Subcommittee Recommends Buying Back Tax Credits

The Tax Credit Review Commission is beginning to deliver its final recommendations on targeted tax credit programs. From an article by the Missouri Watchdog:

The low-income housing program has more than $1 billion in credits outstanding through the year 2022. The subcommittee recommends buying back some of those credits to lessen the state’s indebtedness.

Recommending buying back credits is an admission that outstanding tax credits represent a considerable future liability for the state. If individuals and businesses did not redeem tax credits at indeterminate times in the future, then state revenues would be more constant and the state government would be able to forecast and plan its budget more easily. If there were a high number of tax credits outstanding, and they were suddenly redeemed, it could create or exacerbate budget problems in the future.

I have some questions relating to the logistics of this recommendation, however. Won’t buying back credits increase the state’s indebtedness in the present? Will the state government buy them at their face value, or will it buy them at a premium to encourage recipients to sell early?

Fantastic News for Missouri Taxpayers!

Maybe I spoke too soon. The Tax Credit Review Commission just voted to recommend cutting the film tax credit program in Missouri!

I have written 21 blog posts, and also an editorial, on the specific subject of the film tax credit program in Missouri. Maybe this recent recommendation indicates that people listened to me!

The committee also voted to recommend ending other tax credit programs during that meeting, including the Distressed Areas Land Assemblage tax credit and the Rebuilding Communities tax credit.

I applaud the commission for recommending aggressive cuts to these particular programs, and I hope that the legislature adopts them. I am thrilled that the film tax credit program may be ended soon; I don’t want to jinx it!

Show-Me Institute in the Media

The primary purpose of Show-Me Daily is to facilitate conversation and debate about policy issues in Missouri, from a free-market perspective. Our blog has other roles, though, and one of them is … ahem … self-promotion. So, with that in mind, I’d like to call your attention to the good amount of media coverage we’ve had lately. Here is the convenient and concise rundown for you, our dedicated fans.

Last Tuesday, Nov. 9, David Stokes and Dave Roland appeared on the Bernie Hayes Show on WGNU St. Louis AM 920 to talk about occupational licensing generally, and African hair braiders specifically. You can listen to the whole show here.

On Thursday, Nov. 11, Audrey Spalding was a guest on a panel discussing public education and the film Waiting For “Superman,” at Plaza Frontenac. Audrey was quoted in the St. Louis Beacon and on the St. Louis Business Journal‘s blog about the film and the issues of school quality and choice that it addressed.

Thursday night, David Stokes was quoted in a KMOV CBS Channel 4 story about public pensions. Show-Me Institute scholar Dr. Susan Feigenbaum was also interviewed for the story, an issue that the institute has addressed previously. If I could stress one point further, it would be to repeat the point Dr. Feigenbaum made in her interview that governments themselves are to blame for much of the public pension shortfalls by not making adequate contributions during good fiscal times.

On Friday, Stokes was quoted in a St. Louis Business-Journal piece by Dave Drebes about the potential for the city of St. Louis to re-enter St. Louis County. (You need to subscribe in order to access the full story online.)

Last, but not at all least, is yesterday’s major Post-Dispatch article on economic development, tax-increment financing (TIF), etc. Show-Me Institute intern Tom Duda and Stokes were both quoted in the story on how “economic development” in the St. Louis area amounts to nothing more than using tax dollars to lure business from one part of the area to another — sometimes only a few blocks away.

As a fun parlor game from the Post-Dispatch article, I’ll give 10 Show-Me Institute bonus points (whatever those are) to the first commenter who correctly cites the blatant red herring argument used by someone quoted in that last story.

Tax Credit Review Commission Delivers Final Recommendations; Expect No Surprises

The subcommittees on the Tax Credit Review Commission are delivering their final recommendations. From an article by the Missouri Watchdog:

The tax credit commission will not come back with any sweeping generalizations about the 61-different tax credit programs in Missouri, [co-chair] Gross said.

“Some programs have out lived their useful life… and some have sunsets we will allow to sunset. Those are not going to be controversial,” he said.

Although this is disappointing, it is not surprising. Back in June, I predicted that there would not be calls for scaling back these programs. This is largely attributable to the composition of the commission. It includes businessmen whose companies have been issued tax credits, along with bureaucrats and politicians who have an incentive to grow the size of government.

This was a missed opportunity to reform the economic development strategy in Missouri. It is very likely that targeted tax credit programs are a contributing factor to the state’s budget problems, and the commission should have evaluated their effectiveness in general. True economic reform in Missouri will require a high-level, macroeconomic cost-benefit analysis. Without any reform, Missourians would experience a continuation of the status quo.

The ostensible purpose for the Commission, as Gov. Jay Nixon outlined in his opening remarks, was threefold: help the state make wise use of taxpayers’ dollars to create jobs, incite economic development, and build strong communities. Instead of assuming that tax credit programs are the best means of achieving these goals, the commission should have investigated whether there are other tools that achieve these goals better.

Instead, the commission will deliver recommendations that will not actually do anything to limit the number of tax credits issued in Missouri — it will instead maintain the status quo.

The state economy is not without problems. When the state government says that it will investigate reform, it should engage in a serious effort, rather than mere political posturing.

I Would Be Thrilled if Geoffrey Canada Were the Richest Man in the United States

On Thursday, I was fortunate to participate on a panel to discuss solutions to some of the failings of the U.S. public education system. The panel, which included Russell Grammer, the director of Prodigy Leadership Academy, Anthony Thompson, president and CEO of KWAME Building Group, Inc., and Carter Ward, the executive director of the Missouri School Boards’ Association, spoke after a screening of Waiting for “Superman,” a documentary about children trying to escape failing traditional public schools for higher-performing charter schools.

I am optimistic about the future of K–12 education, because certain schools and education innovators have proven that what researchers and education administrators thought was impossible is, in fact, not.

For example, the Knowledge Is Power Program (KIPP) charter schools have been especially effective in reducing, if not eliminating, the achievement gap:

Students in at least half the KIPP schools Mathematica studied gained the equivalent of 1.2 years in mathematics and 0.9 years in reading three years after enrolling. The results effectively cut the racial achievement gap in half.

Another example of what is possible are the incredible gains made in Harlem, N.Y., by educational advocate Geoffrey Canada. He chose to attempt to “change the odds” of low income children in central Harlem — an area the New York Times reported had a poverty rate of more than 60 percent, and where three quarters of students were scoring below grade level on state aptitude tests. Today, we know Canada’s education nonprofit as the Harlem Children’s Zone (HCZ).

HCZ reports that 90 percent of its high school seniors were accepted into college this past year, and that those students received more than $6 million in scholarships and grants. HCZ also reports that of the four-year-olds that entered one of its programs, nearly one in five were initially achieving educational scores so low that they were classified as “delayed.” By the end of one year in the HCZ program, none of those students were delayed, and the percentage of students in that class that were classified as “advanced” had doubled, to more than 40 percent.

Canada was featured extensively in Waiting for “Superman.” Besides showing the struggles of students, the documentary’s broader message is about the big failures of traditional public education — including rapidly increasing education costs with no change in student academic achievement, the extreme difficulty of firing an incompetent teacher, and the seemingly endless bureaucracy that impedes educational innovation. The documentary’s strength is that it juxtaposes the flat-lining of student academic achievement in traditional public schools with what education innovators, like Canada, have been able to accomplish.

After watching the movie, the panelists took questions from audience members. About halfway through, Chris Guinther, the president of the Missouri National Education Association (the state’s largest teacher union), stood up to rail against the movie. I could write a series of blog posts responding to the statements she made — but space is limited, and you, reader, can only take so much.

I was most disturbed by Guinther’s objection to Canada’s success, because he had, according to her, made money by running the school. Now, after some brief research, I can’t find any indication that Canada has made outsized profits from HCZ, especially because the organization is a nonprofit. However, for the sake of argument, I’ll grant Guinther’s claim that the man who turned around student achievement in one of the most dangerous places in Harlem made a lot of money doing so.

I would be ecstatic if Canada were one of the most wealthy people in the United States. He has unarguably helped some of this country’s neediest children — in an area with extremely high foster care rates — gain an appreciation and mastery of education. I am more excited about Canada potentially reaping financial rewards for his risk taking and success than I am for almost anyone else. Why would money invalidate the success of the HCZ program? If the only criticism of Canada and his work encouraging low-performing Harlem children to succeed academically is that he might be making more than the average teacher, then that’s really no criticism at all.

In fact, I wish there were more potential for great rewards for people who work hard and take risks to vastly improve K–12 education. That might encourage more people to work to solve some of the shortcomings we are seeing in U.S. schools.

The real scandal is that, although educational innovators can make great strides and perhaps be begrudged for their relative financial success, teachers who fail their students can be nearly impossible to fire. For example, New York City’s school system has managed to fire only three teachers during the past two years. Or, as Waiting for “Superman” director David Guggenheim illustrated, in Illinois, only one in every 2,500 teachers lose their credentials, while the disbarment rate for Illinois lawyers is roughly one out of 100. Florida has difficulties firing bad teachers, too. Missouri, at least, appears to have a slightly higher rate — about 2 percent.

Shortage? Yes. Government Solution Required? No.

Today’s St. Joseph News-Press has an editorial about a recent Missouri Dept. of Agriculture program to encourage veterinarians to focus their practice on farm animals and not just lovable puppies and kittens in the suburbs. The basis of the editorial is interesting. I did not know about the shortage of vets in farming areas and the obvious problems that this can cause. Just the other day, my three-year old said he wanted to be a veterinarian when he grows up, so perhaps this will be an issue in my family one day. (I think pretty much every child says that at some point, though.)

To help combat this problem/issue, the editorial suggests, we (of course) need a government solution. This is where I start to disagree:

Recognizing the value of animal health professionals, USDA Rural Development has contributed $500,000 to a partnership with the Missouri Department of Agriculture to create a business plan and pilot program for an educational institution to train veterinarians. The program will focus on skills specific to treating food animals.

Like many things, this problem does not need a government solution. In fact, strict licensing of veterinarians may be one of the reasons we have a shortage in the first place. Furthermore, the veterinarians (via their licensing board) are actively involved in maintaining that general supply shortgage, as evidenced by the ongoing lawsuits against horse-teeth floaters in Missouri. As Dave Roland wrote:

Missouri’s Veterinary Medical Board has sued to prevent horse owners from hiring anyone but licensed veterinarians from working on their animals’ teeth. Equine dentistry is a centuries-old profession that veterinarians traditionally avoided, and equine dentists have their own educational programs that offer far more training and experience with horses’ teeth than is offered in veterinary schools. Nevertheless, the law states that equine dentists must be punished with a $1,000 fine and a year in prison for every horse they treat.

Basic economics tells us that the solution to a shortage is: 1) higher prices or salaries; and, 2) reduced barriers to entry. If we make it easier to be a veterinarian (or vet tech, or horse teeth floater) and allow for the market demand to increase prices or salaries for vets who work on farm animals, this shortage will solve itself.

(Note: Don’t take this as a call to completely eliminate all licensing for veterinarians. There are many worse examples of unnecessarily licensed professions than vets. But there are changes that can be made — expanding the role of vet techs, for example — that would reduce the role of government and allow the market to solve this problem.)

Keep the Playing Field Level in Missouri

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

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.

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Man on Horse Charging