Do Tax Credits Pay for Themselves?

Interesting article on tax credits for movie producers in the St. Louis Business Journal. It describes how tax credits for filmmaking are not in the long run very beneficial to the cities offering them. It portrays the recent stay of George Clooney for his movie Up in the Air, scheduled for release some time next fall, and points out that although Hollywood producers often get deals from cities, the short term economic activity that such productions generate may not be worth the cost.

The online copy of this article is truncated and only available to paying subscribers. But, for those of you who received a print copy this morning, I encourage you to browse through it. It’s on page 45.

Also, be sure to read the Show-Me Institute’s three previous commentaries about why using tax credits to promote economic growth is a recipe for economic stagnation.

Can You Spot the Oxymoron …

… in this Political Fix post?

It’s “stimulus oversight.” The idea of a stimulus is to spend money all over the place, and quickly. If the spending were narrowly targeted, politicians wouldn’t be able to claim that it had effects all across the economy. And if it were slow and deliberate, the theory goes, it would be too late to turn around a recession — or to placate constituents.

“Oversight” and “stimulus” just don’t go together.

Another Reason to Dislike the Stimulus Plan, As If You Needed It

When you send politicians blank checks of money that they are just supposed to spend for the sake of spending it, you inevitably bring out one of the least attractive parts of democracy — legislators fighting to ensure that their constituents get theirs, too!

Today’s Kansas City Star details how Kansas City officials are angry that St. Louis got a lot of pork — aka, stimulus money — and Kansas City received none. This is a perfect real-world example of what public choice economists have long discussed: the logrolling and vote-swapping in a legislature divided by districts leads to ever-increasing spending, as every (or almost every) legislator tries to make certain that their constituents get as large a share of the pie as possible. When the pie gets divided up, if not everyone is satisfied, you just make a bigger pie. Now, Missouri has rules such as the balanced budget amendment and the Hancock amendment that make doing this less common than an assembly such as the U.S. Congress, but it is still unseemly.

This post should be taken simply as a comment on how our democracy works: good, bad, and ugly. It is not a criticism of Kansas City legislators, who are just being open about their displeasure with how the stimulus spending worked out. If it were the other way around, I am quite certain that St. Louis officials would be saying the same thing.

Chance for Students to Win Cash Prizes in News Coverage Contest Ends Soon!

The Show-Me Institute’s Policy Pulse news coverage contest is nearing an end, but there’s still time for interested students to submit entries — one of which could win a total of $1,250 in prize money. The last day to submit new stories is Wednesday, May 20.

The contest is sponsored in conjunction with the Missouri Broadcasters Association and the Missouri Press Association, in order to encourage young citizens and aspiring journalists to participate in Missouri’s political process by investigating policy areas of their choice and creating original news stories. The purpose of this competition is to develop a more informed citizenry, while training aspiring journalists to utilize new media to research, create, and communicate stories about today’s most interesting policy issues.

Students attending high schools and colleges throughout Missouri may submit original news stories covering any policy of their choosing. Acceptable forms of media include audio or video clips lasting no more than five minutes, or written articles of up to 1,000 words. Cash prizes in the amount of $500 will be awarded each month to the best entry written by one high school student and one college student. The college division winner for March has already been selected, and the winning article — which has, so far, won a $500 prize — can now be viewed on the Policy Pulse website.

Judges are still deliberating over the college division winner for April, and an announcement is expected soon. There were no high school division entries for either March or April, so no prizes could be awarded in that category. Again, students have until the end of the day on Wednesday, May 20, to submit entries for consideration in May’s contest.

At the end of May, an additional $750 grand prize will be awarded to the best overall submission from the three previous months, for each of the two school categories, along with a $500 prize awarded to the teacher or professor designated by these grand prize winners, to be presented at the Missouri Broadcasters Association award ceremony on June 6. Any submission that is of exceptional quality will also be posted on the Show-Me Institute’s comprehensive legislative tracking tool, Policy Pulse, online at ShowMePolicyPulse.org.

Contest rules may be viewed online. Also, be sure to check out this contest PSA:

Better Late Than Never

On March 10, I had the pleasure of engaging in a conversation about education on Steve Spellman’s News at Five radio show on Columbia’s KOPN 89.5. In addition to Steve, I was joined by Sarah Read, the president of Columbia Parents for Public Schools. Our host impressed upon us that he wanted to have a civil conversation (not a debate) about the purpose, history, and outlook of public education, and I believe that Sarah and I rose to the occasion. The station’s website just made the recording of our conversation available online, so here’s a link for anyone interested in hearing how it went!

Beware the Licenses

In the very readable Capitalism and Freedom, Nobel laureate economist Milton Friedman wrote about the economic consequences of labor unions, minimum wage laws, and occupational licensing. Anyone with even minor economics training (or perhaps even just a moment’s reflection) can tell you some of the basic costs and benefits of each. Simply put, they all involve concentrated, visible benefits and dispersed or difficult-to-detect costs. 

We’ve definitely talked about licensing here at the Show-Me Institute before; of the three topics listed above, it’s certainly the one we’ve dealt with most (perhaps because David Stokes has such a special place in his ire for the rent-seeking usually implied by occupational licensing). There may be a problem with the way labor economists percieve these three topics, however.

According to a recent post on Overcoming Bias, the preeminent textbooks deal with these topics out of all proportion from reality. According to the post:

In the U.S. now, less than 3% of workers earn the minimum wage, about 12% are in unions, and about 29% are required to hold a state-issued license to do their work.

In the popular textbooks however, slightly less space is devoted to minimum wage than labor unions, and licensing is covered scarcely at all.

Perhaps our fight against occupational licensing would be an easier one if labor economists spent more time covering the topic during their formative years. Or, perhaps more people should tell their friends about the simple arguments against most occupational licensing: barriers to entry increase price, often with no meaningful effect on quality — and quality is often best determined by success or failure in a competitive marketplace.

Taxes and Tickets

This Missourinet article (link via Combest) about a bill in the Missouri House, H.B. 683, tackles some valid issues within the transportation sector.

The bill attempts to streamline the process of paying sales taxes on a newly purchased car. Although no one enjoys paying taxes in the first place, the time, effort, and inconvenience involved in paying the tax at a separate time and in a separate location adds insult to injury. Some of these annoyances would be minimized if a system were in place that allowed consumers to pay the tax directly at the point of purchase.

Another provision would expand an existing law that limits the amount of speeding tickets that can be issued in order to supplement budgets in small towns. The existing law is entitled “Mack’s Creek Law,” named after the small town in Missouri that had, before the creation of the bill, used speeding ticket revenue for a large percentage of its municipal budget.

Virtual Schools in Jeopardy

Edspresso links to this op-ed about the virtual school controversy in Oregon. It describes how Oregon restricts virtual school attendance for students outside of specific districts — a policy that can have no other purpose than to hinder online schools’ growth, because, by their very nature, the schools could serve far-away students just as well as they serve nearby students. Virtual school opponents are now pushing for an enrollment freeze.

If these tactics work in Oregon, I predict that unions in other states will lobby for similar restrictions on virtual schools. The price of lasting education reform is eternal vigilance!

Rating Schools in Britain

I came across this story by way of the Panama City Renaissance School blog. British Prime Minister Gordon Brown has suggested that parents should rate schools, and their opinions be used to expand some schools and close others.

This article is an instructive example of how parental choice is more accepted in European countries than it is here. Britain’s education system is far from a free market, but parents do have choices. Take a look at this sentence (emphasis mine):

Under the plans, if parents are dissatisfied and too many are missing out on their first choice in the admissions process, councils will be forced to expand the number of places at the most popular schools, open new schools, or change the management of those that are struggling.

In the British education system, parents choose between different schools that are financed completely or partially by the state. (Partially financed schools may charge parents for room and board, or for religious courses, but still receive state money to teach the national curriculum.) As happens in U.S. charter school lotteries, parents don’t always get their first choice of school.

It’s striking how this choice is so normal in Britain that parents can complain that they didn’t get their first choice. In the United States, charter school lotteries take place only in the individual cities that have charters — when the political constellations align to give parents any alternative to their assigned schools. We don’t hear a lot of complaints about first or second choices here, because the ability to choose is so unusual. Choice advocates regard it as a victory when parents get to enter a lottery at all.

Although Britain’s education system incorporates more choice, British politicians have not abandoned their characteristic aversion to markets:

Brown attacked Tory plans to introduce a Swedish-style market in education, where schools compete for pupils and are allowed to profit under a voucher system. […]

He said: “A market free-for-all would fail because, as some schools go under slowly as competitors overtake them, children in those weaker schools would be left behind. A whole generation failed – waiting for the market to work.”

The idea that competition leaves children in failing schools for generations, while the political process improves schools in the blink of eye, is laughable. We observe the opposite: Vested interests keep the worst state schools going despite a consensus that they’re terrible. And, under market competition, bad schools are forced to change or close, because otherwise their support dries up.

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