In Saint Louis County, the TIF council recently rejected a TIF
proposal from an Ellisville Walmart, but now the City of Ellisville is
attempting to approve the subsidy proposal anyway.
As David Stokes
briefly mentions in this vlog, the sales tax status of Ellisville in Saint Louis County encourages this kind of tax-incentive competition.
Last year I wrote about a proposal to build a new streetcar that would travel along Main Street in Kansas City. At the time, I was highly skeptical of the fiscal prudence of the plan. What has happened since then? Well, another city-subsidized transit line that serves many of the same areas that the trolley would serve has fallen behind on its loan payments due to lack of ridership. Furthermore, the businesses that the proposed train would serve do not want to get stuck with the bill for it.
A government project that will not make money and its presumed customers do not want to subsidize? Over to you, City Council.
Council members late Thursday unanimously approved three measures that establish a streetcar zone for two blocks on either side of Main Street {…}. The measures … also remove a requirement that private development within the zone provide off-street parking, a move aimed at encouraging use of the streetcar and other public transit.
The rezoning is considered a necessary step as the city races to meet a March 19 deadline to apply for as much as $25 million in federal grants to help pay for the estimated $100 million project.
In short, the city’s rushing the project through to get federal dollars, with the balance of the bill coming from new taxes. It is worth noting that the residents in the trolley district who would be voting on the proposed property and sales tax increases for the project will not necessarily be the ones paying the tax, because the business owners do not necessarily live where their businesses are located. That has some entrepreneurs pretty irked. Says one property owner, “My biggest concern is taxation without representation.”
“The people who vote on it live in the apartments and lofts,” Nicholson said. “The people who pay don’t have a say. I’ve always been a supporter of streetcars, but it’s a community asset, and having business owners pay for it is problematic.”
In any case, when the people who presumably stand to benefit from the trolley do not want to pay for it, should anybody be paying for it? And if the tax is implemented as planned, how will local businesses respond? It seems the city is out of sync with even its own projects and objectives; after all, why would the city plan to build a new hotel downtown — and then turn around and raise downtown hotel taxes to the second-highest in the country to fund the trolley? Wouldn’t these initiatives be working against each other, and even if they did not, isn’t one bad idea enough for the city to take on at one time?
The trolley did not make sense in September, and it still does not make sense.
Two weeks ago I wrote about Norwood Hills Country Club in Saint Louis, which in 2006 was issued a $1.1 million Historic Preservation Tax Credit (HPTC) from the state of Missouri. Rarely do you see an extensive write-up about the “whys” and “hows” of an individual tax credit, but in July 2005, the industry publication Club & Resort Business wrote a long story about the renovations at Norwood Hills and how the club got the tax credits which helped pay for it. The article offered indispensable insight into the club’s internal tax credit discussions, with the apropos headline, reused above, “Norwood Hills CC: No Sweat and Plenty of Gain.” Notably (emphasis mine):
The two-and-a-half-year process of applying (to both state and federal agencies) was arduous and intensely bureaucratic . . . But in February of this year [2005], Norwood Hills was finally notified that it did indeed qualify to be included on the registry. And with the honor came a huge financial benefit: specifically, the ability to earn tax credits for 45 cents of every dollar spent on the renovation project.
How did the club get 45 cents on the dollar? The state HPTC offers 25 cents on the dollar for qualifying renovation expenses, but the federal version of the HPTC offers an additional 20 cents on the dollar for those expenses. At the Show-Me Institute, we talk a lot about state incentives because we are, after all, a state-focused think tank. However, taxpayers should understand that there oftentimes is more than just state money involved in renovation and building projects like this — so much government money, in fact, that nearly half of the cost of a multi-million dollar renovation to a private golf club could be underwritten with tax credits. Have taxpayers gotten their money’s worth? I report, you decide.
One other noteworthy tidbit from the article is that the original idea of making Norwood Hills a Historic Place came from a real estate developer — who apparently did not think Norwood Hills was that historic of a place (emphasis mine):
Another huge boost to the renovation project came after a Norwood Hills member who is a real estate developer suggested that the club, which hosted the 1948 PGA and has a long and rich connection with St. Louis-area social history, look into the possibility of applying for placement on the National Registry of Historic Places. Successfully securing that status, the developer member advised, would then qualify Norwood Hills, which operates as a for-profit corporation, for renovation tax credits.
“[The member] felt we could qualify not so much because of the club’s history or architecture, but because of the distinction of our members in the St. Louis community through the years,” Wright says.
If Norwood Hills as a place was not itself historic, what exactly was the Historic Preservation Tax Credit preserving? “History” is no doubt in the eyes of the beholder, but for taxpayers on the outside looking in at Norwood Hills, what they gained in this process is of considerable interest, sweat or no sweat.
I have been able to determine that the best and worst laws are in Missouri. This is the best law. But, what is the worst law? From the perspective of bad public policy, I think the law giving authority to cities to override a county TIF (tax increment financing) commission may be the worst law in the state (RSMo 99.825(2). Yesterday’s St. Louis Post-Dispatch has a long story about this issue (link via Combest).
Both the Saint Charles and Saint Louis County Executives have been leading the fight against TIF, to their great credit. They are dead right that TIF is nothing more than cities pursuing their interests at the expense of everything else, all while leading to the economically harmful scenario of developers chasing subsides.
Mayor Conrad Bowers of Bridgeton is totally wrong with this quote in defense of TIF:
“Cities have a legitimate right to do what they think is in the best interest of their community and it certainly was in our best interest to keep Walmart in the city of Bridgeton . . .”
What he is so wrong about is that by using TIF, the city is also making tax decisions that impact every other tax district in the area: school, fire, community college, zoo-museum, county, library, and more. If they were acting only with city money, that would be one thing. They are not. They are acting with everyone’s money, and in a manner that will increase Bridgeton’s sales tax collections while hurting the property tax base of all the other districts.
There is no more important policy change in Missouri than removing the ability of cities to override a county TIF commission’s rejection of a TIF proposal. For more on the Show-Me Institute’s work on TIF and the closely-related sales tax pool, check out these links.
Tune-in to KTRS 550 AM at 9 a.m. on Thurs., March 15 to hear about the negative impacts of the proposed Ellisville TIF. Show-Me Institute Policy Analyst David Stokes will be on the McGraw Show to discuss the proposal, which would finance a new Walmart Superstore, and why it is bad for both Ellisville and the rest of Saint Louis County.
Read David’s testimony that was presented to the Saint Louis County TIF Commission.
Economic Freedom Project — This is the story of how economic freedom helped to rebuild Joplin, Missouri after a devastating EF5 tornado destroyed the town in May,
2011.
The state is taxing the wrong things. For those of us who are employed, April 17 looms and a nice massage sure could relieve some stress. That is, if we have enough left in our paychecks after a visit from the taxman.
However, if Missouri would eliminate the income tax and instead tax services such as massages, shoe repair, beauty salons, and tuxedo rentals (all of which are exempt from the state sales tax), we can shift the tax burden to those who CHOOSE to use such services and away from people’s paychecks.
While pondering my income tax burden, I started to wonder just how many services are exempt from the state sales tax.
According to the latest data from the Tax Administration, out of 168 services surveyed, Missouri slapped taxes on only 26! Now, being in favor of low taxes myself, on the surface, that does not necessarily seem to be a bad thing. However, considering that all workers in the state are forced to pay income taxes, wouldn’t it be better to eliminate the exemptions for services that a select group of people use? Then the extra revenue generated could be used to lower the personal income tax. Sure, one would have to pay more for a massage, BUT he/she would have more income to pay for it. The tax burden then would shift to only people who use such services.
Would such a broad-based sales tax harm Missouri? Studies show that taxes on consumption have a less negative impact on GDP growth per capita than taxes on personal income, and personal income tax cuts for lower earners would be most effective for economic recovery.
Tennessee has not been harmed because of its reliance on a broad-based sales tax. Tennessee has no personal income tax and taxes 67 services (at a higher rate, too: 7 percent vs. 4.225 percent in Missouri) and yet it has surpassed Missouri in economic and population growth. This tax structure might not be the only reason for Tennessee’s success, but I think it is fair to say that Tennessee’s economic growth has not been hindered due to a heavy reliance on a broad-based sales tax. Considering that Missouri ranks 49th out of 50 states for job creation, broadening the sales tax base and lowering the personal income tax rates (even if it means more costly massages) does not seem like a bad idea.
This editorial in the Springfield News-Leader argues that the Missouri Legislature should follow the lead of certain charitable foundations and private donors in spending more money on higher education in the state. The piece is titled: “Passion for education now: Hopefully, state officials will learn from those who give.”
However, if the state is going to spend more on higher education, then it is going to have to take it from taxpayers. Taking is the opposite of giving. The state is not learning anything from charitable donors if it uses tax revenue, its primary source of funding, to increase spending on higher education. Spending other people’s money is not charity.
Let’s give credit where it is due; the editorial nicely honors those who have donated money toward the cause of helping others. For instance, it praises the generosity of folks like the late Lorene Thompson Brooks, who donated $4 million toward the “need-based scholarship program Corps of Opportunity and two athletic scholarships.” And it (rightfully) lauds the donors who gave $14.4 million in donations towards a university’s capital campaign – $4.4 million more than the hoped-for $10 million. I cannot help but wonder if these individuals would have been able to be so charitable if the state had taken more of their money.
The argument that the state should mimic the example of private donors, taken to its logical conclusion, undermines real charity. When the state spends more, taxpayers have less money to donate.
Let’s hope the state remains an environment of less taking and more giving.
On Tuesday, February 28, 2012, Amity Shlaes spoke at Saint Louis University's John Cook School of Business at an event organized and co-sponsored by the Show-Me Institute. The topic of the talk was Shlaes' latest book Coolidge — due for release June 26 — which discusses the presidency of Calvin Coolidge with a focus on the effectiveness of his laissez-faire policies in restoring the turbulent economy of the early 20's to "normalcy."
