Another Way To Keep Score?

Posted on by Michael Rathbone

In a league as competitive as the NFL, it serves a team well to gain any advantage available. In Major League Baseball, the bigger market teams have a competitive advantage in that they can spend more money to acquire the higher-priced free agent talent to improve their teams. However, in the NFL, there is a salary cap ($120 million for 2011). So where can a team find a competitive advantage? There are numerous ways teams can gain an edge over their rivals; one such opportunity is the tax advantage.

Like most people, NFL players have to pay taxes on their income. A team located where income tax rates are lower theoretically could offer contracts that are lower in nominal dollars but allow the players to receive higher take-home pay (for the purposes of this post, I am not taking into consideration deductions and tax loopholes, nor am I factoring in cost-of-living adjustments).  Which team’s players have the lowest income tax burden in the NFL? Well, there a couple of things to consider. First, what is the state and local income tax rate for where the players play their eight home games? Next, what is the state and local income tax rate for each of the team’s divisional foes (the players will travel for a road game against each of their divisional opponents)? The other games on a team’s schedule change from year to year, so the combined burden the players face will change somewhat from year to year.

So, for the 11 games (out of the 16 total) that a NFL team has on its schedule every year, is there a noticeable difference between the income tax burdens that the players on different teams face? From my calculations, there is (basic calculations —I only used the top marginal rate, so these numbers do not take into account the lower rates for the lower brackets and these numbers are slightly higher than they really would be). Take, for example, the Houston Texans. A team member who plays a game in Houston would pay no income taxes at either the state or local level. Therefore, for the eight games played in Houston, a Houston player will pay no income taxes. A Houston player will pay no income taxes for the road games in Jacksonville and Nashville, and $1,973.13 for the one game in Indianapolis. Therefore, the total income tax burden for a Houston Texans player making the median salary for these 11 games is $1,973.13. In contrast, a NFL player making the median salary would face a state and local income tax burden of close to $46,000 if he played for the Oakland Raiders (9.3 percent tax rate for eight games in Oakland and one game in San Diego plus the 4.63 percent and 7 percent rates for the games in Denver and Kansas City, respectively). Multiply that figure by 53 (the total number of players on the active roster) and the burden on a team’s players can increase substantially. If you used the mean salary ($1,900,000) instead of the median salary, the burden also increases.

Would this tax burden make much of a difference? I cannot say definitively (I am not an economist), but if one team had to pay a couple of million dollars, which counts against the cap, to just the income taxes, while another team only paid $100,000 or $200,000, I can tell you which team I would rather own.

When Progress and Preservation Collide

Posted on by Greg Aubuchon

Successful cultures arise from a dynamic process that balances a healthy respect for the past with an optimistic regard for the future. In this sense, progress may be understood as successive series of creative destruction and new growth. Among the many benefits of growth is an expansion of the tax base. In this world, an excessive pining for the past and the preservation of its symbols stymies growth and our future prosperity. Today, Saint Louis is confronted with this very issue. Some preservationists are attempting to block the construction of a new medical facility in Saint Louis. Their reason: to preserve the decrepit symbol of a bygone era at the expense of the city and its taxpayers.

The St. Louis Post-Dispatch recently reported the St. Louis Preservation Board’s denial of a demolition permit to Saint Louis University (SLU) to raze the vacant Pevely Dairy headquarters building at the corner of Chouteau Ave. and South Grand Blvd. (you probably recall the Pevely smokestack). SLU officials intend to build a surgical center at the site, but now claim that the historic building may scuttle their plans if the building is not leveled and removed.

Before moving on to more pressing matters, perhaps a brief review of the tax implications is in order. Saint Louis public records indicate that the two parcels in question (1001 South Grand Blvd. and 3626 Chouteau Ave.) generate approximately $93,000 in annual property tax revenues for the city. See here and here. The future tax status of the properties, however, is uncertain (I called SLU’s controller, Gregory Haney, but he declined to express his opinion or share his knowledge on the subject). If the properties fall under SLU’s non-profit status, then SLU may be tax-exempt (similar to SLU’s 200 North Grand property). On the other hand, if property ownership vests in a for-profit entity, similar to Tenet Health System’s ownership of property underlying Saint Louis University Hospital, then taxes will likely be assessed and collected.

In either case, the city still stands to gain revenues if the surgical center is developed. This would arise from earnings taxes on new jobs created at the facility (although we have advocated for the elimination of the earnings tax and for alternative payments in lieu of taxes from tax-exempt non-profits, this blog post deals with the facts and law as they currently exist). For the sake of example, at 1 percent on taxable earnings, 124 jobs at $75,000 annual salary generates $93,000 in revenues, which compensates for the loss of property tax revenues under the tax-exempt scenario, but provides additional incremental revenues to the city under the alternative scenario. In either case, both the economy and the tax base are increased, which is a good thing.

While the tax implications are interesting, perhaps the more fundamental question is why are preservationists so insistent on saving the aging Pevely headquarters building? The history of progress is replete with tear-downs and rebuilds. Progress necessarily implies creative destruction, replacing old with new. Sometimes you have to let go of the past if you are to embrace the future. The past is but a distant memory. Happiness, prosperity, and success are forward-looking concepts that reside, if at all, in the future. Saint Louis, embrace the future, not the past. The Preservation Board should reconsider its decision.

Donnybrook: Audrey Spalding Returns to KETC

Posted on by Audrey Spalding

Show-Me Institute Policy Analyst Audrey Spalding returned to Saint Louis local roundtable discussion show Donnybrook on December 15, 2011. Among the topics covered this time were: a proposal to ban texting while driving in the state of Missouri, the new leadership announced by the RCGA, the controversy surrounding Lowe’s and “All-American Muslim,” and Pujols’ departure from the Saint Louis Cardinals.

Click here to watch the video of the event.

College Loans: It Seems We ALL Have Them Now

Posted on by Michael Rathbone

Missouri Gov. Jay Nixon is asking some state universities for a loan. To be more specific, Gov. Nixon is asking the University of Missouri-Columbia, the University of Central Missouri, Truman State University, Missouri State University, and Southeast Missouri State for a total of $107 million to help fund the Missouri Department of Higher Education (DHE) due to the state’s expected budget shortfall next year. The exact size of the budget gap is not yet known. There are differing reports on its size, with some articles stating it will fall between $400 million-$600 million while the St. Louis Post Dispatch reports that the shortfall is $750 million. Regardless, the amount is not insubstantial.

However, the plan for obtaining a $107 million loan from state universities to help fund a department that gives a lot of money to . . . well, state universities, seems odd. If the state is facing a shortfall, it needs to make the tough decisions to balance the budget (i.e., cut spending and NOT raise taxes). What happens if the state faces a similar situation in fiscal year 2014? Will Nixon ask for ANOTHER loan?

There are other places in the budget that can be cut (granted, these cuts alone will not make up the amount of money needed, but they are a start) before even thinking about cutting money from the DHE, never mind resorting to this loan plan. However, that is not to say that cuts cannot be made in DHE. The DHE budget is not sacrosanct.

For example, in fiscal year 2012, the DHE gave more than $400 million ($366,765,401 from general revenue) to the University of Missouri system. If Gov. Nixon wants a $63 million loan from the University of Missouri-Columbia, why doesn’t he ask the legislature to cut $63 million from the University of Missouri system. Lawmakers can always appropriate more money in future fiscal years (not that they necessarily SHOULD). Why ask for a loan?
Prudence is a virtue for a reason. Before engaging in plans meant to avoid the task at hand, wouldn’t it be better if the state actually finds out what it is paying for and truly decide what it NEEDS to pay for, and what people can do without?

What’s Next? Indefinite Detention Of People Who Text And Drive?

Posted on by Audrey Spalding

Just in time for holiday travel, the National Transportation Safety Board (NTSB) recommended banning the use of cell phones while driving. The news came when the NTSB completed its investigation of a tragic accident that occurred in Missouri in which two people died and another 38 were injured.

This provides the perfect narrative for what some might consider to be very compelling and policy-minded journalism: A tragedy has occurred and a cell phone was involved. Shouldn’t there be a law against that?

Consider this line from the New York Times’ series of articles on the subject: “With virtually every American owning a cellphone, distracted driving has become a threat on the nation’s roads.” Indeed, in September 2009, the newspaper wrote that it was time to crack down, saying that “…texting at the wheel is a national hazard that calls for a firm federal response.”

This weekend, I heard an interview on National Public Radio with Matt Richtel, the author of several Times articles regarding the dangers of cell phone use while driving, discussing whether he considered himself to be an advocate. Richtel provided the standard journalist line, saying that he just thinks it is important to ask tough questions.

Well, here are two more.

1. Traffic fatalities, crashes, accidents, etc. have declined dramatically. If driving is safer than ever, why is there such concern?

The argument I hear again and again (most recently when I sat in on Donnybrook) is that banning cell phones while driving is about safety. However, Missourinet reports that this year, traffic fatalities are headed for a 62-year low. The same trend is seen on the national level. Fatality, injury, and crash rates have all declined substantially since 1990.

If fatalities, crashes, and injuries are down, then I hardly think that we are experiencing a “national hazard” that warrants an outright ban on cell phone use while driving. Of course, there have been accidents where cell phones were clearly the cause. However, with traffic accidents and fatalities down during the same time period that cell phones became popular, cell phone use is clearly not as dangerous as some fear.

And, even if an action comes with a small amount of risk, that does not mean we should pass a law to ban it. In fact, driving with children in the car may be more distracting than those pesky cell phones. Should we ban driving with children? Are we in the midst of a national driving-with-children epidemic?

2. How could this possibly be enforced? And, do we really want to create another vague reason to stop and question citizens?

How on earth could a ban on cell phone use be enforced? Would a police officer be able to pull you over if you look down briefly while driving? How could the officer discern whether you are talking on a hands-free phone or merely singing along to the radio?

The New York Times should know better than to advocate for additional vague ways for police to stop and question individuals. After all, the Times did an excellent study of a “stop, question, and frisk” policing policy. The newspaper found that after a drastic decline in violent crimes in New York City, the number of stops the police made increased dramatically.

Knowing that police officers can sometimes abuse their ability to stop, question, search, and detain individuals, why would anyone advocate for more vague reasons to stop and question people? Driving dangerously is already illegal. What more do cell phone ban advocates need?

Indeed, the last thing I want to see after the passage of federal legislation that allows for the indefinite detention of U.S. citizens on U.S. soil is another vague reason that police can use to stop and search citizens.

The solution is not to ban cell phones.

I do not condone texting while driving. I also am not a fan of eating while driving, or letting your adorable pet distract you while driving. Though it would make an excellent point and is legal, I do not recommend that you hold a banana to your ear and pretend to talk to it while driving.

I was in a nearly fatal car accident when my family first moved to Michigan. The culprit? Ice. Should driving in Michigan be banned from October through April? Obviously not. Instead, I support independent groups working to inform drivers about dangerous winter driving conditions. Similarly, efforts to educate drivers about the dangers of distracted driving may end up saving lives.

But an outright ban? It is an overreaction to a tragedy.

Among the Blackhawks Fans

Posted on by David Stokes

Please check out our latest video where we ask Chicago Blackhawks fans if they intend to take advantage of Missouri’s low excise taxes during their visit to Saint Louis. Intrepid intern Amy and I interviewed as many fans from Illinois as we could, asking if they knew about our low taxes on gas, cigarettes, and alcohol, and if that information was going to influence their purchasing decisions. Enjoy!

Freedom vs. Fairness: Will America Succumb to the Politics of Envy?

Posted on by Andrew B. Wilson

As the third of seven children, I grew up in a family where
fairness issues were constantly bubbling to the surface. It did us no
good. Each of us pleaded in vain for relief from the unequal
division of household chores and duties. And complain though we
would, we could not stop the uneven distribution of presents or
rewards. Our parents did more than reject complaints of unfairness;
they were quick to condemn any display of self-pity.

“Life’s not supposed to be fair,” my father said. “Stop
measuring,” my mother said. “You’re not supposed to measure.”

But this was before a new obsession in American political
life: rising concern over the issue of fairness. Many people have
started to measure – and they are plainly envious of the good
fortune of others. To borrow the words of a Japanese proverb, they
have come to think that the nail that stands up is the nail that should
be hammered down.

That was the spirit of the Occupy movement – on Wall
Street, in Oakland, and many places in between, including four
Missouri cities. Those claiming to be the 99 percent railed
incessantly against the 1 percent. In setting out to make a public
nuisance of themselves, the pity-me protest brigades let the world
know how fed up they are with the unfairness of life.

President Barack Obama has nursed and cultivated this same
sense of grievance. In a speech in Osawatomie, Kan., he invoked
fairness no fewer than 16 times. In one staccato burst, he called for
“a tax code that makes sure everybody pays their fair share . . .
(and) rebuilding the economy based on fair play, a fair shot and a
fair share.”

How fair is that?

Let me put the question another way.

How fair is it to fritter away hundreds of millions of dollars
of taxpayers’ money on green energy companies like Solyndra
which have gone bankrupt?

How fair is it to launch a trillion dollar “stimulus” program that
actually depressed the economy – leaving unemployment higher than it
was before – and then turn around and demand a whole new stimulus
program?

How fair is it to go on the greatest federal spending spree in
modern history – quadrupling the size of the annual deficit and raising
serious concerns about the creditworthiness of the United States – and
then go about the country accusing critics of your profligacy as being
solely concerned with promoting the interests of “millionaires and
billionaires”?

How fair is it to use hard times to promote the politics of envy –
when it is your own reckless rhetoric that has done so much to unsettle the
business community and your own policies that have prevented a normal
cyclic recovery from occurring?

The president and others calling for more “fairness” through
bigger government and higher levels of spending seem to have little or no
concern at how their policies and ideas are eroding economic and political
freedoms.

  • They are calling for the government’s right to claim more of
    your income to spend any way the government sees fit (e.g., on
    silly “job creation” programs that wind up going bust and
    leaving taxpayers on the hook).
  • They are using “fairness” and allegations of corporate greed
    and irresponsibility in order to justify a vast expansion in
    regulation and government control over business and
    commerce.
  • And everywhere – including here in Missouri – they aim to
    enlarge the public sector, even though that drains money and
    jobs out of the private sector.

No one would pretend that the ultimate goal of free-market
capitalism is equal outcomes for different people, regardless of talent,
effort, or sheer luck. That is a socialist agenda. But neither is the free
market – as our president suggests – a place where the rich prey
ceaselessly upon the poor and “everyone is on their own.” That is an
absurd caricature of free enterprise and more than 200 years of American
history.

In fact, the essence of free-market capitalism is voluntary
exchange for mutual benefit. People satisfy their own needs by competing
to satisfy the needs of others.

My parents understood that. They expected their children to
compete and enjoy the benefits of living in a country that has produced
unparalleled wealth and opportunity for its people. But they did not want
us to go about our lives with misplaced expectations of fairness – or to fall
prey to the diseases of envy and self-pity.


Andrew B. Wilson is a resident fellow and senior writer at the Show-Me
Institute, which promotes market solutions for Missouri Public Policy.

Gasoline, Cigarettes, Alcohol and Taxes: When Less Is More

Posted on by David Stokes

Do people visiting Missouri take advantage of the Show-Me State’s lower excise taxes? Right now, the state of Missouri earns tax revenue by having comparatively lower tax rates than neighboring states. Lower tax rates lead to lower prices on gasoline, tobacco, and alcohol — and Missouri’s many regular visitors can and do take advantage of this.

In this video, the Show-Me Institute’s David Stokes and Amy Lutz interviewed several Chicago Blackhawks fans visiting for a Saturday night hockey game against the Blues. Many, but not all of them, knew that Missouri’s tax rates were lower. But after learning of the lower tax rates, all of them planned on purchasing items such as gasoline while in town.

Lower taxes can lead to higher revenues — and keeping taxes low will keep the money flowing into the state of Missouri.

The Gateway City, The ‘Possibility City,’ And Hope For The Future

Posted on by Patrick Ishmael

The guard is changing at Saint Louis’ regional chamber of commerce, the St. Louis Regional Chamber and Growth Association (RCGA).

Dick Fleming, the group’s longtime head, is stepping down from the organization he has helmed since 1994, and his replacement will come from a city just a short drive east on I-64: Louisville, Ky., also known as the “Gateway to the South.” Joe Reagan moves to Saint Louis from Louisville’s equivalent of the RCGA, the Greater Louisville Inc., or GLI. Marketed during Reagan’s tenure as “Possibility City,” Louisville will have to find a new chamber head for the first time since 2005. Louisville is already writing the postscript to Reagan’s legacy.

But the fact of the matter is that no man, or government, or organization, or even coalition of organizations, can plan an economy, or at least plan it well. That is an incredibly important point to highlight and probably the fairest thing that can be said as Reagan joins the Saint Louis community; it also is probably one of the most damaging points one can raise about how the RCGA and organizations like it behave.

Our local chamber loves to get the pat on the back for positive economic news and to pump “public-private partnerships,” oftentimes fueled with tax credits, that fail to substantively move the economic needle in the region’s favor. Meddling in the economy, local or national, destroys wealth more often than it creates it, leaving taxpayers with the promise of prosperity but little else. And it is no secret that Saint Louis city has languished for decades under one failed economic plan after another, compounded by the exodus of residents into nearby counties and driven by the continued intransigence of the city’s political class to step away from its cronyistic tendencies. In short, the economic development status quo is not a blueprint for a prosperous future for this region, and has not been for some time.

Which is why I hope that Reagan’s arrival in Saint Louis is not just more of the same. More precisely, I hope that Saint Louis — and Kansas City, and the state of Missouri — at least return to some sense of regional economic normalcy, if not runaway growth in the coming year. That is a Christmas wish of sorts, I suppose, but a wish that the RCGA, GLI, or any similar organization has limited or no power to bring to fruition.

Maybe a New Year’s resolution for the state and the city is in order instead: To simply let the market work. It does not matter if it is Saint Louis’ chamber hawking Aerotropolis, or Moberly’s chamber hawking Mamtek, or a political class increasingly disconnected from the electorate hawking Solyndra. There are no easy, centralized solutions to our economic woes. Acting like there is in Saint Louis only prolongs the municipal pain. Like all taxpayers, Saint Louisans cannot depend on a small group of decision-makers to make their lives better.

Free markets make genuine and sustainable economic growth possible, and if there is going to be a “Possibility City” in this region, let it be more than just another marketing slogan with another cartridge of development silver bullets as its driving force. Reduce taxes and regulation, get out of the way, and let the free market flourish. May RCGA’s new administration regain its faith in that formulation.

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