is they handle only education issues.”

The AAE also is generally supportive of many sensible education reform initiatives. Such as:

School Choice

“Parents must have the choice of where to educate their individual child. And as educators we must recognize the possibilities for advancement and positive growth in the profession through school choice.”

Performance Pay

“Teachers in a modern workforce do not necessarily need one-size-fits-all salary and benefits packages that do little to recognize teachers who go above and beyond in their schools. “

Tenure Reform

“Further, AAE is against the ‘last hired, first fired’ policy by which newer teachers, regardless of performance are let go first to meet lay-off requirements.”

As a former public school teacher, I know there are many liberty-loving individuals in the classroom and there are probably more organizations that support those values and teachers.

If you are a teacher who supports free-market ideals, I would love to hear from you. Or if you know of other organizations that Missouri teachers should know about, please let me know.

You can reach me at [email protected] or on Twitter @Shulsie

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