The Missouri Department of Transportation, MODOT, is looking into ways of funding necessary maintenance on the main east-to-west highway across Missouri — Interstate 70. One funding option is to raise the gas tax state-wide. An alternative proposal from MODOT is to institute a toll on the highway. In this video, Show-Me Institute Policy Analyst David Stokes suggests the the latter option makes more sense economically, as the people using the highway will be the ones paying for it. This video is a companion to Stokes’ recent op-ed, which can be found here.
Still At The Starting Gate . . .
Missouri is not alone in wanting to give its economy a boost in 2012. But what is the best way to do it? As Missouri Gov. Jay Nixon’s (D) State of the State address approaches on Tuesday, it might be useful to take a look at what some of our neighbors are doing. Recently, Kansas Gov. Sam Brownback (R) unveiled his proposal for tax reform in that state.
Highlights of the Brownback Plan include:
- Lower the top individual income tax rate from 6.45 percent to 4.9 percent (Missouri’s is 6 percent).
- Double the standard deduction to $9,000 for head-of-household filers.
- Eliminate various tax breaks, including those for home mortgages and earned income.
- Eliminate individual income taxes on non-wage business income like limited liability companies.
- Preserve the 1-cent state sales tax.
Now, the plan is described as “close to revenue neutral” and the article quotes a legislator who states “the devil is in the details,” and I happen to agree. However, this proposal points Kansas in the right direction. Any attempt to lower tax rates and broaden the tax base (i.e., closing loopholes and ending tax breaks) should be commended. Is Missouri going to follow (Kansas is not alone in proposing tax reform; Nebraska also is looking at cutting taxes)? State officials in Jefferson City have the opportunity, with the new legislative session, to make some serious changes and set Missouri on the right path to compete economically.
At the Show-Me Institute, we have proposed various tweaks in the state’s tax code that could be beneficial and make the state more competitive. Is Missouri going to move down this road, or are state officials going to continue promoting economic development debacles like Mamtek (and other projects that should remain dead), which make for good photo-ops but have resulted in a failure to grow Missouri’s economy?
A Tax Switch Worth Discussing
Missouri Sen. John Lamping (R-Dist. 24), who is no longer my senator because of redistricting, has introduced a bill to basically trade a cigarette tax increase for an income tax decrease. His bill aims to remove the state income tax on the first $2,000 everyone makes, and to offset it with a cigarette tax increase of 26 cents per pack. (Thanks to johncombest.com for the above links.)
I think this is definitely an idea worth discussing. Everyone in the state would benefit from the tax cut (approximately $35 per worker, and part-time employees would benefit just as much as full-time — unless they are really part-time), and smokers would only pay more after they buy their 135th pack of smokes for the year. Basically, a pack-a-day smoker would pay an extra $60 per year in taxes under this plan, while more casual smokers would basically break even or come out ahead. (Is there anyone left alive who still smokes more than one pack a day? I mean, other than this kid, who doesn’t pay American tobacco taxes.)
The small size of the cigarette tax increase in this bill makes it immune from our criticisms that residents of other states would stop buying their cigarettes here, and thus cost Missouri that voluntary money. Of course, some marginal level of out-of-state purchases will be lost, but for the most part, Missouri’s tobacco tax would still be much lower than surrounding states. I think most of our commuters, visitors, etc., who enjoy a draw would still make a point to buy their smokes here.
I like the part of this proposal that all Missourians would benefit equally from the income tax cut. I like that casual smokers would roughly break even, and heavy smokers would only see a small tax increase. I like that out-of-state smokers would likely still continue to buy here when possible.
I do not necessarily like that a percent of the population (the smokers) are being targeted to fund a general benefit. However, we crossed that bridge a long time ago, and this proposal is far less drastic, and more equitable, than many similar proposals. I do not deny the political reality that tobacco taxes are going to be increased at some point. If that reality takes the form of a small cigarette tax hike that funds a tax cut for all Missouri workers (including the smokers), then Missouri could do a lot worse.
It is not just that the state could do worse, it is that we probably would do worse, such as some drastic cigarette tax hike that drives out-of-state buyers back home and uses the new tax money to fund a new tax credit only for films about ethanol-powered historic buildings near transit.
I think Sen. Lamping’s proposal has a lot of merit and deserves serious discussion.
We All Have Our Priorities
Another session of the Missouri General Assembly has begun and lawmakers in Jefferson City, by law, must close the projected shortfall in the state’s budget. The actual amount of the shortfall is difficult to determine. One source estimates it is $500 million, another says the shortfall ranges between $400 million and $600 million. Needless to say, the number is not insubstantial.
The question arises about what to cut. However, what if appropriators flipped this picture upside-down? What if the legislators asked what should be funded first, instead of what should be cut?
It turns out that the authors of the Missouri Constitution gave this some thought. The state Constitution provides a list of the order in which money is to be appropriated. It seems the authors of the state Constitution tried to tell us the state’s spending priorities. Those funding priorities are (in order):
1. For payment of sinking fund and interest on outstanding obligations of the state.
2. For the purpose of public education.
3. For the payment of the cost of assessing and collecting the revenue.
4. For the payment of the civil lists (in this case, state employees).
5. For the support of eleemosynary (charity) and other state institutions.
6. For public health and public welfare.
7. For all other state purposes.
8. For the expense of the general assembly.
Now, I am not saying cuts in say, education spending, are completely off limits. If there is waste, get rid of it, no matter where it is. However, the legislature should prioritize spending based on the guidelines of what is emphasized in the Constitution, and if spending cuts are needed, they should be in lower priority items. One example of something that might not qualify as “high priority” is the Missouri Wine and Grape Board. Another example is state ethanol subsidies. Between these programs and K-12 education, which is a higher priority to you?
Absent In Dellwood
It is fine if certain members of the Dellwood Board of Aldermen do not want to have the Show-Me Institute write an op-ed praising the city, but they are going to some rather extreme lengths to avoid it.
Several members of the Dellwood Board of Aldermen have intentionally skipped board meetings over the last few months in order to deny a quorum. If the board had a quorum, it would almost certainly vote to disband the Dellwood Police Department and contract out police services to the St. Louis County Police Department. Smaller cities contracting with larger entities to perform certain services is one of the best examples I can give to improve efficiency while maintaining a large degree of municipal independence. I view it as a win-win situation for the people of Dellwood. Apparently, half of the board views it as a threat to speeding ticket revenues, so they are going to an extreme, undemocratic tactic to prevent a measure that will save money and improve public safety at the same time. The absent members of the Dellwood Board of Aldermen are harming their citizens, and behaving embarrassingly while they are at it.
Generally speaking, the county police provide better overall services than very small municipal departments. (But, yes, there are some dedicated, talented officers within small departments.) Just as important, it costs cities less to contract with the county than to operate their own department. If you want to read more about why contracts like this are a good idea, check out this op-ed I wrote when Jennings did it last year.
Musings On Payday Loans And Pawn Shops In Jackson County
Jackson County is considering forcing new pawnbrokers and short-term loan shops in unincorporated areas to locate at least 2,500 feet from each other. That is almost half a mile, and is rather considerable. Just imagine if gas stations were forced to locate half a mile from each other. Can anyone say “higher prices at the pump”? Who knows what will happen to these businesses and their customers if the legislation passes.
And why 2,500 feet? Who came up with that number? This article sites the possibility of crime and lower property values around clusters of these businesses, but half a mile seems a little excessive. I would hardly call it a cluster if the businesses located just one block from each other, but even one block is an arbitrary number.
As you may recall from the mantra “location, location, location,” the location of a business can drastically affect profitability. The proposed legislation may make it impossible for more than one loan shop to take advantage of a good location. Since when is that reasonable? Businesses locate in a particular area for a reason – and unfortunately for the affected businesses, the reason they locate to a particular area may be the county’s legislation dictating the available options.
Additionally, why is the government singling out pawnbrokers and short-term loan shops? What next? The proximity of ATMs? When will the regulations stop?
For more Show-Me Institute payday loan material, check out this and this, as well as this awesome video.
Helping Business Help Us
There has been a lot of political talk about fairness lately, with the notion that businesses and consumers are often on opposite sides. Really? There are steps Missouri lawmakers can take that would be fair and beneficial to both, and maybe a boost to the faltering state economy.
In its effort to change the business climate in Missouri, the Missouri Chamber of Commerce and Industry has identified three broad policy initiatives for the current legislative session. According to Chamber president Daniel Mehan:
“Among the list are issues left unresolved last legislative session that will be advocatied (sic) by Missouri’s top business associations and employers: workers’ compensation reform, employment law, and tort reform,” Mehan says.
Within the context of these broader policy initiatives, the following topics are among the most important issues the Chamber addressed. As briefly discussed below, each deserves careful consideration as a reform measure that can foster economic growth in Missouri.
- Making Missouri employment discrimination law consistent with federal law. Businesses face confusing and parallel obligations under federal and state laws. Making Missouri law consistent with federal law reduces confusion and lowers compliance costs for businesses, which in turn lowers the cost of doing business in Missouri. Consumers and businesses then share the benefits of lower costs.
- Capping damages in employment discrimination cases. Caps make future business costs more certain and predictable. Although the plaintiffs’ bar does not favor this idea, no one is closing the doors to the courthouse. Policymakers should carefully weigh the benefits and costs and make the decision that best advances business competitiveness and the administration of justice.
- Exempting co-employees from liability for injuries sustained in workers’ compensation cases. Currently, employees injured by co-employees at work may sue the latter for damages outside the workers’ compensation system. This gives rise to costly disputes among employees, disruptions in the workplace, and an increase in employer costs (not always monetary). Also, multiple lawsuits for the same injury may occur as the injured employee sues both his employer in workers’ comp and his co-employee in circuit court. Time, money, and effort may be economized by requiring injured employees to maintain a single suit in a workers’ comp venue.
Again, these are but a sample of current issues impacting the business climate in Missouri. These issues are important in that each imposes additional costs on businesses in Missouri. As a result, consumers and households may suffer because they will face higher prices, fewer goods, and lower employment. Remember, we are all in this together, despite what some others may say or imply. Isn’t it possible that sometimes what is good for business is good for the people?
How Well Do Financial Markets Work?
In the final Show-Me Forum of 2011, Missouri Bankers Chair John Howe and Show-Me Institute President Rex Sinquefield discuss the “efficient markets hypothesis,” the idea that it’s impossible to “beat the market” because stock prices reflect all available information. Professor Howe takes a theoretical approach from the start, but buttresses his arguments with a number of studies and experiences.
Hey Platte County, Sell Your Golf Course!
According to an article in the Kansas City Star, Platte County is engaged in a difficult debate regarding budget cuts. Officials have proposed cuts to many departments, including the sheriff’s department. In response and opposition, the sheriff said:
“The golf course fleet is better maintained than the sheriff’s department’s fleet,” Sheriff Richard Anderson said.
This brings to mind a very easy move for the county to make that will (1) bring new revenue into the county (the sale price); (2) reduce future expenditures; (3) expand the county property tax base (placing the property on the tax rolls); and (4) remove the county from doing things government is not intended to do. Privatize the golf course.
Golf courses make up one of the least important government programs. I say this as a golfer. I do not think governments should own golf courses, but at least some just own the land and contract out the operations of the course to private companies. Can someone say “comparative advantage”? But Platte County does not appear to even do that. The county appears to own and operate the entire course as a division of county government. (I base that on my reading of the 2011 budget, pages 221-224.) That is insane.
The Mackinac Center and the Reason Foundation both have conducted great work involving government golf courses. This should be a fairly easy choice for Platte County. Shed the golf course to raise money to improve your sheriff’s fleet. Platte County should sell off its golf course to private operators, and if that is not possible (due to legal restrictions on selling parkland or some other such issue), contract out the management of it.
And I now will resist the temptation to end this post with an overly cute golf reference, such as “Privatization would be a real Birdie for Platte County!”
