Want Higher Teacher Salaries? Raise Property Taxes

Posted on by James V. Shuls

In the past year, much has been made about Missouri’s teacher salaries. According to the National Education Association, Missouri ranks 50 out of 51 states (including Washington, D.C.) in starting teacher salaries. I have shown that we cannot put too much stock in that ranking, as it undervalues Missouri’s true starting teacher salary by putting disproportionate weight on small, low-paying school districts. For this post, let’s set that aside and for the sake of argument assume that Missouri needs to increase teacher salaries. If so, who should pay for it?

The policy conversation around this question typically assumes a state solution. Read the newspapers or listen to testimony before the state legislature and you will hear a clear narrative—it is the state’s responsibility to raise salaries. This ignores the fact that local school districts set the starting salary. Assuming the state is responsible also ignores the important role of local school districts in raising funds for schools.

The Missouri funding formula is a complex partnership of state and local effort. When the Department of Elementary and Secondary Education (DESE) determines how much aid each school will receive, the state calculates how much money the district can raise locally. In doing so, the state assumes a tax rate, or performance levy, of $3.43 per $100 of assessed valuation.

Yet more than 30% of all school districts in Missouri do not even tax themselves at the rate DESE assumes in funding formula calculations. In 2022, 162 school districts taxed themselves at rates lower than $3.43.

School property tax rates are set locally. Changes to tax rates are proposed by local boards of education and local taxpayers vote on those changes. Though Missouri allows for tax rates to vary among school districts, the state has instituted a required minimum rate of $2.75 per $100 of assessed valuation.

In 2022, 55 school districts taxed themselves at the state minimum rate. On average, these districts raised just 38.4% of their funding from local sources.

Missouri could go a long way in raising teacher salaries if these low-tax school districts would simply tax themselves at the state’s assumed performance levy. That, of course, has rarely been mentioned in serious policy conversations.

“Tax-Free Weekend” Underscores Importance of Sound, Stable and Uniform Tax Policies

Posted on by Patrick Ishmael

My colleague David Stokes has been in the news in recent weeks as one of a handful of vocal (and correct) policy professionals objecting to local property tax freezes for seniors, a policy enabled by legislation passed earlier this year. As he noted in his testimony to St. Louis County, freezing taxes on one set of payors without reducing spending “will almost certainly lead to higher tax rates on those properties that are not subject to the property freeze.”

My general position on taxation has always been about maximizing growth, and specifically moving from income taxes to the least destructive tax for growth—the property tax. That does not mean, however, that I am unaware of or unsympathetic to alternative considerations that could be reasonably offered.

  • Property taxes are the least destructive tax for promoting growth, but other objectives beyond “growth” do enter the calculus for policymakers. Is it “fair” for a taxpayer who owns property to get a tax benefit, but not a taxpayer who rents? Are real property taxes problematic in the same way personal property taxes are, or are they completely different policy issues? Like most things in life, tax policy is not a one-dimensional issue; stipulating to that reality is appropriate, even as I support reforms that stoke growth, against possible alterative priorities.
  • From a practical perspective, it also isn’t great if seniors on fixed incomes find themselves unable to make their property tax payments if a massive assessment adjustment, like what we’re seeing in Jackson County, makes staying in their longtime homes fiscally impossible.

All that said, cutting the state and local tax base to ribbons, whether on a permanent or temporary basis, is a precarious proposition precisely for the very reason David highlights: unless government spending falls as tax exceptions are made, the cost of government will inevitably fall to the rest of the taxpayers.

And speaking of . . .

Missourians shopping for school supplies, clothes and computers during the state’s tax-free weekend Aug. 4-6 can save up to 5% more than in previous years.

A 2021 Missouri law taking effect this year prevents all cities, counties and special tax districts from charging local sales taxes during the back-to-school weekend.

Tax holiday shoppers have been exempt from the state sales tax of 4.225% since 2004, but many municipalities still charged local sales taxes. With local sales taxes eliminated, this year, shoppers will save up to 9%.

I would love to say that the sales tax holiday for school supplies is a net good for the state and families, but as The Tax Foundation notes:

While sales tax holidays have been politically popular for a long time, they have seen a boost this year as lawmakers look for ways to share surplus funds with taxpayers who are struggling to afford goods and services amid high inflation. But however well-intended they may be, sales tax holidays remain the same as they always have been—ineffective and inefficient. [emphasis mine]

Sales tax holidays have been and always will be dubious tools for promoting reasonable public policy objectives—they simply shift consumer spending patterns instead of changing them and are often used to promote illusory economic development benefits. As with tax credits on income taxes and tax abatements on property taxes, carving up the sales tax base with “tax holidays” can have similarly unintended consequences, even if the policy is good politics and good intentioned. But as with the senior property tax carveout, even a good intentioned sales tax holiday is bad policy.

Tax Free Weekend, Property Tax Freeze, and School Lunches

Posted on by Patrick Ishmael

Patrick Ishmael, and David Stokes join Zach Lawhorn to discuss freezing property taxes for seniors, what the research says about the impact of “Tax Holidays”, the latest developments in the Kansas City Royals search for a location for a new ballpark, and more.

Listen on Apple Podcasts 

Listen on Stitcher 

Listen on SoundCloud

Produced by Show-Me Opportunity

Data’s Double-Edged Sword

Posted on by Elias Tsapelas

Missouri’s outdated information technology (IT) systems appear to be in the center of another controversy. Typically, Missouri’s antiquated IT systems unnecessarily inflate government costs and reduce efficiency. But now, Missouri’s IT systems are so poor that the state can’t participate in the federal government’s summer food stamps program. Without diving into the merits of whether Missouri should be opting into this program in the first place, the state’s excuse serves as a reminder of how outdated technology and poor data quality can cut both ways.

For years, I’ve been complaining about Missouri’s IT systems and have been begging for improved data quality. Back in 2020, due to insufficient computer systems, pandemic unemployment benefits couldn’t be tied to recipient incomes, which led to the federal government paying many individuals more to stay home than to go back to work.

More recently, I’ve written about Missouri’s sluggish start to the post-pandemic Medicaid eligibility redetermination process. States often struggle to keep up-to-date income or address information on Medicaid and other welfare program recipients, which is why there are frequent checks to see whether those enrolled in these costly programs are still eligible to receive services. But for the last three years, many recipients maintained coverage because the state didn’t know that they no longer qualified, or weren’t allowed to remove them even if they did. It’s easy to see how poor data in such cases can quickly result in serious government waste.

These data limitations are a big reason why I wrote that the recently signed “benefit cliff” legislation is a bad idea. While it may sound good to slowly reduce welfare benefits as recipient incomes increase to avoid an abrupt loss of services, the government implementing something like that requires far better data than what is available. Missouri doesn’t keep real-time income data on program recipients, and often only checks earnings once per year. Even if a program tries to offer a welfare off-ramp, if eligibility is only checked once per year, all you have is another cliff.

All this to say, accountability in government spending is incredibly important, and it’s unfortunate that Missouri has fallen so far behind. But it’s also a good thing that the federal government wants to know that the summer food stamp benefits are actually making it to kids who need them—regardless of whether Missouri could get its act together to comply with the program’s requirements.

For a while now, the costs for Missouri’s insufficient computer systems were primarily borne by state taxpayers via bloated programs. But now that our state is missing out on millions of available federal funds aimed at benefiting children, it is my hope the issue of improving IT is something everyone can agree on. Let’s hope Missouri’s legislature listens and takes action next year.

State-Created Tax Map a Solid Tool for Oversight of Local Sales and Use Taxes

Posted on by Patrick Ishmael

Over the years, I’ve talked a lot about the importance of transparency because transparency can often be an effective tool against government overreach. Generally speaking, the more the public knows about its government, the less likely that government will behave in ways contrary to the public interest. Transparency not only makes it easier to uncover past failures but also to head off future mistakes. As has been said, sunlight is the best disinfectant.

That’s why the latest version of Missouri Department of Revenue’s sales and use tax mapping tool is so welcome. A story by the eMissourian is a testament to precisely how I would hope the site would be used by the media and the public:

A purchase in downtown Washington comes with an 8.85 percent sales tax, which includes a 2 percent city sales tax and a 0.375 percent tax for the Washington Area Ambulance District.

Someone making the same purchase in downtown Union would have to pay 9.475 percent in sales tax. While Union has the same 2 percent city sales tax as Washington, consumers also pay a 0.5 ambulance district tax and a 0.5 percent tax for the Union Fire Protection District. St. Clair has the same 9.475 percent sales tax rate, with its fire and ambulance districts both having half cent sales taxes.

While Pacific charges a higher 2.5 percent city sales tax, it has the same overall 9.475 percent sales tax rate because no fire sales tax is shown.

You can find the sales and use taxes in your jurisdiction, and any Missouri jurisdiction, here.

It’s worth noting that while a number of articles this month have referenced the map as “new,” as my colleague Elias Tsapelas might note, it’d be more accurate to characterize it as “improved.” House Bill 1858 in 2018 and Senate Bill 153 in 2021 both helped lead to the new initiative, and perhaps serendipitously those local rate transparency initiatives also coincided with both the Show-Me Checkbook spending transparency projects and parallel spending transparency initiatives by the state treasurer and the state office of administration.

In other words, the transparency initiatives of the late 2010s are starting to bear fruit here in the early 2020s, so while some features on the interactive map may be “new,” the ideas aren’t. Of course, the state can always do more to promote transparency, such as requiring spending transparency from local governments and curricular transparency from schools and districts. But for what this tax map narrowly seeks to do, it does a good job of it.

A Bandage Approach: Teaching after Retirement

Posted on by James V. Shuls

It is quite common for school districts to post advertisements to recruit new teachers. You may have noticed an interesting change in these postings recently—they are focused on retired teachers. In an effort to alleviate teacher shortages, the Missouri Legislature passed Senate Bill 75 this past session. Among other things, it allows retired teachers to come back to teaching while continuing to receive their retirement benefits. This idea of allowing retired teachers and administrators to continue working after retirement is not a bad one; indeed, I’ve proposed something similar myself.

The problem is that allowing retired teachers to come back to the classroom does nothing to address the problem. Let me be clear on what I mean by “the problem.” I am not talking about the problem of teacher recruitment and the number of people entering the profession. I’m talking about the teacher pipeline problem caused by the retirement system itself. It is a system that pushes people out. It incentivizes teachers, principals, and superintendents to retire in their mid-50s. This new provision does not address that issue; instead, it makes it worse.

Researchers have long known that defined-benefit pensions, such as those used in the Missouri teaching profession, have two key effects on the labor market. They provide a pull for workers to stay until the peak benefit period, then they push workers out. If a teacher begins working in Missouri right out of college around the age of 22, they will likely hit their peak benefit period around the age of 53.

If lawmakers truly want to keep great late-career teachers in the profession, they should revise the system that pushes them out in the first place. The best way to do this would be to move to a new type of pension system where teachers’ retirement plans would continue to accrue wealth as they continue to work through their 50s.

If we view Senate Bill 75 as a temporary fix (it does have a sunset built in) to address an immediate issue of teacher shortages, then the bill is fine. It is not, however, a fix to a teacher pension system that pushes out individuals who have so much more to give.

The Great School Rethink with Rick Hess

Posted on by Susan Pendergrass

Susan Pendergrass speaks with AEI’s Rick Hess about his new book “The Great School Rethink”.

Learn more about the book: www.aei.org/research-products/b…eat-school-rethink/

Frederick M. Hess is a senior fellow and the director of education policy studies at the American Enterprise Institute (AEI), where he works on K–12 and higher education issues. The author of Education Week’s popular blog “Rick Hess Straight Up,” Dr. Hess is also an executive editor of Education Next, and a Forbes senior contributor. He is the founder and chairman of AEI’s Conservative Education Reform Network.

Listen on Apple Podcasts 

Listen on Stitcher 

Listen on SoundCloud

Produced by Show-Me Opportunity

You Can Take Your Shades Off

Posted on by Susan Pendergrass

The future of Missouri’s workforce may not be very bright. A recent CNBC analysis of the Top State for Business ranked Missouri at a less-than-stellar 32nd. This ranking is based on what CNBC describes as “which states are delivering most effectively on the things that mean the most to business” and contains 10 categories of “competitiveness.”

The worst news for Missouri is in the Workforce category. Metrics for this category include the concentration of STEM workers and the percentage of workers with bachelor’s degrees, associate’s degrees, and Industry Recognized Credentials (IRCs). It also includes net migration of educated workers, worker training programs, right-to-work laws, and worker productivity. Missouri ranked 49th out of 50 states in Workforce, garnering just 151 of the 400 possible points.

There are a few things we know about Missouri’s workforce now and its prospects for the future. The percentage of Missourians with college degrees has been declining in recent years. The percentage of Missourians with bachelor’s degrees has declined from 31.9 percent in 2020 to 31.7 percent in 2022. (For reference, it was 25.6 percent in 2010.) Not going up as fast or remaining stagnant is problematic. Declining is very bad news.

We also know that just 60 percent of our 61,200 high school graduates in 2022 were considered to be college or career ready when they left with their diplomas. The Missouri Department of Elementary and Secondary Education (DESE) determines college or career readiness by scores on the ACT or SAT college entrance exams, the ACT WorkKeys assessment, which measures career readiness skills, the Accuplacer assessment, which is a college placement exam, and the Armed Services Vocational Aptitude Battery (ASVAB) military assessment.

So, our workforce is already in bad shape, and we are handing diplomas to nearly 25,000 high school graduates who are known to not be college or career ready. Wouldn’t you think that our leaders would be addressing this like the crisis that it is?

More than a Metaphor: The Kansas City Streetcar Nearly Goes Off the Rails

Posted on by Patrick Ishmael

As Americans across the United States were celebrating the country’s independence two weeks ago, it appears the Kansas City Streetcar wanted to join the fun when, on the Fourth of July, one of its rails moved (gently) skyward. Indeed, as a streetcar approached a bridge over I-670, the operator noticed the rail move a little, and then a lot. The streetcar’s progress halted and now the entire line will be shut down for what could be a month or more:

On Thursday, contractors began to dig into the rail bed on the I-670 bridge to fix a piece of steel track that emerged from the pavement earlier this week.

A streetcar driver noticed the problem on July 4, when the rail popped out of the ground as a train was approaching the bridge. Donna Mandelbaum, a spokesperson for the Streetcar Authority, said the driver was able to stop in time to avoid further damage or injury.

Since then the Streetcar Authority and its partners have been examining the bridge and rails to find out what caused the problem. Mandelbaum said the rail had likely bent because of thermal expansion.

Since then and in the meantime, service along the streetcar will be provided by buses which, if you’re familiar with what Show-Me Institute analysts have said about the city’s streetcar projects over the last decade, is fitting. Buses are faster, cheaper to set up, easier to reroute, and easier to keep in operation. Simply put, they’re better. That for a decade Kansas City pushed to build the line and later expand it despite its obvious drawbacks is a testament to the city’s commitment to dubious transit schemes in service to questionable economic development objectives.

Kansas City may not be alone among municipalities in the misguided effort to resurrect old-timey transit—hello St. Louis!—but the absurdity of using rails like this in Kansas City is accentuated by this tale, where four feet of broken track has shut down four miles of transit service for, likely, four weeks. For shame.

Support Us

The work of the Show-Me Institute would not be possible without the generous support of people who are inspired by the vision of liberty and free enterprise. We hope you will join our efforts and become a Show-Me Institute sponsor.

Donate
Man on Horse Charging