Virtual learning isn’t the future…it’s here right now! Blended with traditional education, it can reform school districts, cut costs and help students. Show-Me intern Mary Kate Hopkins has more…
Rising Taxes And Tax Giveaways In Kansas City
In two weeks, Kansas City voters will consider a proposal which would eliminate the city’s land tax and replace it with a sales tax, an issue which Show-Me’s David Stokes and Joe Haslag wrote about last week. Beyond the policy points that Stokes and Haslag raise, this land tax/sales tax swap, as presented to voters, would result in a net tax increase for Kansas Citians. Unfortunately, some supporters of the change have been less than transparent in explaining that aspect of the measure.
Tax hikes are troubling under most circumstances anyway, but they are particularly troubling in the context of development cultures where tax incentives are running amok. As the Kansas City Star‘s Dave Helling astutely notes today, the proposed tax hike would not only apply to both struggling and prosperous Kansas City neighborhoods, but the tax revenue would not be wholly plowed back into improving public services. Rather, millions would go to supporting city Tax Increment Financing (TIF) projects that, in many instances, probably should not have received TIF anyway.
“The first TIF proposal that reaches my desk had darn well better be from the east side,” [former Kansas City Mayor Mark Funkhauser] thundered, promising to focus the subsidy on the city’s poorest neighborhoods.
Of course, the first TIF proposal to reach Funkhouser’s desk wasn’t really from the east side. He signed it anyway. […]
Never mind. His idea was sound. [ . . . ]
Boosters of Question 1 promise to eliminate several city levies in exchange for a half-cent sales tax hike. They don’t say it, but passing Question 1 would also unquestionably increase the city’s overall tax burden, by about $24 million a year, money that would come in part from the city’s poorest residents.
That might be a good deal if all that extra $24 million went for better streets or cleaner parks. Alas, about $4 million would go to — you guessed it — reimbursements for TIF projects, possibly including that new hotel near the Plaza.
For those unfamiliar with TIF, it allows incremental increases in taxes from a development to be dedicated to certain costs of that development. Originally intended to help struggling communities attract investment, TIF has grown to be used as a standard tax incentive regardless of the economic status of a development’s surrounding area.
Stokes and other Show-Me scholars have long suggested that TIF is overdue for a reform. This latest tax proposal serves to reaffirm that proposition. Raising taxes is typically a suspect proposition, but raising taxes and transferring some of that money to city projects in tony areas through tax incentives meant to help struggling communities is especially disappointing. Kansas City already has some of the highest tax rates in the Midwest, and along with the ballot proposition that would raise taxes, officials are considering raising taxes further for a vanity trolley car downtown.
Does this sound like a sustainable trajectory? Given the tax hike and transfer, does this even sound like a just trajectory, a trajectory that treats Kansas Citians and their hard-earned money appropriately?
How to Improve Healthcare Without Obamacare
In this video, Dr. Charles Willey, MD, explains some simple steps that could be taken to improve healthcare in America — no government mandate necessary.
Simple Questions: Where Do You Stand On Tax Credits? And What Would You Do About Them?
As the summer has progressed, substantive and thoughtful policy discussions appear to have finally broken back onto the political stage — a stage too often left vacant when “business as usual” returns to the state capitol and elsewhere. On TV and in print, the conversation about the state’s future has reached a fevered pitch, and as such, I think now is a good time to again revisit the question of tax credit reform in Missouri.
As Christine Harbin, Audrey Spalding, Michael Rathbone, myself, and many others have documented over the years, development tax credits have grown into a multi-billion dollar enterprise in the state, and yet Missouri’s economic fortunes have continued to decline despite this flush spending. This culminated with the state losing a U.S. House seat after the 2010 Census. Missouri is not keeping up with the rest of the country. In very real and disturbing ways, Missouri is being left behind.
The examples of policymakers seemingly failing to recognize the problem are wide-ranging, from the half-billion dollar Aerotropolis proposal that collapsed in 2011 to the revelation that even a country club was able to jump into the development tax credit conga line. The country club was able to get a cool million dollars in tax credits from the state for its trouble. And just this month, the Missouri state auditor issued a “blistering” report on the Quality Jobs Tax Credit program, which has promised that more than 45,000 jobs would be brought to the state through the program since 2005. The actual number of jobs the state says were created through the program? A fraction of the promise: 7,176. That first number is great for politicians at press conferences. That second number — the number that actually counts — is bad news for Missouri workers.
With all of that understood, I wonder: Do Missouri’s policymakers believe development tax credits are a real and serious problem in the state? What would they do to reform them? Or would they, to the state’s detriment, be OK with another round of “business as usual” in Jefferson City?
Warrantless Fears Of Tolling In Warrenton
Yesterday, I testified at the Missouri Blue Ribbon Citizens’ Commission on Transportation meeting in Hannibal. It was a good public forum: well-attended, well-run by its co-chairs, former Sen. Bill McKenna and former House Speaker Rod Jetton, and it was interesting. There was less rent-seeking in the public comments than I expected (Thank you for being here. Give us X,Y, and Z!).
The city of Warrenton, in Warren County, was well-represented. Several people in various city capacities spoke. Warrenton is located near where the proposed I-70 toll would begin, according to a Missouri Department of Transportation (MoDOT) plan presented in the last session of the Missouri Legislature. Warrenton officials, to say the least, are opposed to this plan.
One city official said enacting a toll at this location would make Warrenton “a ghost town.” Others said it would devastate city businesses and cause people to move out of the city. Others said it would cause travelers, truckers, etc., to avoid the area entirely and cost Missouri tax revenue. One said a toll would put their businesses at a “competitive disadvantage.” They all have a right to their opinion; but they are all totally, completely, abjectly wrong.
You know what would put Warrenton businesses at a competitive advantage, not disadvantage? Having a new, expanded, six-lane highway serving the city and county. It is not like Missouri is inventing toll roads here. There are thriving cities along toll roads throughout the United States. They are not “ghost towns.” The entire idea of that is preposterous. Did the Lake of the Ozarks Community Bridge harm the community because it has a toll? Did Party Cove disappear when they enacted a small toll that paid for building a brand new bridge and saved drivers a half hour of driving to get across the lake?
Tolling works across the United States to build infrastructure we need while the people who benefit from it pay for it. It is human nature to fear risk more and judge benefits less than deserved. That is what I saw yesterday from civic leaders in Warrenton.
Show-Me Institute research on private financing and tolling, public-private partnerships, highway investment, and I-70 are available here.
McGraw Milhaven – David Stokes on KTRS
David Stokes has a recurring spot on McGraw Milhaven’s KTRS radio program. In this appearance, Stokes and the host discuss topics such as transportation funding in Missouri, Missouri’s relatively low excise taxes, strange and rare taxing districts, and the homeowner in Hadley township who refuses to sell and may prevent the proposed development from moving forward.
Rex Sinquefield on the Radio with Charlie Brennan
Radio Host Charlie Brennan named Rex Sinquefield one of his five
individuals “Most Crucial to the St. Louis Region” in this radio spot.
During their discussion, Rex and Charlie highlight some of the public
policies that Rex feels need changing in order to revitalize the city of
Saint Louis and the state of Missouri.
Kansas City Land Tax Should Be Expanded, Not Eliminated
It is a bad idea to eliminate Kansas City’s land tax. Almost every economist sees the advantage of land taxes. The general welfare calls for taxes that do the least harm in the form of affecting the quantities of goods or services that people ultimately care about. Nearly all economists agree that a land tax is one of those policies in which taxing land affects the value of the parcel, but does not affect the quantity of land. Henry George, Milton Friedman, Paul Samuelson, and Joseph Stiglitz all recognize the desirable properties associated with land taxation.
The land tax’s fundamental premise is straightforward. The tax collected is the product of the rate and some measure of the land. Any improvements to the land are not subject to the tax. With such a tax in place, the price of the land will change. Indeed, the price is simply the present value of the streams of future income that the land generates. Unlike most goods, the price change accompanying the tax implementation does not affect the quantity of land available. In other words, the supply of land is inelastic with respect to price. Under this rule, landowners seek the land’s use with the highest return. That is a good thing.
In addition, land taxation is easy to implement. The Kansas City version is based on assessed valuations of land already computed by various counties as part of the comprehensive property tax system. So, take the existing assessments, set the rate, compute the tax, and collect.
Kansas City is the only local government authorized to collect a land tax in Missouri. One would assume that when you are the only city in Missouri authorized to enact a tax that economists almost universally recommend, you would want to expand it and remove other, more harmful taxes, right?
Wrong. The Citizens’ Commission on Municipal Revenue (CCMR) recently recommended eliminating the land tax and replacing it with higher sales taxes. Whatever the sales tax is applied to will undoubtedly change the prices and quantities of goods and services. (As an aside, the proposed swap is not revenue neutral. The final result would be a substantial tax increase.) The CCRM, a group consisting mostly of lawyers and former government employees, did not explain why welfare would be higher under the sales tax. Rather, they pointed to the small monies collected from the land tax, which can be addressed by raising it instead of the sales tax. Other factors rendering the land tax undesirable, in their view, are its low growth rate over time, and the fact that it is confusing. They provide no analysis as to why the growth rate is low, and we frankly disagree that it is confusing. It is a tax on the value of land. What is confusing about that?
Let us be clear. The sales tax replacement will be added onto an already comparatively high local sales tax. Thus, prices for goods and services subject to the sales tax will rise and the quantity purchased within the taxing jurisdiction will fall. Consumers will find lower-priced items in neighboring towns, including those across the state line, with lower sales tax rates. The point is that every other taxable item has a higher elasticity and therefore, will cause greater welfare harm to people. If Kansas City seeks to minimize the harm, it would raise the land tax, not eliminate it.
If eliminated, Kansas City is unlikely to be able to re-implement the land tax due to changes in state law since it was first instituted. Kansas City has a tax that other cities in Missouri should envy, and economists would almost universally encourage. And this is what voters are being asked to eliminate in August. We hope Kansas City voters think twice before replacing the least harmful taxes like the land tax with less desirable substitutes.
Joseph Haslag is chief economist and David Stokes is a policy analyst at the Show-Me Institute, which promotes market solutions for Missouri public policy.
Time-tested Argument Against National Health Insurance
In this video, Dr. Palmisano relates a story from early on in his medical career, testifying before congress in 1976 that national health insurance is a bad idea.
Dr. Palmisano explains why it was a bad idea then and is a bad idea now.
