Page 632 – Show-Me Institute

Keep the Playing Field Level in Missouri

Posted on November 10, 2010May 5, 2026 by Christine Harbin

It will be interesting to see how the economic climate in Missouri may change under a larger Republican majority. David Lieb highlights some possible policy changes in an Associated Press article (link via Combest):

Lower taxes in all likelihood. Greater legal protection against discrimination claims. And less exposure to potential litigation involving work place illnesses and injuries.

If the state government were to reduce the overall cost of doing business in Missouri, the state would likely experience a higher marginal amount of business activity.

I emphasize the word overall. Overall welfare would increase if the state government adopted policies that affect all businesses in the same way. I worry that the state government in Missouri could decide to lower the tax burden of only a select group of businesses, which would increase the burden on those that remain in the tax base.

As an additional negative consequence, providing favors for a select group would pit industries against each other in a competition for state tax incentives. This practice would incite businesses to expend resources in an effort to solicit the favor of government officials, instead of performing productive activities in the private sector.

Police Raids and Occupational Licensing: Coming to a State Near You

Posted on November 8, 2010May 5, 2026 by David Stokes

Here is something I hope we never see in Missouri: Police raids to arrest unlicensed barbers in Florida and California. Drudge links to the story out of Florida, where the police used unlicensed barbering as an excuse to check for other illegal activities. Some barbers were actually arrested for not having a license, which brings to mind Ulysses Everett McGill doing his time in jail for practicing law without a license.

This is the perfect segue to note that I will be appearing on the Bernie Hayes show on WGNU 920 AM in St. Louis tomorrow morning at 7:00 to discuss occupational licensing. I will be appearing with Dave Roland to talk about the issue of licensing those who provide African hair braiding in Missouri. Please listen in if you can.

Schizophrenic Public Policy on Dairy Products

Posted on November 8, 2010May 5, 2026 by Christine Harbin

On Sunday, the New York Times ran two articles about public policy for dairy products. One of the articles is about how an organization called Dairy Management, which was created by the United States Department of Agriculture, is pushing the sales of dairy products like cheese and milk. The other article is about New York City’s health commissioner, Dr. Thomas A. Farley, who leads initiatives to convince the public to consume less fat and sodium — nutrients that are plentiful in dairy products. The interesting thing about these two articles is their juxtaposition: While the government is encouraging consumers to consume more cheese (via Dairy Management), the government is also informing them to eat less of it (via the NYC health commission).

I find it interesting that Dairy Management is funded by levies imposed on farmers, while the federal government has paid hundreds billions of dollars in subsidies to farmers. Two market distortions do not a free market make; instead, they further distort the market. A simpler and more efficient way for the government to decrease dairy consumption would be to eliminate subsidies to the dairy industry. This would cause consumer prices to rise naturally, which would in turn lead individuals to consume less. There are many problems in public policy, and a great number of them are government-created. The solution is not more government, but less.

I also find it morally questionable interesting that Dairy Management focuses on exporting the very products that have been deemed too unhealthy for domestic consumers. Again from the article:

Dairy Management, which reported expenditures of $136 million last year, also received $5.3 million that year from the Agriculture Department to promote dairy sales overseas.

When the government subsidizes one thing and taxes another, individuals change their consumption as a consequence. No one knows the optimal mix of goods and services — your guess is as good as mine (or as good as a government official’s, for that matter). Individuals could achieve higher levels of welfare if they were allowed to choose for themselves the bundle of goods and services that they consume.

Incidentally, the Show-Me state has historically played an instrumental role in propping up dairy prices. From the first article (emphasis added):

For years, the federal government bought the industry’s excess cheese and butter, an outgrowth of a Depression-era commitment to use price supports and other tools to maintain the dairy industry as a vital national resource. This stockpile, packed away in cool caves in Missouri, grew to a value of more than $4 billion by 1983, when Washington switched gears.

Supreme Court Considers Education Tax Credits

Posted on November 8, 2010May 5, 2026 by Christine Harbin

The Supreme Court is revisiting the use of tax credits as a mechanism for funding education, and whether religious schools are an appropriate recipient. From an article in the New York Times:

The program at issue on Wednesday gives Arizona taxpayers a dollar-for-dollar state tax credit of up to $500 for donations to private “student tuition organizations.” The contributors may not designate their dependents as beneficiaries. The organizations are permitted to limit the scholarships they offer to schools of a given religion, and many do.

The program was challenged by Arizona taxpayers who said it effectively used state money to finance religious education and so violated the First Amendment’s prohibition on the official establishment of religion.

I argue incessantly against tax credits when they are targeted and devoted to economic development, but I have a more favorable opinion when they are used to fund education. Unlike targeted tax credits, most education tax credit programs don’t favor certain groups over others. Anyone can take advantage of these credits — individuals, corporations, etc. It’s not an über-exclusive group, like filmmakers or beef producers.

Education tax credits are a mutually beneficial strategy: Individuals and companies can reduce their tax burden and schools can be funded. There are direct/personal use credits (on a need basis) and scholarship donation credits (to serve the poor). This means that low-income populations particularly benefit from these tax credits; if a person doesn’t make enough to pay taxes, then his or her children are typically eligible for a scholarship.

As a positive consequence, education tax credits preserve choice and freedom in education. By increasing competition between schools, much like vouchers do, education tax credits incite schools to improve in order to continue to attract students. This is particularly important in cities that have low-performing schools, such as Saint Louis.

Perhaps Missouri should consider offering education tax credits as a mechanism for school funding. Missouri presently offers charitable tax credits that are similarly structured, such as the Food Pantry Tax Credit. Programs such as these set up a structure for a civil society that can someday replace government programs. This would be beneficial, because charitable organizations can allocate resources more efficiently and effectively than government.

The Future of Higher Education?

Posted on November 5, 2010May 5, 2026 by John Payne

George Leef of the Pope Center for Higher Education Policy has an interesting review of self-described progressive Anya Kamenetz’s DIY U, which argues that higher education would be vastly improved by a greater variety of options, rather than forcing everyone into the four-year college model:

The latter half of DIY U is about the many ways in which innovators (“edupreneurs”) are trying to give students new and better options. Established educational institutions want to sell students a big (and usually very expensive) bundle of education and credentials, but innovators are trying to unbundle those services and sell them separately at much lower cost–or even giving them away.

For example, there is Western Governors University, an online university that costs students less than $6,000 per year. WGU was formed in 1999 and instead of simply following the usual procedure of organizing academic departments in the traditional fields, officials convened a council of employers and asked, “What is it that graduates you’re hiring can’t do that you wish they could?”
[…]
All of this is about unbundling. If you walk into a grocery store wanting just one or two items, you can get just those items. If you want just one of two items of education, you shouldn’t have to buy a whole cart-full of courses. Kamenetz likes the idea that individuals should be able to customize education to suit their particular needs and desires. So do I.

One big problem, though—in a society that has become credential-crazed, how do people who get their education in unstructured, informal ways (I thought of writing “non-traditional” but when you think about it, this idea is very traditional, going back to the ancient Greeks) show that they have a base of knowledge? College degrees don’t necessarily betoken any learning, but they’re better than trying to explain that you got a lot out of the various topics you studied online when the employer insists on a B.A.

“Accreditation and assessment, the source of the ‘sheepskin effect’” she writes, “is proving the toughest nut to crack.” Innovation may crack it, though. Today, students can compile and publish a portfolio to demonstrate their knowledge and capabilities by using free software like WordPress and Drupal. Since the college degree is no longer a very useful screening mechanism, if a few employers would start saying to applicants, “Don’t show us where you’ve taken courses, but instead show us evidence that you’ve learned something that would be useful here,” the dam may break quickly.

Notice what is absent in this vision of the future of higher education. It involves no government subsidies, regulations, or even institutions. What makes it work is voluntary cooperation and the free market’s fabled discovery process. Students will learn more at far less cost. Laissez-faire will produce enormous benefits if existing institutions don’t strangle the educational freedom movement in the cradle.

Of course, the “traditional” college is primarily a product of tremendous government subsidization. Very few people attended colleges prior to World War II, but attendance rates skyrocketed in the late 1940s through the 1960s with soldiers using G.I. Bill funding to obtain degrees, and their Baby Boomer children — often funded by the newly created Pell Grant — following soon thereafter. Attendance rates continued to grow to the present, but now many of those who attend college never finish, and the focus of college has shifted from a liberal education to a form of halfhearted career training. Ending these subsidies could put emphasis back on older forms of education, like apprenticeships and trade schools, which could focus on practical arts without betraying their stated missions.

Musings on the Hotel Tax Vote

Posted on November 4, 2010May 5, 2026 by David Stokes

It may have been a very small issue, but some of the best news out of Tuesday’s election was the defeat of hotel taxes in Clayton, Richmond Heights, and St. Peters. Hotels in Clayton and Richmond Heights already have two taxes imposed on room stays — on top of the local sales tax. These are the same two taxes imposed on hotel rooms throughout the city and county. The reasons why I think the St. Louis hotel tax pool works are described in this article.

I applaud the citizens of these three cities for rejecting the proposed taxes. It would have been so easy for the majority to vote to increase somebody else’s taxes — that somebody being any unknown travelers staying in the hotel. Whatever the reason for the defeat, this is good news for fiscal discipline. Now these cities may have to make the tough budget choices that other cities are making, rather than just raising taxes and moving budget items around so they fit under the heading of “tourism.”

Rapping the Recession

Posted on November 3, 2010May 5, 2026 by John Payne

Back in January, a rap video contrasting the different business cycle theories of John Maynard Keynes and Friedrich Hayek produced by George Mason University’s Russell Roberts and filmmaker John Papola appeared on YouTube, where it has since garnered more than 2 million views. Keynes insists that economic downturns are caused by a lack of aggregate demand brought on by the “animal spirits” of consumers and producers, while Hayek maintains that an excess of credit from the central bank encourages malinvestment in a number of sectors.

Roberts and Papola are producing another video with the same actors playing Hayek and Keynes, and applying their theories to the present situation. You can catch a preview of the video, along with a short interview with Roberts and Papola from a conference sponsored by The Economist magazine, embedded below.

With the Right Strategy, STL’s New Developer in Chief Could Move City Forward Quickly

Posted on November 2, 2010May 5, 2026 by Audrey Spalding

The Post-Dispatch reports that Barbara Geisman is stepping down from her post as Saint Louis’ deputy mayor for development. Geisman has held that post since Mayor Francis Slay appointed her in 2001.

Already, people are speculating about who will fill the vacant spot, and with good reason. The position of deputy mayor for development is a powerful role. Whoever fills it will have significant input on how the city encourages and attempts to attract growth, and that person will help oversee the operations of the Land Reutilization Authority (LRA). With more than 9,000 properties, the LRA is the city’s largest landowner.

I look forward to seeing who will end up filling Geisman’s post. Saint Louis has the opportunity to take a new, more successful approach to promoting economic development. As Thomas Duda has pointed out on this blog, the city has the unfortunate habit of subsidizing, and re-subsidizing the creation of vacant commercial and residential space that no one wants. Those attempts to encourage new development within city boundaries are an extremely expensive betting game that Saint Louis frequently loses.

I hope that the new deputy mayor for development will take a more organic approach to development, by making it easier for private individuals to develop real estate in the city (although not with tax dollars). Revamping the administration of the LRA is one way that the city could promote economic development at little to no cost.

Once per month, the LRA meets to accept, reject, or defer offers from individuals who wish to purchase LRA property. So far during 2010, there have been more than 400 offers to purchase LRA property. Some of these properties have remained vacant for decades, yet only about 140 properties were sold. The rest of the offers were either countered (the LRA frequently asks for higher offers), deferred (the LRA may delay its decision), or rejected. I should note that counteroffers and deferrals can operate effectively as a rejection — the potential purchaser may not have enough money to meet the agency’s counteroffer, or the deferral may be indefinite.

The chart below shows roughly the result of all of the offers that the LRA received this year from people wanting to purchase property. As you can see, a minority of offers have been accepted this year.

I want to focus only on the number of times that the LRA has rejected offers to buy its property. This year, offers to purchase roughly 80 different LRA properties were rejected, some several times.

For example, we can look to 2925 Union Blvd., a property that three different people have attempted to purchase in recent months — but every offer was rejected. Two of those people bid the LRA’s asking price of $2,000 and still were rejected. The third bid $1,500, a price that the LRA could choose to accept, but didn’t. The reason for these rejections — where people are asking to pay to purchase vacant property that costs the city money to maintain — is unclear. Furthermore, by rejecting these offers, the LRA also rejected revenues of at least $100,000 in property sales revenue. Had the properties been sold, the city would receive property tax revenue from the new owners, and the city would no longer have to pay to maintain the properties.

One reason the LRA may reject offers today is that the agency hopes it can attract a developer to remake the entire area if it first amasses a large amount of property. Instead of waiting for a hoped-for developer of the future who may have a chance at redeveloping entire blocks of the city (even if the hypothetical developer shows up, the proposed development will likely cost the city millions and perhaps never even materialize), a better strategy for Saint Louis would be to let private individuals who want to purchase LRA property do so.

The city actually tried the strategy of freeing up LRA property in 1989, by reducing the price of side lots (smaller than 40 feet wide) to a maximum of $135. The pilot side lot program was limited to just a 16-block area within the city. During a two-month period, six side lots were purchased. Throughout the rest of the city, which has an area of more than 60 square miles and encompasses thousands of city blocks, only 17 side lots were sold during the same time period. The LRA executive director at the time, Michelle Duffe, called these numbers inconclusive. I’d say they were evidence of a small-scale success.

The new deputy mayor for development should free up LRA property to potential buyers. City revenues would increase, and we’d see more local development. If he or she wants to take a small but significant step forward, one way would be to push the LRA to implement a side lot program similar to the one tried in 1989. The city has everything to gain, and little to lose.

Real Estate Development With Public Dollars Provides No Demonstrable Net Benefit

Posted on November 2, 2010May 5, 2026 by Thomas Duda

Missouri’s Fifth Senate District — which includes downtown St. Louis — was the recipient of nearly $1 billion in state monies between 2000 and 2010, according to data from the tax credit tool at Show-Me Living.

This amounts to a total of $171.28 for each Missouri resident spent on tax credit projects in just one of the state’s 34 Senate districts.

If we look in greater detail at the more than $600 million expended by the state for “Redevelopment” in the Fifth Senate District, we see that $530 million was devoted to historic preservation.

Of the state historic preservation spending in the Fifth Senate District, $375 million went to projects that also received the Federal Historic Preservation Tax Credit. Missouri’s preservation tax credit reimburses 25 percent of project costs, and the federal tax credit reimburses 20 percent of project costs, so we can estimate total Federal Historic Preservation Tax Credit spending in Missouri’s Fifth Senate District at $300 million.

This amounts to $0.98 in federal funds spent on historic preservation in Missouri’s Fifth Senate District for every resident of the United States.

When we consider local tax increment financing (TIF), using data from the Missouri Department of Economic Development’s 2009 TIF Annual Report, we can account for an additional $600 million in taxpayer funding for development in St. Louis city. As we can see in the chart below, as of 2009, less than $100 million of this spending has been paid for.

Given current estimates of St. Louis city’s population from the American Community Survey, TIF expenditures amount to $1,768.61 for each city resident.

The total amount of public funding for real estate development in St. Louis city may be unknowable, given the complex interplay between various modes of taxpayer financing. Data exists for Community Improvement Districts, federal grants, state and local industrial development bond financing, local real property tax abatement, and other public programs, but is much harder to aggregate.

A person almost has to go to law school to appreciate how development in St. Louis works. For those of us living here without the benefit of a legal education, though, it is readily apparent that, although state and local governments spend lots of taxpayer monies on real estate development, no one is providing quantitative evidence that the benefits of these expenditures exceed the costs.

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