Yesterday, the St. Louis Post-Dispatch ran an interesting article about area charter schools. Yours truly was quoted on the closing of the Imagine charter schools. I maintain that bad schools should close; that is the beauty of school choice. For more on the closing of the Imagine schools, check out this post by former Show-Me Institute Policy Analyst Audrey Spalding.
So, How About That Unemployment Rate?
There are 7,700 fewer people working in Missouri in July than there were in June. Think about that for a moment. That is 7,700 people who could be bringing home paychecks who now have to find some way to pay the bills. That is 7,700 people whose lives have been disrupted because a once solid thing on which they could count, their jobs, has gone. This figure tells a story that a .1 percent jump in the unemployment rate cannot tell.
Is this drop in employment an anomaly for Missouri? Sadly, it is not. From 2010-11, total employment in Missouri fell from 2.651 million to 2.632 million. This is the second worst performance in the country, just slightly better than Wisconsin. In fact, Missouri’s total employment declined from 1997-2011. This performance is not a blip, it is not an anomaly nor a fluke. This is a sad trend for a state that can and should do better. At the Show-Me Institute, we have released an essay that details other ways Missouri has underperformed economically when compared to the rest of the country.
However, it does not have to be this way. The Show-Me Institute has discussed various ways that Missouri could improve its economic situation. These are proposals that will benefit the state.
More Bad News for Missouri Competitiveness
With the stroke of a pen, Kansas Gov. Sam Brownback has changed the competitive landscape in the Midwest. What happens next will depend upon how Missouri and other Midwestern states respond to a bill the Kansas Legislature passed at the end of the last session and Brownback signed into law.
The new law reduces the state’s top tax on wage income from 6.45 percent to 4.9 percent. Much more dramatically, however, it also abolishes the state income tax for many entrepreneurs and small business owners.
Under the new law, partnerships, S-corporations, and sole proprietorships are now exempt from paying any state income tax in Kansas. For example, if the owner of an S-corporation has $10 million in sales and $500,000 in “pass-through income” — meaning income after wages and other expenses — he would pay zero taxes to the state of Kansas on his $500,000 income.
Officials in Kansas make no secret of the fact that they want to promote their state as a Midwestern tax haven — appealing to entrepreneurs and small businesses in neighboring states, including Missouri, which has a top individual income tax rate of 6 percent, or $30,000 on $500,000 in income.
If small business owners in Missouri, Oklahoma, or other states want the same deal that Kansas is now offering to more than 190,000 small businesses, they just need to relocate to the Sunflower state.
How big a threat does this pose to the future growth and prosperity of our state? As economists, we can offer a few back-of-the-envelope calculations.
Missouri entrepreneurs in the 11 counties bordering Kansas would presumably be among the first to move. The population within these counties is 1.48 million people, or just more than 24 percent of the state’s total. For 2010, the total aggregate income of people filing individual income tax forms in Missouri for partnerships, S-corporations, limited liability partnerships, and sole proprietorships is $13.2 billion. Based on the population distribution, we would therefore expect that people with pass-through income in the border counties would account for roughly 24 percent of the $13.2 billion, or $3.17 billion.
Let us suppose that 10 percent of small businesses and entrepreneurs in those border counties deemed it worthwhile to move. That would translate into a $317 million reduction in goods and services and a roughly 1 percent reduction in income in the border counties. Based on 2011 income per worker, Missouri would see about 4,500 jobs go across the border.
Of course, people in other parts of Missouri might also elect to take advantage of the welcome mat that Kansas has put out for entrepreneurs and small business owners and that would further erode the base of our already weak and under-performing state economy. Entrepreneurs who might otherwise have launched their new business in Missouri may choose to launch it in Kansas instead.
Oklahoma Gov. Mary Fallin is advocating a reduction in her state’s top income tax rate to 4.5 percent from the current 5.25 percent, and she has cited the new Kansas law as cause for urgency. “Oklahoma needs to compete with our neighbors,” Fallin said. “To do that we need to lower our income tax.”
In a recent press conference, Missouri Gov. Jay Nixon sounded strangely complacent, saying “we haven’t spent a great deal of time talking about what they (Kansas) did.” With all due respect, we suggest that this is something worth discussing.
Our lawmakers need to start thinking seriously about creating a more favorable tax regime for economic growth and job formation in Missouri.
Joseph Haslag is chief economist and Michael Podgursky is a co-founder and director of the Show-Me Institute, which promotes market solutions for Missouri public policy.
A Victory For Taxpayers: Kansas City May Privatize Airport Shuttle Service
Via Tony’s Kansas City, some very good news on the privatization front. The Kansas City Business Journal reports that Kansas City International Airport (KCI) may contract out its shuttle service to Standard Parking, which apparently already operates many of the airport’s parking lots. Not only would privatizing shuttle service save the airport money, but it would also bring KCI in line with many other airports that have already privatized the service.
The five-year contract would be worth $3.6 million a year, which Mark VanLoh, director of the aviation department, said would save the airport about $7 million during the length of the agreement. . . .
VanLoh said KCI (Code: MCI) is one of the only U.S. airports still running its own shuttles, and the costs and insurance headaches have gotten to be too much.
For example, the shuttles have been involved in about 50 accidents during the past two and a half years. Half of those resulted in lawsuits, with the city paying an average of $200,000 each. Under the contract, Standard would take over the insurance obligations.
The airport saves money, Standard makes money, and the service to customers continues. Sounds win-win to me. Indeed, Kansas City (and the state generally) should consider privatizing more of its services. Fortunately, the Show-Me Institute has a handy dandy list of proposals worth a look. The airport’s move is a step in the right direction.
Who is Hurt by Eminent Domain Abuse and TIF in Richmond Heights? – Part 3
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.
KIPP Inspire Academy: Steady Improvement in Student Achievement
On Wednesday, I recounted my visit to KIPP (Knowledge Is Power Program) Inspire Academy, also known as KIA, in South Saint Louis. I mentioned that KIA’s executive director, Kelly Garrett, was excited about the school’s performance on the state standardized tests. I have since been able to crunch the numbers myself and the results look good.
Below I display a graph of KIA student achievement in math and communication arts. Please note, the graph has two separate figures for each subject, cohort and overall. The overall figure contains all students tested in a specific subject. The cohort figure follows one group of students as they progress through the grades. Thus it contains students in fifth grade in 2010, sixth in 2011, and seventh in 2012. I display the cohort figure because Kelly and others involved with KIPP believe students continue to grow the longer they stay with KIPP.
As it turns out, the cohort of KIA students have shown impressive growth in both math and communication arts for the past two years. As always, one must be concerned about selective attrition, where lower performing students leave the school at faster rates. Without having examined the attrition rates, I could not address that directly. Nevertheless, the test score results are improving not only for the cohort of students, but for all students.
It seems safe to say, at least from this snapshot, that KIA has a positive impact on student achievement. I hope to see these numbers grow even more in the coming year.
A Voter ID Victory In Pennsylvania: Missouri, Take Note
Yesterday, a Pennsylvania judge rejected a challenge to a state law that requires photo identification to vote in Pennsylvania. Far from a radical finding, the Washington Post reminds us that photo ID requirements are legal under the U.S. Constitution according to the U.S. Supreme Court, and, in the Court’s view, are a reasonable step toward addressing a serious public concern.
While the [Pennsylvania] challenge was brought under the state constitution, Simpson’s opinion was heavily influenced by the U.S. Supreme Court’s 2008 decision that seemed to give states the green light to require voters to present photo IDs. In the court’s lead opinion, Justice John Paul Stevens, now retired, said that such a law in Indiana was a reasonable reaction to the threat of voter fraud, “amply justified by the valid interest in protecting the integrity and reliability of the electoral process.”
The Supreme Court’s ruling in that case had a very clear majority, 6-3, and received the support of one of the most liberal justices on the Court at that time, John Paul Stevens. Photo voter ID is not some radical proposal. It is a rational reaction to the concerns attendant to a system where we want every legal voter’s voice to be heard. As I have argued, if even 1 percent of the vote is fraudulent in an election, how many important races could that swing? If there are ways to prevent that sort of fraud and reaffirm our commitment to ensuring voters’ votes are protected, why wouldn’t we pursue them? Missouri elections would benefit from similar photo ID rules.
Shenanigans In Ellisville!!!
At tonight’s Ellisville City Council meeting, a charter amendment is being introduced to amend the rules for recalling elected officials in Ellisville. Then, because of the looming deadline to get things on the November ballot, they have scheduled a special meeting for the next night (Thursday) to pass the charter amendment because they likely will not have unanimous support to pass it in one night.
“They,” of course, are the “Walmart 5,” the members of the city council who supported the Tax Increment Financing (TIF) for Walmart despite substantial community opposition. There is a recall effort underway in Ellisville against some of the “Walmart 5” (not all are eligible for recall for technical reasons). The TIF was a terrible idea, but this recall charter change idea is so awful that it makes the TIF idea look like the invention of the wheel.
The attempt to alter the rules of the charter after citizens have instituted a recall effort is one of the most atrocious abuses of power I have seen in Missouri in the 20 years I have been following politics and government. Thankfully, even the Walmart 5 cannot find a way around the rule that voters must approve charter changes. Hopefully, this naked attempt to silence widespread opposition to the TIF will fail, either at the polls or through a successful blocking of it in the next few nights.
Tom Pendergast is not dead. He just moved to West County.
Who is Hurt by Eminent Domain Abuse and TIF in Richmond Heights? – Part 2
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.
