David Stokes, Elias Tsapelas, and Patrick Ishmael join Zach Lawhorn to discuss the start of the 2024 Missouri legislative session.
Produced by Show-Me Opportunity
Why Don’t We Remove the Floor from Missouri’s Income Tax Triggers?
RSMo §143.011(4)(1) represents the essence of Missouri’s income tax reduction trigger law. Passed in 2022, the law reduces the state’s income tax over time to a floor of 4.5%, assuming certain revenue targets are met. Importantly, the section states that “[n]o more than three reductions shall be made under this subsection.” In other words, when the tax cut triggers are all met, no further cuts below 4.5% can be made.
Why stop at 4.5%? As the state’s general revenue grows, shouldn’t tax rates be adjusted accordingly so that the total size of government doesn’t also grow? By eliminating the limit of three reductions to the income tax rate from the law, Missouri can set forth a fiscally responsible glide path to eliminating the income tax entirely, using current law to facilitate this autopilot tax reform. Letting taxes drop as revenues rise is an appropriate and efficient way of achieving this end.
We have talked at length and for years about how destructive income taxes are to growth and why they should be phased out and ended in Missouri. Accelerating that stepdown is worthwhile, but not stopping that stepdown is just as important, given the current law. Policymakers should remove the floor and let the individual income tax rate continue to fall if government revenue keeps rising.
The Authority of the Missouri Auditor Should Be Expanded to Enhance Local Transparency
The Missouri State Auditor’s Office plays a crucial role in promoting transparency and accountability in government. Although the Auditor arguably already has many powers to advance these ends, state law could provide the state auditor with further explicit authority to ensure local spending is transparent and publicly reported.
To achieve this transparency objective seems simple. A new statement could be added to RSMo §105.145(2) that says, “the auditor may require the submission of supporting documents for such financial transactions, including but not limited to check registers or their electronic equivalent, and digital bookkeeping files.” Such an addition wouldgive the state auditor the authority to require supporting documents for financial documents reported to the state by local governments. The auditor could then post the documents online, giving the public a complete and detailed picture of how their money is being spent.
With such a change to state law, the State Auditor would be better equipped to ensure that public funds are being used in a transparent and accountable manner. For its part the public would be able to see how money is spent rather than being forced to use the Sunshine Law to get such records—a process that, as staff at the Show-Me Institute has discovered over many years, is often made more difficult by officials apparently trying to prevent the dissemination of these records.
No more asking “pretty please” for transparency from local bureaucrats. The Auditor’s Office would be able to deliver this transparency if it had such explicit powers.
Expanding Interstate License Reciprocity Can Improve Access to Health Care
Interstate licensing reciprocity in healthcare is an issue near and dear to my heart. Starting with the implementation of the Volunteer Health Services Act in 2013 and followed by a host of reciprocity reforms in recent years, Missouri has found itself at the forefront of licensing reform issues nationally.
But Missouri can do better, and that means updating state law to ensure that the objective of reciprocity—that is, the expansion of health care supply to patients by leveraging qualified individuals from other states—is in fact achieved.
Two areas, then, that require attention in Missouri are the six-month delay in reciprocity admission that’s permitted under RSMo §324.009(3) and the compact exception in RSMo §324.009(10) that allows licensing boards to step in front of reciprocity reforms by entering into preemptive compacts. Both the six-month delay and compact exception can be easily corrected by deleting those provisions.
These tweaks to Missouri law may seem obscure and small, but they are important, and they should be implemented as quickly as possible for the benefit both of the professionals affected and the consumers and patients that will benefit from increased access to those professionals.
Repeal Certificate of Need For the Health and Welfare of Missourians
Certificate of need (CON) laws have been a subject of debate since their inception in the United States half a century ago. Intended to control healthcare costs and improve access to care, Missouri’s CON law requires healthcare providers to obtain government permission before opening certain facilities, expanding certain care services, or installing certain medical machines.
Yet research tends to show CON has the opposite effect of its original intention, leading to higher costs and reduced access to care for patients. This is not surprising, of course. As President Ronald Reagan once joked, often when the government comes “to help” is when the public should get concerned.
Missouri can stop “helping” in this counterproductive way by unwinding its CON law. By repealing its certificate of need law through removing sections 197.300-197.367 from the state’s statutes, Missouri could promote competition, reduce costs, and increase access to care for all Missourians.
To find out more about the CON issue in Missouri, read our 2019 paper on the subject, End Certificate of Need in Missouri.
Transparency in Municipal Government Should Be Mandatory
Longtime readers are familiar with the wide array of transparency projects that the Show-Me Institute has undertaken over the last few years. In fact, our Show-Me Checkbook Project has helped prod two separate “checkbook” portals in state government since its introduction six years ago, but participation in those state portals is largely voluntary for local governments. Missouri should change that and require that, as a condition of being able to take money from people through force (which is what taxation is), local governments generally and cities especially should be reporting their spending to the state regularly and with specificity.
There are two key ways of doing this reporting. The first way is by embracing something along the lines of House Bill 2242 from 2019, which included mandatory municipal transparency language. The second way is by tweaking Missouri Revised Statutes §§37.1090 to 37.1098 by replacing the voluntary “may” language with mandatory “shall” statements.
Making local government transparency mandatory in Missouri would be an enormous leap forward in government accountability in the Show-Me State. Transparency can empower people, build trust in government, and ensure public resources are used in the best way possible.
The Parents’ Bill of Rights: Its Time Has Come
We have long said that if the government can take your money, it needs to account for it, and whether that money is taken by state government or local governments, the obligations remain the same. This is especially true when it comes to our schools and school districts. That’s why we introduced the Missouri Parents’ Bill of Rights in 2021: to give parents more control over their children’s education and ensure that they have a say in the classroom. It’s also why the Legislature needs to (finally) pass it in 2024.
The Parents’ Bill of Rights focuses on five key areas: curriculum transparency, school choice, parental involvement, data privacy, and district accountability. High among those objectives is the establishment of an online portal where district curricula can be viewed by parents so that they are fully informed of the instruction happening in their schools. We discussed these issues at length before Missouri’s U.S. Civil Rights Commission Advisory Committee earlier this year.
The core of the problem, as we’ve revealed over the last few years, is that the current setup for finding out what’s going on in schools requires either a forthright district (or school) or a district that’s compliant with the letter and spirit of Missouri’s Sunshine Law. In essence, taxpayers have to ask about how their money is being spent – rather than simply receive or see it without having to beg for it. The potential result of the current law is straightforward, with districts playing games with responses or attempting to charge outrageous sums for the information.
Now it’s time for this important policy to become law. By empowering parents, improving educational outcomes, promoting school choice, enhancing transparency and accountability, and protecting student data privacy, the adoption of a Parents’ Bill of Rights could have an important impact on the state’s education system—and improve the relationship between parents and the schools they fund.
Kansas City’s “Source of Income” Housing Rule Is an Abuse of Government Power
A version of this commentary appeared in the Courier-Tribune.
In an attempt to increase the supply of affordable housing in Kansas City, the Mayor and council have passed, with various amendments over time, requirements that developers seeking city tax incentives set aside some units for lower-income residents. There have been arguments over the exact details of the law, but overall the requirement is valid because it is, to a large extent, voluntary. Developers don’t have to seek tax subsidies. However, if they choose to seek them, they have to play by certain rules. So far, so good.
The latest proposal to support affordable housing in Kansas City, however, is the opposite of voluntary. The city council is considering a requirement called a “source of income” rule. This rule would prohibit landlords from refusing to rent to tenants who pay with housing vouchers or other types of government assistance. The most familiar of these programs is called Section 8. This proposal is a violation of the individual rights of landlords and a dangerous expansion of city government’s role in the economy and housing market. Beyond that, it is simply infuriating that local officials think they have the right to do this.
The Section 8 housing voucher program, along with the other programs run by the Department of Housing and Urban Development (HUD), is a federal government program. It has always been voluntary for landlords to participate. That voluntary nature is one of the program’s strengths, and there is no shortage of landlords who choose to take part in it. The most recent estimate we know of stated there were around 695,000 landlords nationwide who participated as of 2016. Many of those are large, property-management businesses with numerous units.
There are many examples of government social programs in which participation is voluntary. Doctors are not forced to accept Medicaid payments, yet many do. Grocery stores are not required to accept food stamps, yet many, if not most, do. That is how the Section 8 housing voucher program has successfully worked for many years. Imposing a local mandate in Kansas City will force landlords either to join the program against their will, creatively find other reasons to deny high-risk renters, or sell their properties to larger landlords. Each of these results is bad.
Denying high-risk renters is made more difficult by other aspects of the bill, which take the proposal beyond tragedy to farce. The bill states landlords cannot reject applicants based on things like poor credit scores, past eviction history, or criminal record. It is essentially forcing landlords to rent to anyone who applies, no matter their financial state or criminal history. Are laws requiring school bus companies to hire drunk drivers and pre-schools to hire sex offenders coming next?
It is fair to question the presumption that something needs to be done about Kansas City’s supply of affordable housing in the first place. The Kansas City metropolitan area was ranked the 13th most affordable housing market in the country in one survey. Another very recent survey ranked Kansas City 27th out of the 100 largest metro areas in total affordability, where housing was an important part of the calculations. Among the many other worthy objections to this source-of-income rule is the fact that it’s a solution in search of a problem.
If Kansas City wants to do something that might actually help lower-income people find more affordable housing, it could rezone parts of the city, especially those near transit stops, to allow for more multi-family housing units. Increasing the supply of housing of all types is the best way to lower the cost of housing. Minneapolis dramatically reduced its zoning requirements in 2018 to allow more apartments and condominium developments. Since that time, median rental rates in Minneapolis have increased by just one percent—the lowest in the nation—due to increased housing supply. The law of supply and demand remains undefeated, no matter how much members of the Kansas City Council may prefer addressing this issue by ordering people around.
Landlords and developers can meet this demand for housing if they are allowed to—authoritarian mandates are not required. This council can let the free-market work for housing in Kansas City, as it has done very effectively for decades.
The Worst Law in Missouri
Municipal annexations have been back in the news. An unincorporated area near Manchester (in St. Louis County) overwhelmingly rejected that city’s annexation bid, and the dispute over local marijuana taxes has brought to mind that it is too easy for cities (outside of St. Louis City & County) to annex commercial areas.
All this makes for a great opportunity to bring up the most important annexation-related change we need in Missouri, which is to get rid of the special rules regarding annexations and fire districts in St. Louis County. I am generally not in favor of annexations. We have too many small cities as it is, and municipal annexations should be more difficult (again, outside of St. Louis). I generally support the special rules for new incorporations and annexations within St. Louis County, except for the one involving fire districts.
Statewide, if a city with a fire department annexes an area within a fire district, the city has to pay the lost property taxes to the fire district on a declining basis for five years. That is fair. The district may have issued bonds based on the larger populations, and the five-year phaseout is a reasonable way to address that. But in St. Louis County, RSMO §72.418 allows fire districts to essentially force cities to pay their taxes forever, as long as the original fire district still provides fire protection for the newly annexed part of the city—even if the residents of the newly annexed part want services to be provided by the city’s fire department, not the old fire district.
Hazelwood and Crestwood have found this out the hard way, as both cities – particularly Hazelwood – have been raked over the coals (pun intended) by the Robertson and Affton fire districts respectively. The Robertson case was so egregious it finally spurred a recall of the fire board, which for the previous two decades had been raising taxes to a confiscatory level. How could they do this? Because a tiny number of voters in April elections could elect a board that then raised the tax rates Hazelwood was required to pay under its “agreement” with the district, knowing that the entire city of Hazelwood had to pay the tax, not just the residents within the crossover parts. How much was spending out of control? According to The Robertson Report:
While searching for an explanation for this high cost per call, Valley Park Fire Protection District (VPFPD) was identified as the most proportional fire district to Robertson FPD. Between 2016 and 2020, both maintained two firehouses, two ambulances, one pumper/rescue and one ladder truck, responded to almost equal number of emergency calls (VPFPD 2246 vs RFPD 2455 annually) and took roughly the same percent of commercials calls with an average 8.8% difference. A comparison of financial audits during these years revealed Valley Park FPD had spent $18.8M in total expenses (an average of $3.7M annually) to operate while Robertson FPD had spent $45.6M (average of $9.1M annually) for the exact same EMS and fire service. This is a total spending difference of $26.8M within 5 operating years. [emphasis added]
Special laws like RSMO §72.418 shield fire protection districts from municipal competition for local tax dollars and harm taxpayers. This law needs to be removed. The law is highly beneficial for the fireman’s union, and bad for everyone else, especially taxpayers. If residents and voters want to have municipal annexations or incorporations that include fire protection by municipal fire departments, then that’s what they should get.
