It’s Official: Payday Lending, Minimum Wage Initiatives Off November Ballot

Posted on by Patrick Ishmael

Supporters of two proposed Missouri ballot measures have thrown in the towel weeks after the Secretary of State’s office announced the initiatives had come up short on signatures. The Kansas City Star reports that the two groups pushing the measures, Missourians for Responsible Lending and Give Missourians a Raise, have decided to drop their lawsuits challenging the Secretary of State’s findings. While it is clear the issues likely are not dead in the state, it appears they are going into hibernation. The Show-Me Institute has written a great deal about both payday lending and the minimum wage, and we will have an extended examination of the latter in a paper to be published this month.

At their core, the solutions so often pushed ahead for both issues — like capping loan interest rates and raising the wage floor — share a common problem of policy. First, payday lending exists in large part because its customers cannot get credit anyplace else; payday loans are very, very expensive, but if the alternative is having your gas or electric flipped off for lack of money, it is an option many of the working poor would want to remain available. Cap payday interest rates, which are basically set to account for the risk of default, and you will have fewer payday loans, which leads to other, potentially more difficult, problems for the lenders’ former customers. One way or another, those bills have to get paid. Payday loans serve that need and risk, for a price.

Raising the minimum wage presents a similar problem. By raising the floor for what workers must get paid, employers are incentivized to hire only the most skilled labor. In fact, studies show that raising the minimum wage harms the very people it is supposed to help — those on the bottom rung of the pay scale. As David Neumark wrote for the Show-Me Institute in 2006:

When a minimum wage goes up, the higher wages don’t always go to the workers who need them most. Minimum wage laws create winners and losers — the winners see their wages and incomes rise, while the losers are unable to find jobs or to work as many hours as they would like. If the winners were mostly unskilled workers in poor families, a minimum wage increase might be worthwhile. Unfortunately, this doesn’t seem to be the case.

Put more succinctly, raising the minimum wage makes it more difficult for low-skilled workers to find employment. While raising the wage sounds on the surface like compassion, in practice, it oftentimes means anything but.

These are serious issues that deserve serious debate from both sides of the issue. For now anyway, it appears public votes will have to wait.

Stuck In The Middle: Missouri’s Academic Gains

Posted on by James V. Shuls

Last month, a few notable education scholars released a study titled Achievement Growth: International and U.S. State Trends in Student Performance. The study uses data from the National Assessment of Educational Progress (NAEP), and three tests used for international comparisons. These data allow them to compare the United States growth in terms of academic achievement with 48 other developed or developing countries. They also compared states to one another. Essentially, they are estimating how much more students in the same grade know now than they did 14 years earlier.

From 1995 to 2009, they estimate students in the United States gained “just short of the equivalent of one additional year’s worth of learning among students in their middle years of schooling.” While these gains may appear large, when they are “compared to gains made by students in other countries, the progress gains within the United States are shown to be middling, not stellar.” In all, 24 countries ranked higher than the U.S. in terms of growth and 24 ranked lower.

Missouri ranked 27th in terms of academic growth among the 41 states for which data were available. Thus, Missouri is a middling state in the middle of a middling country.

Some might claim that Missouri is faltering because we underfund education. These authors tested the funding theory and they claim “the data offer precious little support” that achievement growth can be attributed to money.

So what accounts for some states growing more than others? A variety of factors may have contributed to each state’s academic growth, including low states catching up and general economic growth (as we know, Missouri’s economic growth has not been stellar). There is also some suggestive evidence that states like Florida and North Carolina, which have enacted numerous education reforms, are seeing more growth than states that resist education reform.

One thing is certain: we cannot get out of the middle with our current strategies. We need to try something new.

On Commissions And The Fountainheads Of Reform

Posted on by Patrick Ishmael

One of the first books I read in my introduction to the liberty movement was Ayn Rand’s The Fountainhead, the tale of an unconventional architect named Howard Roark and his commitment to designing buildings consistent with his principles. About midway through the book, Roark meets with the board member of a hotel who is considering hiring Roark, and their dialogue (located, for your consumption, at this link) pretty well summarizes my general take on what “committees” and “commissions” typically do.

In short? Usually not much.

I bring this point up as a prelude to news from yesterday that the governor of Missouri has “revived” the tax credit review commission he created in 2010, a commission which included elected officials and actually offered a pretty good report on reforming tax credits in the state. Tax credits drain hundreds of millions of dollars from the budget every year, often to the benefit of questionable “economic development” projects. (See: private homes and a country club golf course.)

Of course, since that first report was produced, there has not been tax credit reform. In fact, just months after it was published, the Missouri Legislature almost passed a massive new tax credit in the Aerotropolis bill, which we vehemently criticized pretty much from start to finish.

Attempts at tax credit reform should be applauded, but what exactly will be different about the commission this time around that will make it consequential in a way it was not before? We at the Show-Me Institute have written extensively about the first round of commission hearings and findings and the wastefulness of the state’s development tax credit system. We have offered solutions, like eliminating many of these failing credits and using the savings to completely eliminate the corporate income tax. Tax credits in Missouri are a serious problem. The first commission agreed.

Is the second commission going to . . . agree again? How does that move the reform ball forward? On the national level, you are not going to see a sequel to the 9/11 Commission or the Simpson-Bowles Debt Commission, probably ever, because a “second commission” basically implies that the first commissions did not get its work done. To be clear, the first Tax Credit Review Commission delivered its product with clear recommendations. Our elected officials have not adopted them. The problem is that our political class is basically happy to pay lip service to tax credit reform, but they refuse to expend any political capital on actually reforming tax credits, whether by adopting the substance of a commission report or by reforming tax credits in some other meaningful way.

What I want to see is leadership on the issue from our elected officials, not a cycle of committee meetings where nothing gets done. To be clear, when given the opportunity, I will vigorously fight for genuine reforms before the reconstituted commission. But only the political class can make those reforms a reality — can literally change the law — and I am not convinced at this point that a new commission is going to save taxpayers more money than it wastes. May I be proven resoundingly wrong.

The Tax Credit Problem Is Still A Problem

Posted on by Michael Rathbone

The state issued more than $400 million in economic development tax credits last year, as it did the previous year and the year before that. What did all these tax credit issuances get us?

The number of jobs shrunk and we have an economy that barely grew last year. Considering the other issues that face these tax credit programs, does anybody really think that the taxpayers are getting a good bang for their bucks?

Economic development tax credits interfere with the markets by trying to determine what the future of Missouri’s economy will look like. Monkeys throwing darts have a better chance of determining the future economic needs of Missouri than bureaucrats in Jefferson City.

Meanwhile, Kansas just took a chainsaw to its personal income tax. Starting in January, 191,000 small Kansas businesses will not be paying taxes on their income. How is Missouri going to stop the avalanche of small businesses (especially those in Kansas City) from stampeding across State Line Road, with more tax credits?

The state can carry on with the same game they have been playing (and losing) for years. Or it can try something new. Patrick Ishmael and I continue to express our view that eliminating the state’s corporate income tax would help the state catch up. Eliminating the state’s corporate income tax would benefit all Missouri corporations, not just those who happen to be politically favored. It would give Missouri a leg up on Kansas (which still taxes its C-corporations) and coupled with a phase-out of some state tax credits, would not harm state revenue.

Missouri faces a critical choice. It will either keep playing the development game or it will try something new. Ditching the corporate income tax is not the cure-all, but it would be a positive first step.

Who is Hurt by Eminent Domain Abuse and TIF in Richmond Heights? – Part 4

Posted on by Josh Smith

The Hadley Township community in Saint Louis County is another example of the devastation that Tax Increment Financing (TIF) and eminent domain abuse in Missouri can cause. Residents have been stuck in a state of uncertainly for years now as the city and various developers have planned to buy and/or take their homes for commercial development. That uncertainty has had a devastating impact on the neighborhood as some residents let their properties deteriorate (understandable in the situation) while others tried valiantly to maintain their homes and the historically African-American neighborhood they love. The Show-Me Institute sat down with residents to discuss the situation in Hadley Township in this series of videos.

More background on Hadley Township

More videos in this series
Part 1
Part 2
Part 3

No, Not That Galbraith

Posted on by Kacie Barnes (Galbraith)

Hello Show-Me Daily readers. I am Kacie Galbraith, research assistant and the newest addition to the Show-Me Institute team. No relation to the economist James Galbraith (nor to his late economist father, John Kenneth), although no econ college professor could resist asking whether I was part of the family. Originally from the Garden State, I completed college and a master’s degree in New York before moving to Saint Louis, where I obtained firsthand local government experience working for the City of University City.

Due to my background and interest in economics (B.A. at New York University) and public administration (M.P.A. – Syracuse University), Missouri state and local policy issues are important to me. I believe the people who are affected by the outcomes should make the decisions, and that those decisions should be economically viable. James Galbraith certainly would disagree with me when I say that extensive government regulation is not the answer to many problems that arise in society (go free markets, go!).

As a newbie here, I thought it would be fun to share some of my favorite Show-Me Daily blog posts:

1. He Cannot Be Serious — about a college instructor who believes he should receive unemployment benefits. Meanwhile, he would benefit more if he reconsidered his chosen career path in a field with too many competitors and not enough positions available.

2. Stadium Subsidy Surprise — a classic example of a sports stadium that is not earning enough money to be self-sufficient, which means taxpayers to the rescue. Why should we fund activities whose benefits to the local economy do not outweigh their costs?

3. If You Need a Subsidy in Chesterfield, Where Don’t You Need One? — tax credits, tax subsidies, tax giveaways — whatever you call it, it is usually an abuse of taxpayer dollars. It is simply a way to disguise government spending to make it appear somewhat more palatable.

MNEA, Where Do The Dues Go?

Posted on by James V. Shuls

Why do teachers join a union or a teachers’ association? When I was working on my bachelor’s degree in education, I recall several professors encouraging me to join because of the protection offered in the event of a lawsuit. The same thing happened after I accepted my first job. At that point, other teachers encouraged me to join. It seems many teachers, like me, join a union out of fear that there is an imminent danger of being sued. What these teachers may not realize is their money is not simply purchasing lawsuit insurance; they are supporting a highly active political organization.

Earlier this month, the Education Intelligence Agency released the 2012-13 budget for the Missouri National Education Association (MNEA). The organization expects to raise more than $7.4 million from dues that teachers pay.

Personnel costs consumer the bulk of MNEA’s budget, 66 percent. The executive director’s salary alone is $165,000 and benefits are $144,000.

MNEA also collects $180 in dues from members for the national NEA; nearly $5 million in total was collected from Missouri teachers. The NEA donates this money to a number of organizations. You can peruse a complete list of the organizations the NEA supported in 2010-11 according to their financial disclosure report here.

MNEA members may want to know their dues are going to support many liberal and progressive causes, including $125,000 to Health Care for America Now! — a national coalition that works to “promote, defend, implement and improve the Affordable Care Act.”

Whatever the reason for joining, it is not likely the average member knows where his or her membership dues are going or the types of organizations they are supporting. There are certainly better ways of getting liability coverage than doling out money to finance causes you may not support.

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