Location, Location, Location

Posted on by Justin Hauke

It seems that property tax reassessment reform is nearing final passage in the House (it’s already passed the Senate). I’ve written before about this bill, but here’s a reminder: It would mandate that local jurisdictions roll back property tax rates in response to higher assessments. Advocates argue that the rollback provision is necessary because it ensures that city officials approve tax increases by a vote, rather than by simply inflating property values.

The article has some pretty good coverage of the arguments. In addition, Dave Stokes wrote a fairly comprehensive review of property tax reform last December, and blogged about it here.

But I still don’t completely buy the whole “rollback” argument. While I recognize the potential for appraisal abuse, people certainly don’t feel upset when their house depreciates and they then pay less in taxes. So why should it work in reverse? And if we extend the argument further, why not mandate the same thing for sales tax rates? If the price of a good appreciates in value, should consumers pay a lower tax rate on that good so that the nominal amount of tax is the same as before? Certainly, that would seem silly. But maybe I’m just missing the point.

I definitely disagree with the recommendation that a fair compromise would involve simply adjusting property appraisals by a county average for a particular type of property. Property values are idiosyncratically determined by their specific locations, and it would be patently unfair (in my opinion) to subsidize booming neighborhoods at the expense of houses that have lost thousands of dollars in value.

The Cost of Good Schools

Posted on by Eric D. Dixon

The Show-Me Institute, in conjunction with Saint Louis University, is sponsoring the second lecture in its Series on Economic policy on Thursday, April 17. The speaker, James Guthrie, will address the question, "How Much Money Will It Take to Give America Good Schools?" Here’s a snippet from Guthrie’s bio:

James Guthrie is a professor of public policy and education, chair of the Leadership, Policy, and Organizations department, and director of the Peabody Center for Education Policy at Peabody College of Vanderbilt University. He instructs both undergraduate and graduate courses, and conducts research on education policy and finance. He is founder and chairman of the board of Management Analysis & Planning, Inc. (MAP), a private sector management consulting firm specializing in public finance and litigation support.

A pre-event reception will begin at 3:30 p.m. on April 17, with the lecture beginning at 4:00. If you, or anybody you know, may be interested in further examining the complex issues surrounding school finance, be sure to take a look at the event invitation, and then register online.

Bonuses for Teachers

Posted on by Sarah Brodsky

There are pros and cons to this teacher pay proposal:

House Bill 2430, sponsored by Democrat Jason Holsman, would pay teachers a recruitment bonus of $5,000 to work in a small district. Math and science teachers would get $7,500.

After five, 10 and 20 years in the district, the teacher would receive a retention bonus of $2,500, $5,000 and $10,000 respectively.

Rewarding teaching just for sticking around is not the way to encourage innovation. If you’ll get a bonus after a certain number of years automatically, why strive to teach better? Current salary schedules already place too much emphasis on tenure and not enough on teaching quality.

On the other hand, higher pay for math and science teachers is a good idea. Districts have trouble holding on to math and science teachers when they have to pay them the same as English and history teachers. In general, districts should be free to offer more money to teachers they want to retain — whether that’s because they teach hard-to-staff subjects or because they’re exceptional teachers.

The Proper Role of the Judiciary

Posted on by Dave Roland

John Stoeffler has a column today in the South Side Journal, in which he quotes the famed constitutional scholar Joseph Story in support of his argument that each branch of government should be its own "final arbiter when it comes to deciding upon the constitutionality of the powers the Constitution authorizes and delegates to it."  If Congress or the president overstep their proper constitutional authority, Stoeffler says, the only legitimate remedy is to vote the bums out — the courts should have nothing to say on the matter. Stoeffler, who apparently operates a "constitutional think tank" called the Madison Forum, makes this notion of limited judicial authority the basis of his support for a proposed constitutional amendment before the General Assembly that would prohibit Missouri’s courts from ordering any increase of taxes or any expenditure of public funds unless they have been specifically authorized by the legislature or a vote of the people.

Stoeffler’s reasoning is flawed, even though the idea behind the constitutional amendment itself has some value. Federalist 78 explains that the judiciary is the proper branch of government to keep the other branches of government within their constitutional boundaries. Alexander Hamilton’s explanation of the judicial authority is directly contrary to that adopted by Story (and now, apparently, Mr. Stoeffler):

If it be said that the legislative body are themselves the constitutional judges of their own powers, and that the construction they put upon them is conclusive upon the other departments, it may be answered, that this cannot be the natural presumption, where it is not to be collected from any particular provisions in the Constitution. [… T]he courts were designed to be an intermediate body between the people and the legislature, in order, among other things, to keep the latter within the limits assigned to their authority. The interpretation of the laws is the proper and peculiar province of the courts.

Hamilton also opined on the limitations imposed on the judiciary itself. In contrast to the executive branch, which "holds the sword of the community," and the legislative branch, which "commands the purse" of the community, the judicial branch "has no influence over either the sword or the purse; no direction either of the strength or of the wealth of the society; and can take no active resolution whatever. It may truly be said to have neither FORCE nor WILL, but merely judgment; and must ultimately depend on the aid of the executive arm even for the efficacy of its judgments." (Emphasis in original.)

So, as described by the authoritative statement on the meaning of the U.S. Constitution, the proper role of courts is to rule upon the constitutionality of the acts of the other branches of government — but they are only empowered to strike down violations, not to refashion the laws so they will conform to the judiciary’s notions of what is proper. For example, school finance cases have been raging for years in Texas, but (despite the intense efforts of the school districts) the Texas Supreme Court recognizes that even when it has held the financing program unconstitutional, it is not permitted to compel the legislature to adopt a specific scheme. Instead, while the unconstitutional system may be enjoined, the legislature has full discretion as to how it will remedy the deficiency. And, of course, even the judiciary’s decisions are subject to checks and balances, in that the executive branch must agree to enforce the courts’ judgments.

The Mess That Missouri Made

Posted on by Justin Hauke

An economics blog I frequently visit scours the Internet for “Greenspan mess” sitings — articles in which the words “Greenspan” and “mess” are mentioned in the same paragraph (this occurs much more frequently as of late).

I think we could do the same thing in Missouri with the words “developer” and “blight.”

On today’s list: O’Fallon.

“City officials late Thursday night were debating whether to declare blighted the site of a proposed eco-friendly housing development to allow a developer to receive a tax break over 20 years.”

Missouri newspapers should just hotkey this sentence. It could read something like this:

“[State, County, City] officials [insert time] were debating whether to declare blighted the site of [insert property or district here] to allow a developer to receive a tax break over [enter years here] years.”

Terrific Quote From Mayor Funkhouser

Posted on by David Stokes

The funky mayor of Kansas City appears to understand that political patronage and city hall featherbedding are the ways of political machines, not responsible government. I absolutely love this quote from him in today’s Prime Buzz blog, by the Kansas City Star:

"My job is not save someone’s job," he said. "My job is to exercise leadership."

He said his responsibility is to ensure city workers are doing their jobs well on behalf of citizens.

The above quote gives me hope, which is of course all the rage in fashionable American politics these days. But I digress. The mayor’s response was to a question about whether he is going to fill two openings on his staff. He said yes, and left himself open to criticism (already appearing in the article’s comments section) about "not caring" or "being a meany" or some such crap.

The key question should not be whether the mayor is going to fill his two positions. The question should be: Are they truly needed, and is there enough to do for the new hires to work an honest 40-hour week (or more)? If the answer to those questions is yes, then the mayor should fill the spots. One of the openings is for a policy analyst, and I can assure you that nobody in American business or government has a more demanding job or works harder than policy analysts. …

I shall close in all seriousness. Government is not a jobs program, and taxpayers should not have to fund city workers just because they have been there awhile, or they have good political connections, or because it would be cruel to let them go, or whatever. It is terrific that Mayor Funkhouser understands this, and is leading by making the hard but necessary decisions. Saint Louis City Hall could take a lesson from this. And as I now await the angry phone call, I should clarify that I am referring to Saint Louis city government as a whole — not just one office or leader.

Saint Charles County Grows Without TIFs

Posted on by David Stokes

Local governments throughout Missouri continue their neverending quest to lure favored businesses and keep the chosen ones they already have within their boundaries, by granting tax abatements, tax increment financing (TIF), and tax exemptions. Yet not every government entity in Missouri is playing this game. One local government in particular has vociferously opposed TIFs, and has been extremely careful with its use of other development tools. How has it worked for them? The government in question, Saint Charles County, has been the fastest-growing county in the state for three decades.

While governments constantly seek to both raise tax revenues and lure businesses, too often they first enact burdensome tax codes and regulations, then give away the store to the select businesses they want to lure in. Wouldn’t it be much easier on everybody to create a favorable tax and regulatory climate across the board, and trust that it will lure businesses and development to your community? Saint Charles has chosen the latter plan, and the economic growth in the county speaks for itself.

Saint Charles has not only refused to use TIFs, it has actively fought court battles when cities within the county have attempted to use them. The cities within Saint Charles know they will have a fight on their hands every time they attempt to enact a new TIF. The result is that only 491 parcels of property in Saint Charles are involved in a TIF, compared to 1,808 in Saint Louis County and 2,293 in Saint Louis city. The fact that all of the TIF parcels in Saint Charles and most in Saint Louis County are within municipalities is a strong argument for having these decisions made at the county level.

An analysis conducted by business consultants for the Saint Charles Economic Development Council in 2004 stated, “TIF financing [sic] is often not easy to get approved,” citing this as one of the few drawbacks to the county’s business climate. Of course, the consultants — who are in the business of getting incentives for their clients — relied on the constant canard that maintaining a competitive edge requires increased use of government incentives. Recent history has demonstrated that Saint Charles has done just fine, thank you, with very limited use of incentives.

The county has also refused to issue tax abatements and exemptions, while it has judiciously managed the use of tax-free revenue bonds for projects. Basic economics teaches that a wider tax base enables lower rates for everyone, and these low taxes are certainly one of the reasons the population of Saint Charles has increased from 145,250 in 1980 to 348,844 in 2007. Comparing property tax rates across boundaries can be tricky, but one tax levy in particular compares directly and consistently. The commercial surcharge that is added to commercial property tax bills in every Missouri county totals $1.64 per $100 of assessed valuation in Saint Louis city, $1.70 in Saint Louis County, and just $0.53 in Saint Charles. Clearly, when taxes are this low, you don’t need to dole out tax breaks.

Obviously, many other factors explain the tremendous growth throughout Saint Charles, and some of the county’s cities have aggressively used TIFs and other incentives for their own developments. Has the use of incentives by municipalities like Saint Peters and O’Fallon had a greater impact on the area’s economic growth than the county’s prudence has? One might argue that, but the county’s general low-tax and pro-business policies have been in effect for three decades. The use of incentives by cities has come too recently to explain most of the growth.

Like an arms race, local governments throughout Missouri fear unilateral TIF disarmament would put them at an economic disadvantage. Saint Charles County has shown that it is possible for a local government to avoid the use of tax giveaways and still be a growing, thriving community. I hope other governments throughout Missouri will learn from this example.

David C. Stokes is a policy analyst at the Show-Me Institute, a Missouri-based think tank.

 

Scarlet-Letter License Plates

Posted on by Sarah Brodsky

I’m all for preventing drunken driving, but I don’t think scarlet-letter license plates are going to solve the problem. Here are a few reasons I doubt they’ll be so effective as some legislators hope:

1. Drivers will start paying more attention to the license plates around them when they should be paying attention to traffic signs and signals. This distraction could itself cause accidents.

2. In many families, two or more people takes turns driving one car. It’s unfair to subject relatives of a drunk driver to scarlet-letter license plates. This also makes the plates less useful, because no one will know whether they indicate a convicted drunk driver or just a family member.

3. If a car is swerving or otherwise behaving erratically, police should pull it over — whether or not the driver has been convicted previously. As for all the previous offenders who apeear to be driving normally, it’s unlikely that the police will be able to track them all down by their license plates and keep close enough tabs on them to prevent accidents. If convicted drunk drivers are so dangerous that police really need to see that on their cars, then those people should not be driving at all.

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