A ‘Historic’ Surge

The tuition hikes that the University of Missouri is instituting are affecting real families all across the state. The Show-Me Institute spoke to one family from Saint Charles County who will be doubly impacted. With an annual increase of $260 per student, the family’s mom, Laura (not her real name), said they will have to pay an additional $520 for their two children to attend Mizzou. Will this extra $520 bankrupt the family? It will not, but it will force them to cut back on some much-needed home and auto repairs.

Due to faulty electrical outlets in the home’s bathrooms, Laura said that they are forced to dry their hair in the kitchen, and with the extra money needed to pay for college, they will be forced to continue this practice. Laura also said that the family may have to forego putting new tires on their son’s car. It is not difficult to imagine the unnecessary worry this young man’s parents will feel when their son drives to and from Columbia on old and worn out tires, especially if it is raining or snowing.

While the University of Missouri raises tuition on families such as the one described above due to state cuts in higher education funding, historic tax credit authorizations in Missouri are on an upswing. In fact, the $91 million in Historic Preservation tax credits authorized in the first six months of fiscal year 2012 have almost surpassed state estimates for Historic Preservation authorizations for the entire year.

The question should be asked whether handing out tax credits of questionable value (like the $1 million tax credit issued to Norwood Hills Country Club)  is worth more to the citizens of the state than preventing a tuition increase that will affect families across the state.

Considering that the state of Missouri faces a large budget shortfall, it would behoove the state to make sure that, at the very least, tax credits go to worthwhile projects. A possible avenue for oversight of the tax credit system would be to subject tax credits to the appropriations process. Missouri Sen. Jason Crowell (R-Dist. 27) has submitted a bill (SB 436) that does just that, and there are items in the bill that deserve commendation. Subjecting tax credits to appropriations would enable the state to keep closer tabs on these programs and help ensure that questionable issuances are examined. Considering the price that all Missourians pay for these tax credits, is subjecting tax credits to some sort of appropriations process too much to ask?

Missouri Should Lower Barriers For Out-of-State Charitable Medical Missions

Licensing laws are typically seen as a way to ensure that members of a profession are well-trained and, thus, their customers well-served and protected. But could overly restrictive licensing rules actually be bad for customers’ health? There is reason to believe so; restrictive and ambiguous Missouri licensing requirements in health care have kept, and are keeping, at least one charitable medical group that provides free medical care to the needy from operating freely in the state. That group: Remote Area Medical (RAM).

The brainchild of British transplant Stan Brock, RAM started as a relief service abroad. But for many years it also has turned its services inward to help America’s neediest, providing medical care to those who otherwise would not have received it. Brock told 60 Minutes in a 2008 report (featured above) that his organization “operate[s] entirely on the generosity of the American people.” Like so many families, stretching those sometimes “little checks” is how RAM makes ends meet. In addition, thousands of highly-trained and medically-licensed volunteers have traveled the country assisting Brock’s work for decades by providing their professional services free of charge.

Yet a recurring stumbling block as RAM visits states is artificial barriers to entry – that is, state laws that prevent out-of-state volunteers from easily donating their medical expertise because of burdensome, and sometimes expensive, licensing requirements. During a phone call last week, Mr. Brock told me that RAM wanted to do more in Missouri, but onerous state requirements — such as requiring licensed in-state medical personnel to participate in a clinic before RAM could provide its services — had stifled his organization on several occasions. Most recently, he said, Missouri regulations prevented RAM from providing free eyeglasses to the southwest corner of the state.

But Missouri could make it easier for groups like RAM to help the state’s neediest if officials relax licensing rules and explicitly allow medical professionals licensed in other states to provide their services for these charitable endeavors. Tennessee has led the way on this policy front.

In 1995, Tennessee enacted the “Volunteer Health Care Services Act,” a reform of its medical licensing law which allowed relief organizations like RAM to bring out-of-state medical professionals to help Tennessee’s poor without putting professionals licensed in their home states through an arduous and unnecessary process of re-licensing. If a doctor is licensed to practice in her home state, RAM can bring that doctor to provide her services free of charge to Tennessee’s medically-underserved. It is, in short, a clear and unambiguous law that ensures the state’s neediest are served ably and safely.

The good news? The reform movement appears to be spreading, with a handful of states following Tennessee’s lead in whole or in part. Oklahoma has reformed its laws to accommodate organizations like RAM, and more recently, Connecticut and Illinois passed legislation that allows organizations like RAM greater access to its neediest citizens. Arizona currently is taking up a reform of its own laws.

Tennessee’s law is a model for the country – and a model that Missouri, one of Tennessee’s neighbors, would do well to emulate. Allowing organizations like RAM to freely enter Missouri would go a long way towards improving care to Missouri’s underserved. When burdensome licensing laws and medical regulation interfere with the delivery of skilled, safe, and desperately needed services to America’s poor, the system is in need of reform. For Missouri, relaxing licensing laws for charitable groups like RAM would be a step in the right direction.

Is This The Sort Of Development Missourians Expected?

Meet Norwood Hills Country Club. In 2006, the state issued more than $1.1 million in state Historic Preservation tax credits (HPTC) to the facility.

Norwood Overview from Norwood Hills CC on Vimeo.

Norwood Hills Country Club first opened in 1922. A successful private club in north Saint Louis, it hosted the PGA Championship in 1948. In 2005, the club sought and received designation as an historic landmark in the federal government’s National Register of Historic Places. As a designated historic landmark, it was eligible for Historic Preservation tax credits from Missouri, and the state issued credits to Norwood the next year, in 2006.

norwood

Whether credits for a country club are an appropriate use of taxpayer money is a question worth considering. The Missouri Department of Economic Development administers the Historic Preservation tax credit program, so tax credits in that program are imbued with a presumption that a fundamental objective of the credit is economic growth. Indeed, entire studies have been devoted to trying to measure the HPTC’s impact in terms of jobs and growth. But does granting historic preservation credits to a private country club that markets a $1,000 entry-level membership package really promote economic growth? Is that what Missourians thought they were paying for by offering these credits?

The HPTC is often defended as a way of correcting market failures and increasing positive externalities — that is, giving an intangible boost to the standard of living of those who can see and enjoy the property. Is it likely that there was a market failure at Norwood Hills that the state had to step in and correct? And is it reasonable to believe that Missourians will really be able to enjoy the externalities promoted as a result of sending their tax dollars to a private club?

To be clear, determining whether a building is “historic” is oftentimes in the eye of the beholder. But taxpayers have ample reason to question whether the state should be granting tax credits to country clubs, not only on grounds of whether an economic development objective is really being advanced, but also whether society is really getting a “positive externality” when it subsidizes an operational private club and golf course. And certainly, sometimes buildings are properly considered “historic” by virtue of their age alone, but if the “age” of a building is enough to get an HPTC, what should be the cut-off year? 1800? 1900? 1950? 1980? The later that date gets, the more important it is that the reverse of the question is asked: how many buildings would not be considered historic under the tax credit system?

Moreover, the proximity in time between historic designation and tax credit issuance is troubling. Did Missouri issue a tax credit to preserve an historic landmark, or was an historic landmark created to access Missouri tax credits?

Lastly and more generally, what has the state foregone – what “unseen” projects and tax cuts have gone by the wayside – because the state has been putting money into projects like Norwood Hills?

policy bfast clips

 

 

At the Show-Me Institute’s policy breakfast on Feb. 8 titled “Rich State, Poor States”, Jonathan Williams of ALEC said people are voting with their feet in this country, and moving to states that have the lowest tax burdens. . . .

“Rich States, Poor States” was the theme of the Show-Me Institute policy breakfast on Feb. 8. Show-Me Institute chief economist Joe Haslag said the data is clear. Missouri is falling behind the country.

Missouri’s Budget Shortfall: Two Legislators’ Views

At the Show-Me Forum in Columbia on Monday, February 6, State Senator Kurt Schaefer and State Representative Chris Kelly discussed the state of the state. Both agreed Missouri doesn’t have enough revenues. Sen. Schaefer said one area to look to make up the shortfall is state tax credits.


State Representative Chris Kelly and State Senator Kurt Schaefer discussed the state of the state at the Show-Me Forum in Columbia on Monday, February 6. Both agree Missouri doesn’t have enough revenues, but Rep. Kelly insists the shortfall shouldn’t come from education.

Adios, MOSIRA?

That is the word on the street. This morning, news broke that a Cole County circuit judge had ruled that the 2011 MOSIRA law, an incentive program passed to promote bioscience research in Missouri, was unconstitutional as written, and to the chagrin of MOSIRA supporters, it does not look like a legislative fix will be coming this year (emphasis mine):

The reason, Mayer said, is many in the Senate will demand comprehensive tax credit reform — an idea that died twice last year over difference between Republican leaders — before signing off on the fund, known as the Missouri Science and Innovation Reinvestment Act (MOSIRA).

“I don’t think the Senate can pass MOSIRA without comprehensive reforms to our state tax credits,” Mayer said. “That was true during the special session and that’s true now.”

The Senate passed the MOSIRA bill with a contingency clause that said it couldn’t go into effect unless a separate tax credit bill also won approval. Even though the House didn’t approve of the contingency clause it passed the bill anyway in the hope that it would hold up in court.

In a ruling Tuesday morning, Cole County Circuit Judge Dan Green concluded that the contingency clause was unconstitutional, and because he believes it was vital for the legislation to pass and “may well have been a last-ditch attempt to garner enough votes,” the entire fund is unconstitutional.

The “separate tax credit bill” referenced here originally included the Aerotropolis credits, but when the Missouri Senate largely removed those credits from the bill, the Missouri House declined to pass the tax credit bill in any form. That decision, it appears, has sealed MOSIRA’s fate, at least for now; everyone expects that the case will be appealed to the Missouri Supreme Court, and there always is the possibility that Judge Green’s decision could be overruled. That said, it is very good to see legislators recognizing the gravity of the tax credit problem. Legislators should not be resurrecting the same sorts of failed tax credit ideas and tax incentive policies over and over again: abetting a tax incentive system that, particularly since the late 1970s, has grown fatter and fatter as the decades have passed.

Try something new: reduce taxes for everyone. Missouri can be more competitive, and it can start by eschewing opportunities to constantly pick and choose who benefits from the state’s largesse.

A Free Speech Win In Saint Louis

St. Louis resident Jim Roos, in front of the offending sign. <p>Photo by the Institute for Justice.

St. Louis resident Jim Roos, in front of the offending sign. Photo by the Institute for Justice.

Good news for Saint Louisans: That “End Eminent Domain Abuse” sign that you can see at the intersection of Hwys. 44 and 55 is here to stay. In a partial free speech victory, the U.S. Supreme Court declined to hear the appeal of a circuit court ruling that struck down portions of Saint Louis City’s sign code for violating the free speech clause of the First Amendment.

For those of us in the Midwest, this is great news. This means that government cannot regulate signs and murals based on their content. And, as a result, the St. Louis Post-Dispatch reports that the offending portion of the city’s zoning code may have to be rewritten.

This is also a meaningful victory for anti-eminent domain activists in Saint Louis. Jim Roos, the plaintiff (pictured above), has had more than his fair share of struggles with city government. Using eminent domain, the city took 24 different properties from Sanctuary in the Ordinary, or managed by Neighborhood Enterprises, a nonprofit that provides low-income housing that Roos founded.

In protest, Roos painted the large “End Eminent Domain Abuse” sign on another property threatened with eminent domain. As a result, the city hit Roos with a citation, and said that a permit was required. He applied for a permit, only to be denied.  We wrote about this issue in 2011, in a post aptly titled, “Using Your Property to Criticize Us for Taking Your Property? You’d Better Believe That’s Illegal.”

Fortunately, Roos  and the Institute for Justice, a nonprofit libertarian public interest law firm, continued to challenge the city’s zoning code, leading to the partial free speech victory today.

Those of us in the 8th Circuit (Missouri, Arkansas, Iowa, Minnesota, Nebraska, North Dakota, and South Dakota) can take solace in knowing that our First Amendment rights are a little more secure. However, as Michael Bindas, the Institute for Justice attorney who represents Roos, pointed out, “Unfortunately, citizens in some other federal circuits do not enjoy the same protections that Jim’s case secured.”

Hopefully this case will help give victims of eminent domain abuse the courage to stand up and complain about it. Of course, the best victory for property owners would be for laws that allow eminent domain abuse to be repealed.

You can learn more about Jim Roos and the Institute for Justice here.

Not All Ideas Are Bad Ideas

It seems that the Show-Me Institute can be pretty hard on the state government sometimes. For that, we make no apologies (it is in fact one of our Prime Directives). However, while we may be tough, we also strive to be fair. That is why I must commend the effort currently underway in the Missouri Legislature to reform our tax structure. Senate Bill 472, sponsored by Missouri Sen. Will Kraus (R-Dist. 8), would modify various tax credit programs and require the Missouri Department of Revenue to apply any increase in revenue generated from these modifications to a decrease in the corporate income tax rate.

Some (but by no means all — Historic Preservation and Low-Income Housing are capped, but not eliminated) of the various tax credits that will be repealed include the rolling stock tax credit, the charcoal producers tax credit, and my favorite (not really), the wine and grape production tax credit. The money saved if the state abolished these tax credits would go toward offsetting revenue lost if the corporate income tax is reduced. In fact, the fiscal note for this bill states that there will probably be little to no net impact on general and total state revenue. However, I would caution that estimating the fiscal impact when it comes to tax credits is difficult, because it is difficult to determine when or if tax credits will be redeemed.

I have made the case before about why corporate income taxes should be cut (or eliminated), but I want to summarize the benefits of a lower corporate income tax. Lower corporate income taxes are fair because they apply to all corporations and not favored industries. Lower corporate income taxes also allow a company to reinvest more of its money into the company, and they can make a company more competitive compared to companies in other states, without having to resort to corporate handouts like tax credits. Combined with the elimination of some tax credits, which have a record of not being successful in generating economic development, SB 472 has potential to do some good for a state that ranks 49th in job creation.

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