In this comprehensive look at property taxation in Missouri, Show-Me Institute Policy Analyst David Stokes highlights examples of all the things supported by property taxes. Also included is a look at what sorts of things work well when funded by property taxes and what sorts of things don’t.
For background on this good-natured feud, Hartmann’s post, Audrey’s post, and Hartmann’s response to Audrey. Was lots of fun. Full audio below.
In this short video, Show-Me Institute Policy Analyst David Stokes gives an overview of a few things funded by property taxes. He also offers a prescription for which sorts of things work best when funded by property taxation, and which sorts of things don’t.
Read the full policy study here.
Read the related case study here.
See the full video discussing examples of all kinds of property taxes here.
First, a picture:
Click picture to see Patrick Ishmael’s recent post on the DED and tax credits.
Every dot represents an address in Saint Louis that has been issued Missouri Department of Economic Development (DED) tax credits since 1999. The larger the dot, the greater the tax credit. Contrary to the misconception of many, these tax credits represent real taxpayer money: money that could have been used for other government functions, but wasn’t.
Let me give an example of how this all works with a quick story.
When I was growing up, I mowed my neighbors’ lawns for extra money. Economically speaking, this was a mutually beneficial exchange: I received $15, and my neighbor received a beautiful, cut lawn.
But now, let’s instead say my neighbor would not pay me more than $10, and I would not work for less than $15. I wouldn’t cut the lawn.
But what if the government promised me a transferable or refundable $5 tax credit for every lawn I cut – that is, a stipend against my taxes that I could redeem for cash or at near-face value to someone with a greater tax burden? I would cut the lawn because I’d effectively be receiving $15 for the work – $10 from the private sector and $5 from the government.
Yet how equitable is a system like that? Should the government give me tax credits to mow a neighbor’s lawn? If not, why not? The simplest response people have to this question is that in private transactions, parties negotiate for services. One way or another, the lawn gets cut; government distortion of the lawn-cutting market is unnecessary. Giving $5 to those who mow lawns is $5 less for roads, disaster relief, and other necessary government functions.
And yet, these market distortions nonetheless happen, even in generally no-nonsense places like the Show-Me State. More than $1 billion in tax credits have gone toward projects at about 2,200 Saint Louis City addresses, representing more than 45 percent of all the tax credits that the DED issued to the entire state. The problem? Saint Louis only makes up 5 percent of Missouri’s population.
A forthcoming case study will examine this issue further.
Kansas City continues its mighty struggle to save its children and future offspring from the possible ravages of pension-induced bankruptcy. The city has commissioned, for this purpose, its Pension System Task Force. In a recent Kansas City Star editorial, the paper notes, with healthy skepticism, the appearance of defined benefit proponent Hank Kim before the task force. According to the authors, Mr. Kim strikes a rather glib pose when addressing the issue:
While many states and cities are altering their defined benefit plans because of money woes, Kim doesn’t sound that worried.
•Kansas City task force chairman Herb Kohn has said the city should aim to have its pension systems funded at 90 to 100 percent. As of 2010, though, three systems were under 80 percent, a far cry from the 96 percent average in 2002.
Kim isn’t nearly that aggressive.
In May, when talking about the 78 percent funding average for state pension plans, Kim said that “78 percent is a number we’re very comfortable with.” In fact, he has indicated that a 70 percent level is fine, too, because Fitch Ratings considers that adequate.
Counterpoint: The Government Accountability Office calls for at least an 80 percent funding level. So do many pension managers.
Kansas City taxpayers deserve honest answers to a host of questions, not least of which is whether the city’s pension managers have adopted a reasonable discount rate in determining the current funding levels needed to sustain future payouts to retirees and their families. In today’s uncertain financial environment, is an 80 percent funded level benchmark reasonable? Should the pension systems continue to assume historical market return averages of 8 percent when determining current funding levels? If one were to substitute a more reasonable rate, given market performance over the last decade, of say 4 percent, then the degree to which the systems are currently underfunded grows.
Our children deserve our immediate attention to this matter. Missouri currently has approximately 130 state and local public pension plans. What assurances are there that these are solvent in the mid- to long-term? Of course, one may counter, the systems are audited under the law. But so was Enron!
You may trust, but first verify.
Craig Cheatham’s KMOV exposé, “Selling St. Louis,” includes the single-best primer on the Aerotropolis issue that I’ve seen. Must-watch stuff, especially if you’re new to the topic. Below is the segment:
The hour-long event is featured in its entirety here.
The quote comes from notes the NCBE made from a meeting with Jens Tubbesing, “the lead person for Aerostrata to develop airfreight feasibility study for China.” We’ve already revealed that Aerostrata’s preliminary report showed warehouse space at Lambert is already sufficient to sustain the sort of cargo activity contemplated by the China Hub. But as it turns out, the “Aerotropolis” project was indeed lacking in one important aspect: critical private sector interest.
The document, in its entirety, follows.
We must create the demand, political and economic timetables are not the same, need private business to take the lead, like a Ross Perot and his business now employing 27,000 in Dallas. We need someone, not a government agency, to make things happen.
As Mr. Tubbesing notes, “it’s all about demand.” Where’s the entrepreneur that would drive the Aerotropolis project forward and make it a success?
Embedded below, at Show-Me Sunshine, and on our DocumentCloud. You can search the entire bill below.
For more on how businesses could receive Aerotropolis tax credits without using an airplane or even exporting a product, see this post.
