Aerotropolis: China Hub Responsive Documents, Part 2
Aerotropolis: China Hub Responsive Documents, Part 1
Post-Dispatch on Aerotropolis: “Those goods don’t actually have to be flown by plane…”
Longtime readers of the Show-Me Institute’s research into the Aerotropolis legislation have known for some time that the bill’s tax credits, as written, could be used for trade that was not international in nature. To quote from our case study (emphasis in original):
Most strikingly, owners of warehouses that use two modes of commerce – not necessarily air cargo, but perhaps road and rail transportation – could draw on the tax credits. So could owners of warehouses that are refrigerated for storage of perishable materials. Again, the Senate substitute for the Aerotropolis legislation doesn’t require those facilities to process international cargo.
The recent revelation by the St. Louis Post-Dispatch‘s Tim Logan that factories using “two separate ‘modes’ of transportation” could get Aerotropolis tax credits is, therefore, old news to SMI regulars. In a story published Monday about how a prospective car manufacturer coming to St. Louis might pay for a possible $160 million plant (“likely … a mix of private money, federal loans and, probably, state and local incentives,”) there was this tidbit (emphasis mine):
Then there’s Aerotropolis. Since it would be exporting, Emerald [Auto] may also be eligible for the tax credit program being debated by state lawmakers right now.
The legislation would offer credits, worth up to $300 million, towards the construction of warehouses and factories that house goods bound for export. Those goods don’t actually have to be flown by plane, just moved by two separate “modes” of transportation. So cars shipped to Europe may qualify.
[Sharon Heaton, Emerald’s general counsel and a managing director at Wellford Energy, a D.C-based clean energy lobbying and investment firm] said she wasn’t sure yet if Emerald would seek Aerotropolis credits – should they become law. But, she said, they’re watching the debate, and said the credits represent the kind of thinking a company wants to see.
“Aerotropolis says a lot about the forward thinking of St. Louis area,” she said. “They’re really thinking about ‘what are the advantages we can provide a business to come here?'”
Logan is right that there’s a multi-modal aspect to the Aerotropolis tax credit legislation. He’s wrong that export is required to get a tax credit. The relevant text of the legislation is in 135.1513.1.(2) and says that “The owner of any qualifying gateway facility with level two air cargo activity, a qualifying assembly and manufacturing facility, or a qualifying cold-chain facility shall be entitled, during the eligibility period,” to Aerotropolis tax credits (emphasis mine). And what constitutes a “qualifying assembly and manufacturing facility”? As defined by the legislation itself in 135.1500.2.(28):
“Qualifying assembly and manufacturing facility,” a new building located within a gateway zone that is equipped for manufacturing or assembly and in which the receipt of production materials or components or the shipment of finished goods or products, or both, involves at least two modes of multimodal commerce;
Multimodal commerce is defined in 135.1500.2.(21) as “modes of commerce for the shipment of materials, components, goods, or products, including road transportation, railroad transportation, water transportation, or aircraft transportation.” (The “including” language is fun, too, because it means that a wide variety of transport methods — horse and buggy, bicycle, burro and/or foot — could qualify as multimodal modes of transport because the language doesn’t limit the number of modes that qualify.) But in any case, nowhere is there a word requiring that Emerald export a product to receive the credit.
And it’s reasonable to believe that the Emerald Auto example will not be an outlier as it pertains to the Aerotropolis legislation once implemented. We’ve noted the dubious beef export theme many times — and over the weekend the Columbia Missourian confirmed that “U.S. beef still banned” — but that aspect of the debate obscures the fact that the Aerotropolis legislation’s language could send millions of dollars to projects completely unrelated to international trade and even completely unrelated to the airport itself.
If Emerald Auto could snatch Aerotropolis tax credits without flying or even exporting their products, who else could? And why on earth would taxpayers need to subsidize it?
Update: After an e-mail from the Show-Me Institute noting exports aren’t required for the tax credit, the Post-Dispatch has edited its article. The key paragraph now reads (emphasis mine):
The legislation would offer credits, worth up to $300 million, towards the construction of warehouses and factories that house goods being shipped through St. Louis. Those goods don’t actually have to be flown by plane, just moved by two separate “modes” of transportation. So cars shipped to Europe may qualify – in fact the bill doesn’t specify that they must go overseas. The program also includes breaks on state and local income taxes.
What’s Wrong with Aerotropolis: Grounded Beef
In this video, Show-Me Institute policy analyst Patrick Ishmael explains how, despite the claims of Aerotropolis proponents, Missouri beef can not be exported to China because of current Department of Agriculture regulations.
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Unknown Party Slips New-and-Improved Tax Credit Handout into Aerotropolis/Eco-Devo Legislation
In a blog post published today at the Southeast Missourian, state Sen. Jason Crowell raises a battery of concerns about the economic development legislation being put together in Jefferson City for the special session. He describes the bill as a deal “cut behind closed doors in a non-transparent inside job” to the benefit of “fat cat campaign donors.” Sen. Crowell also thoroughly rips the Aerotropolis portion of the legislation, calling it a “special interest giveaway.”
And now we find out from the Kansas City Star that apparently new tax credit provisions are popping up in the legislation, and it looks like no one knows who’s throwing the taxpayers’ money around.
This is a problem (emphasis added):
A reconfigured package of state aid that could benefit a wealthy St. Louis developer is complicating prospects for a special legislative session aimed at creating jobs across Missouri, lawmakers said.
A provision included in one draft of a massive economic development bill could provide additional financial support for developers such as Paul McKee, who has spent years pushing for a sweeping mix of housing, offices and retail space for a two-square-mile area north of downtown St. Louis.
McKee already has received nearly $28 million in land assemblage tax credits, and some lawmakers are frustrated that they haven’t seen much progress in the development.
A reconfigured package of state aid that could benefit a wealthy St. Louis developer is complicating prospects for a special legislative session aimed at creating jobs across Missouri, lawmakers said.
A provision included in one draft of a massive economic development bill could provide additional financial support for developers such as Paul McKee, who has spent years pushing for a sweeping mix of housing, offices and retail space for a two-square-mile area north of downtown St. Louis.
McKee already has received nearly $28 million in land assemblage tax credits, and some lawmakers are frustrated that they haven’t seen much progress in the development….
It’s not clear who put it in the legislation. Lawmakers said provisions can be added to draft legislation without identifying the author.
Two points to consider:
First, how exactly did legislators come to a legislative agreement on July 20 if the legislation hadn’t been finalized? One lawmaker suggested that “various versions of proposed legislation are circulating and that few provisions are set in stone.” Then what precisely was agreed to when the special session announcement was made?
And second, the legislation is well over 350 pages already. How many other tax credit Easter eggs are hidden in these weeds? Legislators and taxpayers shouldn’t have to pass the bill to find out.
What’s Wrong with Aerotropolis: Grounded Beef
The first of a series.
Gas, Booze, and Cigs: How Lower Tax Rates Make Money for Missouri
In this video, David Stokes takes a first-hand look at commuters buying their gasoline, alcohol and tobacco in Missouri, motivated by the Show-Me State’s lower excise taxes — and therefore lower prices. This shifting of purchases across state lines mean higher tax revenues for the state of Missouri, precisely because our tax rates are lower.
Every day, Missouri has approximately 195,000 commuters that come into the state to work. That is the fifth highest total for any state. It is 55,000 more than leave the state to work each day. That ratio (+ 55,000) is the third highest number for any state. In both cases, Missouri trails only states along the eastern seaboard. (Our source for this is the 2000 Census, and we will update these numbers as soon as they are released from the 2010 Census.)
Missouri has low excise taxes. We have the lowest cigarette tax, the sixth lowest gasoline tax, the lowest beer tax, the ninth lowest wine tax, and the third lowest tax on spirits (liquor). What do excise rates and commuter totals have to do with each other?
Low excise taxes serve as an inducement for the 195,000 commuters to Missouri to voluntarily choose to purchase these goods while in Missouri. Missouri gains the tax revenue, and those commuters then bring many of the costs of the externalities of these items back to their home states. Low taxation levels on items that are often bought as part of a special trip serve as an incentive for commuters into Missouri to make those special trips when in Missouri. (This is opposed to, say, lowering the tax on lettuce, which is generally purchased as part of a comprehensive trip to the grocery store.)
These goods (gas, alcohol, tobacco) have other properties that make them a target for purchasing by commuter consumers. They can be purchased very quickly. This is a function of the standard quantity the goods are bought in, and the lack of search costs for most of the products. The reduced search costs are themselves a function of either no brand loyalty (gas) or extreme band loyalty (cigarettes). Among these three goods, only alcohol will generally see comparison shopping, but even there brand loyalty is very strong. These goods also do not spoil. (Cold beer is an exception.) Commuter consumers are not going to buy groceries on their lunch break, or before a long commute home in traffic. Finally, all of these items are more difficult to purchase online than other goods, for fairly obvious reasons and certain legal restrictions.
Missouri’s low excise taxes don’t just benefit Missourians who use these goods. They benefit the entire state by encouraging 195,000 daily commuter consumers to make these purchases while in Missouri. On the other side, they encourage the 140,000 Missourians who leave the state each workday to hold off on these purchases until they return to Missouri. This maximizes the tax revenues received by Missouri, while the costs of the externalities are spread among many states.
NB: As a matter of internal policy, the Show-Me Institute does not hold opinions. All opinions expressed in Show-Me Institute publications and video are those of the respective authors or speakers.
Grandview Passes Hotel Tax
Residents in the Kansas City suburb of Grandview have just voted in favor of levying a 5 percent tax on hotel stays beginning in 2012. The city expects to net about $120,000 annually and plans to spend the increased revenue to attract tourists.
Although the vote has already taken place, Grandview residents should be aware of the potential effects of the tax on the city’s hotel industry.
In the suburbs of Kansas City, people have plenty of options to choose between competing hotels. Because its neighboring municipalities levy the tax while Grandview does not, Grandview will be forfeiting its own competitive advantage when attracting potential guests.
This hotel tax could potentially lead to less people choosing to stay in Grandview as the city will no longer have its tax advantage. That in turn could mean less revenue and less business for the city’s hotels.
We’ve previously covered the potential effects of hotel taxes in Jefferson City and Saint Louis County.
