Page 631 – Show-Me Institute

The Wall Street Journal Weighs In on Unicameral Legislatures

Posted on October 26, 2010May 5, 2026 by David Stokes

Yesterday’s Wall Street Journal had an article about something that we here at the Show-Me Institute have discussed previously: the idea of unicameral state legislatures. I mentioned this issue briefly in my “Government In Missouri” opus, and Josh wrote a blog post on the subject last year that lead to one of our better comment-section discussions.

Josh’s blog post adds important information that today’s WSJ article is missing. Many state legislatures used to be structured like the federal model, with a House based on population and a Senate based on the number of officials per county, or something like that. After the Supreme Court ruled that all public bodies had to be based on population (except the U.S. Senate), the purpose of having separate bodies declined.

So, how do you reconcile these potentially conflicting goals (which I assume many of you visiting this blog share, at least to some degree)?

Greater efficiency in government, as measured by lower costs rather than by greater ease of passing laws.

The desire for a wide range of viewpoints in government, i.e., enough elected officials that various viewpoints can be included. (Think Ron Paul and Nancy Pelosi both serving in the same House.)

The knowledge that legislative bodies with more members spend more money. This is the “Law of 1/N,” a generally accepted rule of public choice economics.

The desire to have a system in which it is difficult, not easy, to pass new laws or spend money.

I think points three and four are the real conflicts. I can imagine moving to a unicameral Missouri General Assembly, which would save significant operating costs and would allow for enough members to represent a variety of views. But, once established, it would need to have strict rules that would restrict the incentives to spend more money, but make it easier for the leadership to pass the laws they want (i.e., no filibuster); or, you could do without those rules and empower individual members in a way that would make passing new laws harder but also increase logrolling opportunities and incentives to spend more. (Passing laws and spending money don’t necessarily go hand in hand. Many laws that infringe on our freedoms don’t cost much, and most of the spending occurs within the budget process that every elected body will have.)

I think you can also achieve these goals if you are willing to sacrifice the second goal — a variety of viewpoints. A very small unicameral legislature with empowered individual officials could reduce the logrolling incentives to spend, and make it hard to pass new laws, but this situation would sacrifice the presence of more divergent views in favor of very large districts. However, if it had a very short session length (meeting for one month a year, say, or even just every other year), you might be able to accomplish these goals and also have a larger number of representatives. As with the number of members, time is an important constraint.

Most of the papers that support the statements above are not available for free online. You can read about them, though, and see the citations in sections three and four of my policy study.

Private Investigators Can Go to Jail if They Don’t Get Their Licenses

Posted on October 26, 2010May 5, 2026 by David Stokes

Missourinet has the scoop on the recently installed requirements for licensure of private investigators in Missouri. I remember when the efforts to license that profession got going. I owned a firm that did a lot of process serving in the 1990s, and I attended some industry meetings at which the subject of licensing was discussed. (To be clear, I was never a private eye — not that there is anything wrong with being a private eye.)

All the standard justifications for licensing were used: Higher standards would be good for the industry, would lead to increased public respect, would bring more profits for current practitioners, etc. In most cases, for most industries, those reasons are totally bogus. In the case of private investigators, however, I can see some merit in licensure.

The lifeline of the private investigation industry is access to information. In the Internet age, information is all around us, but some of it is still restricted. Consider driver licensing or credit bureau information. Both of them are imperative to the investigation industry; they contain obvious key information needed for finding people, etc. If you allow some people access to that information, I can understand that you would want to know who has access to it and who is using it, in case they start to abuse it. It is really just a modern technology version of the logic Milton Friedman used to support registration of taxicabs.

I can understand the arguments some readers might make, that private investigators should not be able to access information like that in the first place, license or no license. So why not just prevent access altogether and get rid of licensing rules at the same time? I can agree with that in part, but I don’t like the implicit assumptions that only agents of the government (including lawyers, as members of the bar) get to have access to certain information. Obviously, you can’t be giving out that information to everyone, either, so I admit I don’t quite know where to draw the line.

In reading the rules of private investigator licensing in Missouri, they appear to have left out the worst excesses of licensing. They don’t appear to have placed any limit on the number of licenses, or instituted any extreme education or experience requirements. However, that same lack of explicit guidelines might allow the board too much discretion in rapidly approving ex–law enforcement officials (who, for obvious reasons, make up the bulk of the labor pool in this field), while rejecting applicants without law enforcement backgrounds. I hope that does not happen. Those are decisions that clients and markets should make.

The fees for the application process are high, which is probably intentional. Not high as in law school high, but still high. Often, licensing rules are designed to help the current practitioners by reducing part-time competition. A $500 application fee might not deter anyone who wants to do the job full-time, as a career, but it may well be high enough to prevent someone from applying who is looking to do it part-time. The fact that the fee is only $50 if you want to be an employee of an existing agency tells me the same thing, and I don’t think it is proper for government to be making those decisions.

P.S. — Thanks to Combest for the story link, and our thoughts go out to John on the recent passing of his father.

I Wish They Paid Me for Grades Here

Posted on October 26, 2010May 5, 2026 by Abhi Sivasailam

A recent working paper from the National Bureau for Economic Research adds to the evidence that “performance pay” for students produces gains. From the abstract:

Policymakers and academics are increasingly interested in applying financial incentives to individuals in education. This paper presents evidence from a pay for performance program taking place in Coshocton, Ohio. Since 2004, Coshocton has provided cash payments to students in grades three through six for successful completion of their standardized testing. Coshocton determined eligibility for the program using randomization, and using this randomization, this paper identifies the effects of the program on students’ academic behavior. We find that math scores improved about 0.15 standard deviations but that reading, social science, and science test scores did not improve.

The Coshocton program is funded with money contributed by a local businessman.

Although 0.15 standard deviations may seem small, it’s not bad compared to other educational interventions. In terms of improvement per dollar spent, this program seems more efficient than other more popular interventions, like lowering class sizes.

Neither Health Nor Wealth

Posted on October 25, 2010May 5, 2026 by John Payne

Health economist John Goodman, who has been referred to as the father of the health savings account (HSA), published an article a few days ago looking at how the new health care law might impact the labor market. It’s not pretty:

Right now we’re estimating the cost of the minimum benefit package that everyone will be required to have at $4,750 for individuals and $12,250 for families — understanding that the proclivity in this Congress and in this Department of Health and Human Services is to add benefits, not reduce them, making the package even more expensive. That translates into a minimum health benefit of $2.28 an hour for full time workers (individual coverage) and $5.89 an hour (family coverage) for fulltime employees.

Granted, the law does not specify how much of the premium must be paid by the employer versus the employee — other than a government requirement that the employee’s share cannot exceed 9.5% of family income for low- and moderate-income workers and an industry rule of thumb that employers must pick up at least 50% of the tab. But the economic effects are the same, regardless of who writes the checks.

In four years’ time, the minimum cost of labor will be a $7.25 cash minimum wage and a $5.89 health minimum wage (family), for a total of $13.14 an hour or about $27,331 a year. (I think you can see already that no one is going to want to hire low-wage workers with families.)

Employers could also dump workers onto government exchanges, but that costs them $2,000 in penalties per instance. Either way, the costs of employing low-productivity employees will rise dramatically, which means that not only will the health care reform bill fail to increase access to health care for many low-income people — it may also cost them their jobs.

Proposals for New Hotel Taxes in Suburban Saint Louis Misguided

Posted on October 25, 2010May 5, 2026 by David Stokes

Unlike most other taxes within Saint Louis County, the hotel tax is nearly always the same wherever you stay. That’s because hotel taxes in the county have, for 20 years, operated through a countywide pool that supports the regional work of the St. Louis Convention and Visitors Bureau, funds major county parks, and pays off the bonds used to finance the Edward Jones Dome.

The pooled nature of the tax also reduces the incentive for city planners to attempt to use tax dollars to lure hotels to their municipality. Outside of a pooled tax system, cities will frequently promise away property taxes, which in large part fund other government agencies, in exchange for the hope of being able to keep the bulk of the resulting increased sales tax revenue. A pooled system greatly reduces this practice, because cities share tax revenues. This practice makes everyone better off, because it allows market forces to dictate where hotels are located, rather than leaving it to government planners.

Two cities located in Saint Louis County are now proposing local hotel taxes. Voters in Clayton and Richmond Heights will decide on Nov. 2 if they want to institute the tax. Voters prefer taxing other people instead of themselves, so I will be pleasantly shocked if the proposals fail. But just because voters will likely approve the tax does not make it sound policy. Hotels already pay substantial commercial property taxes and business license fees to the cities in which they are located. The guests themselves also pay the standard city sales tax on their rooms. These taxes already account for the public services used by hotel guests during their stay.

The hotel tax system is similar to another successful pooled tax for many cities in Saint Louis County — the sales tax pool. Cities within this pool have seen less usage of tax increment financing (TIF) and other forms of incentives. Indeed, all the prominent cases of eminent domain abuse in the county have occurred in cities that are outside of the sales tax pool, such as Sunset Hills and Rock Hill.

If every city in the county is authorized to adopt its own hotel tax, you can rest assured that some cities will offer property tax abatements and other incentives to persuade hotels to move there. We have already seen that scenario with the retail industry in the county. The end result does nothing to increase total economic growth for our region. Instead, it only benefits select cities at the expense of school districts and other taxing bodies.

The structure of the tourism tax pool benefits our entire area. Most importantly, it allows hotel owners to invest in their businesses without fearing they will be put at a tax disadvantage to competitors in neighboring cities. This is no theoretical risk: One project in Richmond Heights has already been put on hold because of the potential tax increase. The pooled tax approach also allows for coordination in advertising our city to potential conventions and tourists. This author does not necessarily like using tax dollars to run ads in Des Moines urging people to come to Saint Louis, but it would be far worse if those ads said, “The 12 residents of Champ, Mo., encourage you to visit their village.”

If cities want to grow business within their communities, they should focus on keeping taxes on businesses low, and not imposing additional taxes on select industries — as the cities of Clayton and Richmond Heights currently propose — or on business in general, as Clayton is also doing with its commercial property tax rate increase. Pooling taxes works for the cities in the sales tax pool, and it has been working for the hotel and tourism industry in Saint Louis. Voters in Richmond Heights and Clayton should consider the costs associated with these hotel tax increases, and the state legislature should consider rescinding the ability of cities in Saint Louis County to enact their own hotel taxes. The county’s existing hotel and tourism taxes are more than sufficient to accomplish their purposes: to advance both the city and county of Saint Louis as a whole, not 92 separate municipalities.

David Stokes is a policy analyst for the Show-Me Institute, a Missouri-based think tank.

Giant Disappointment for Kansas City

Posted on October 22, 2010May 5, 2026 by David Stokes

A City Council committee in Kansas City has tabled (aka, killed) a proposal that called for simply studying the idea of contracting out the management of certain city assets. Like almost every major city, Kansas City is facing long-run budgetary difficulties. To give one, large, specific local example, Kansas City has a signed agreement with the federal government to invest $2.4 billion in its sewer system over the next 25 years.

Mayor Mark Funkhouser courageously proposed merely looking at the possibility of contracting out city services. Much of this proposal followed up on work he did as Kansas City’s auditor. Not surprisingly, city unions went ballistic, because it’s well known that taxpayers now work to support government employees, not the other way around.

I hope that Kansas City reconsiders this rejection — and that St. Louis embraces the potential — of contracting or privatizing city services while they still can do it from a position of strength. Eventually, they may be forced to do it because of economic realities, and then they won’t be in a position to get the best agreement for taxpayers.

Suffocating Neighborhoods, Parcel by Parcel

Posted on October 21, 2010May 5, 2026 by Thomas Duda

We hear it all the time, that the growth of government stifles innovation and crowds out individual agency. One rarely sees this concept writ so large and discernibly upon the landscape, however, as when encountering abandoned, publicly owned properties.

Consider 4634 Cottage Ave., pictured below in August 2010. Until 1999, it was in private ownership following its construction in 1906. A sign reading “Private Property NO TRESPASSING” hangs ironically on one of the building’s boarded door openings, a vestige of the structure’s past life as an income-producing property.

Today, the multi-family dwelling is in a perpetual state of decay because of its status a property owned by the Land Reutilization Authority (LRA).

Private owners in a free market have vastly different incentives than do government agencies to ensure the health and vibrancy of assets under their control.

This month’s meeting of the LRA Commission will be held on Wednesday, Oct. 27, at 8:30 a.m. in the board room of St. Louis Development Corporation, on the 12th floor of 1015 Locust St. in downtown St. Louis.

Ethanol Update on Recent Policy Decisions and Options

Posted on October 20, 2010May 5, 2026 by David Stokes

I am to ethanol what Chrissy is to tax credits, so I have been mildly remiss in waiting a few days to write about the latest on the ~~massive scam~~ economic growth opportunity that is the ethanol industry.

First, the bad news, which is really not all that bad — yet. The Environmental Protection Agency (EPA) approved increasing the amount of ethanol allowed in the standard blend of gas, from 10 percent to 15 percent. The important thing to note here is that the agency has allowed such an increase, not required it. There is really no argument against allowing the option for retailers who wish to undergo the expense in order to sell a higher blend, or to consumers who choose to buy that higher blend. So, as long as it remains an option rather than a rule, I see nothing wrong with the EPA’s decision.

The fear, of course, is that states like Missouri will subsequently require the higher blend for gas sold in the state. We currently have a ludicrous law that requires a 10-percent blend of ethanol in Missouri gas, whether we want it or not. If the state were to increase that requirement now, it would be a sick joke. I am tepidly optimistic that this won’t happen, because the higher blend is not recommended for most old cars.

I agree with this part of the article suggesting that, minus the requirement, most gas stations won’t choose to sell the higher blend, and we might not have much to worry about:

Critics said the decision could be a frustration to drivers and argued that many retailers will opt not to sell the higher blend because of the expense of adding new pumps and signs.

In places where there is enough demand, retailers will choose to sell it. Customers should also be informed enough to realize that the suddenly cheaper option at the pump might not be right for their cars. If everyone read this blog, they would already understand this.

On to the potentially more exciting news: getting rid of federal ethanol subsidies entirely! The main ethanol support programs are scheduled to expire at the end of the year, and Congress has yet to renew them. Abolishing these subsidies — or, more accurately, just letting them expire — would be the ~~sole~~ crowning achievement of the 111th Congress. Seriously, getting rid of those subsidies would be a victory for markets and freedom, and a loss to rent-seekers everywhere. The 111th Congress would deserve praise for letting them expire.

Columbia: The (Subsidized) Silicon Valley of the Midwest?

Posted on October 19, 2010May 5, 2026 by Christine Harbin

From an article in the Columbia Daily Tribune:

To bring a potential 120 new jobs to Columbia, the state has presented 3M with a $4.27 million package of incentives. Most of that will come in the form of tax credits; about $1 million is grant money.

My intention is not to fault individuals and companies for taking advantage of the resources that are available to them. Instead, I argue that taxpayer monies should be put toward the best uses, and I have difficulty believing that concentrating the benefits on the favored few and diffusing the costs on the rest is an optimal strategy.

Considering only the amount expended via tax credits, the state government is spending $27,250 per job (plus dead-weight loss). When the grant money is included, the state is spending $35,583.33 per job. Is this level of subsidy the best use of taxpayer monies, particularly at a time when the state government has decided to make cuts to other services, like education and public safety?

Subsidizing select businesses and industries is an admission by the state government that the cost of doing business is too high in Missouri. As an unfortunate consequence, the businesses and individuals that remain in the tax base are left to pick up the tab, which makes it even harder for them to compete. Instead of distorting the playing field with generous incentive packages, the state government should focus on providing a favorable business climate for all individuals, businesses, and industries, not just a select few.

Given its long history of layoffs in the Columbia region, how can government officials be certain that this company will actually deliver on the 120 jobs that it promised? Companies in other states have failed to deliver on the jobs promised in exchange for receiving taxpayer monies, and it is likely that the same may happen in Missouri.

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