Ashland Wants to Make Its Sales Tax How High?

Posted on by David Stokes

It may surprise you to know that cities in Missouri depend more on sales taxes and less on property taxes than almost any other state. I think there should be more balance in that equation. From the Institute’s paper on Missouri’s 20 largest cities:

Relying heavily on sales and use taxes may not be the best way to ensure reliable, stable revenue streams. Property taxes tend to provide a more stable revenue stream.

The City of Ashland in Boone County has a sales tax proposal on the April ballot. Typically, new sales tax proposals tend to be something like a quarter-cent for parks or a half-cent for transportation. But the Ashland sales tax proposal is for an additional one percent general sales tax on top of the existing one percent general sales tax. Ashland is proposing to use the new revenues for roads and police. This new tax, if approved by voters, would put the new Ashland sales tax rate at 3.5 %, which, as far as I can tell, would be the highest municipal sales tax rate in Missouri. It would be higher than Joplin’s sales tax rate, which at 3.125% is the highest rate for any large Missouri city. (We need to leave the City of St. Louis out of this because it is an independent city so there are no county sales taxes to consider.)

Ashland’s own promotional materials for the sales tax (which are clearly not just informational but actively promoting it) directly state:

Data show that an estimated 60 to 70% of sales tax revenue generated within the City of Ashland is paid by those that do not reside in Ashland. This sales tax increase will have the largest impact on those that do not live in Ashland. (emphasis added)

This continues the trend of many cities thinking they are smart by taxing “the other person,” even though plenty of other cities and counties are trying to do the same thing. You think your residents are getting a good deal by taxing those outsiders, but your residents are getting jobbed in the same way by the other cities and counties around them. This practice is at its most extreme with traffic ticket revenues. (The adoption of use taxes is the opposite of this—use taxes imposes sales taxes on residents of the community.)

Ashland has a relatively low property tax rate, which will be decreased further if the sales tax passes. This just further increases Ashland’s reliance on taxing shoppers and outsiders instead of people directly paying for the municipal services they use. Residents make smarter decisions about what municipal services they want when they are the ones paying for them, not when they can outsource the cost of running their municipality to non-voters. This is true with the earnings tax in St. Louis and Kansas City, and it is true with outlandishly high sales taxes in Joplin, Hazelwood, and Ashland.

I recognize that people in Ashland are not trapped. Residents and visitors may choose to shop in Columbia or Jefferson City if local sales taxes are too high. But that doesn’t mean it is good public policy to increase the sales tax rate as much as you can. The purpose of government is not to maximize revenue just for the sake of it.

I don’t claim to know for certain what “too high” is for sales taxes, but watching Ashland try to pass another general sales tax on top of the state, county, and local sales taxes the residents already pay makes me think that Ashland is almost certainly above it. Sales taxes have an important role in funding state and local governments, but Ashland city officials are taking things too far with their latest proposal.

The Earnings Tax Changes We Need

Posted on by David Stokes

Kansas City officials have repealed the changes to the earnings tax refund system they made last year. Last year’s changes made it much more complicated and expensive to claim a refund for work done by nonresidents outside of Kansas City, such as people working from home part of the time. Kudos to the mayor and city council for approving these changes and going back to the old system, which had been working well.

This is a good time to remind people that the City of St. Louis is the opposite case—city government continues to do everything wrong when it comes to the earnings tax. Efforts are underway in Jefferson City to clarify that St. Louis and (presumably) Kansas City cannot tax remote work—as St. Louis continues to do unapologetically—and instead must institute a reasonable process to refund earnings taxes withheld for work nonresidents perform outside of the cities.

What should such a process entail? First, I think employer statements indicating the percentage of time a nonresident has worked outside city limits during a year should be treated as prima facia evidence of that fact. Obviously, there should be penalties for fraudulent filings. Beyond that, if a refund is denied there should be an impartial hearing process by the collector of revenue available at the city level if taxpayers request one. If after such an administrative hearing, the refund is still denied, then taxpayers should have the right (but not the requirement) to file a lawsuit in circuit court. In court, the judge should not be required to assume the city’s prior denial is correct. In other words, taxpayers should have the right to a trial de novo on the merits of their refund claims. Finally, people making claims should be able to recoup court costs and lawyer fees if they are victorious. Since the average amount of a refund claim for any one person would be relatively small, I think few cases would go this far, but cities should be financially responsible if they improperly deny people their legitimate refunds.

Kansas City was not, then was, and now is not again denying legitimate refunds. Kansas City has a fair process posted online. The government of the City of St. Louis has been abusing the process all along and is finally being told by courts it needs to give refunds. Because of the city’s obstinance, it is also necessary to clarify that class action suits are authorized in these instances, as filing a suit against St. Louis for a few hundred dollars is not something most people are going to do, which is exactly what city officials appear to be counting on. The abuse of taxpayers in the City of St. Louis needs to stop, and it needs to stop now.

How Can We Serve All Students Well?

Posted on by James V. Shuls

Public schools serve all students. This idea leads to one of the most common criticisms of school choice programs—that these programs only serve a select group of students. I believe this criticism stems from an honest desire to ensure every child gets a good education. Yet, this attack on school choice programs falls short. It is a red herring and distracts from the true issues at hand. Moreover, it elevates one value over others that we hold as a society, such as diversity and pluralism.

When critics of school choice levy this claim of exclusion against private schools, they forget a few important details. First, it is not historically true that public schools served all people. Black Americans, Native Americans, students with special needs, and nearly every other marginalized group can point to a time in our nation’s history when they were excluded from our public school system.

Second, this claim of “serving all” is not presently true. No school can serve all students, so our public school system rations admission. Several public schools have attendance zones that draw boundaries between affluent and impoverished communities. These lines can and do exclude poor students from receiving a quality education. In fact, schools have employees whose jobs are to vet the addresses of students to remove those that do not belong.

The truth is that no school serves every child. It is impossible. That is why this attack fails; the true goal is not for a single school to serve every child but for every child to be served well by our educational systems. Serving all students well can only happen when we recognize the point of an education system is to meet the unique and varied needs of students and their families.

The late senator Daniel Patrick Moynihan understood this. In a 1977 address to the graduating class of LeMoyne College in Syracuse, NY, he said:

Diversity. Pluralism. Variety. These are values, too, and perhaps nowhere more valuable than in the experiences that our children have in their early years, when their values and attitudes are formed, their minds awakened, and their friendships formed.

I cherish these values, and I do not believe it excessive to ask that they be embodied in our national policies for the betterment of American education.

Our public education system should serve every student well. Yet we simply cannot do that by assigning students to schools via mandatory attendance boundaries. The only way to truly serve all students well is to elevate these other values of diversity, pluralism, and variety. The only way to truly serve all students well is to provide them with educational options.

Expanding the VIP List for Charter School Eligibility

Posted on by Avery Frank

In Missouri, only a select few are eligible for the VIP status of charter school eligibility. The “bouncer” until recently only had two names on his clipboard: St. Louis City Public School District and Kansas City Public Schools. For a charter school to exist, it must have a sponsor. Sponsors must be one of the following: a public four-year university, a community college, a private university, a technical school, a local school board, or the Missouri Charter Public School Commission.

For accredited districts (districts that meet the academic standards set by the state), only the local school board can sponsor a charter school. This has served as a formidable roadblock to charter school formation, as no accredited district has sponsored a charter school. However, if a school district is unaccredited (districts that fail to meet the standards set by the state) for three consecutive years, or has been provisionally accredited for three consecutive years, any of the other entities mentioned in the above paragraph can sponsor a charter school. Recently, the Missouri Charter Public School Commission created a charter school called the Leadership School in the provisionally accredited Normandy Schools Collaborative.

While the Missouri Legislature is most likely not thinking of charter schools in terms of nightclubs, the prospect of charter school expansion is being discussed to make the list less exclusive. Senate Bill (SB) 304 would allow charter schools to be created in any municipality with a population of more than 30,000 or any school district located within a county with a charter form of government. If SB 304 passed, charter schools could be established in:

  • All currently eligible districts
  • School districts in the following counties: St. Louis, Jackson, St. Charles, Jefferson, and Clay (a sponsor from a state-approved entity would be required)
  • School districts in municipalities with more than 30,000 residents, which currently includes: Cape Girardeau, Jefferson City, Joplin, Springfield, and Columbia (a sponsor from a state-approved entity would be required)

SB 304 would be a solid first step to give parents outside of St. Louis and Kansas City more options. Columbia is a good example of a city whose residents could benefit greatly from this bill. In Columbia , English/language arts (ELA) and mathematics scores are below the state average—students in the district currently have 43.8% and 30.8% proficiency rates, respectively. Low-income students are particularly struggling, with rates of 24% and 13.1% in ELA and mathematics—around 7 points below the state average for low-income students. With these scores in mind, maybe a family in Columbia wants a charter school because it is unsatisfied with the instruction in the local district. Perhaps a low-income family could find a charter school that specializes in instruction for low-income students. Charter schools can provide these needed alternative options for Columbia families, and SB 304 would make it possible.

Charter schools of various types (classical, English as a second language, low-income, etc.) have opened in Kansas City and St. Louis. One school, University Academy, has been named a “Blue Ribbon School” (an honor bestowed by the U.S. Department of Education for schools that exemplify excellence). Families across the state want and need more options. Missouri is a diverse state, and families deserve a diverse array of options to cater to their children’s needs and hold education institutions accountable.

A New Economic Playbook with Allison Schrager

Posted on by Susan Pendergrass

Susan Pendergrass speaks with Allison Schrager about inflation, the Federal Reserve’s next move in light of panic in the banking sector, how supply-side reforms can boost the economy, and more.

Allison Schrager is a senior fellow at the Manhattan Institute and a City Journal contributing editor, where her research focuses on public finance, pensions, tax policy, labor markets, and monetary policy. She is also the author of An Economist Walks Into a Brothel and co-founder of LifeCycle Finance Partners, LLC, a risk advisory firm.

Read Allison and Brian’s report: New Economic Challenges, New Supply-Side Playbook: How Congress Can Fight the Next Recession

Listen on Apple Podcasts 

Listen on Stitcher 

Listen on SoundCloud

Produced by Show-Me Opportunity

Short-Term Rentals, Long-Term Taxes

Posted on by David Stokes

Kansas City and Springfield both have hotel tax proposals on their April ballots. In neither case do they propose raising the hotel tax (dare to dream that this were the case for all tax increase votes). Instead, they are seeking to expand the imposition of hotel taxes to short-term rentals, such as Airbnb, Vrbo, and that neighbor lady down the street who rents spare rooms out to minor league hockey players like in Youngblood.

Expanding the tax base makes for good tax policy, and equalizing the tax difference between competitors is also good policy. There is no reason that a hotel should have its guests pay one tax rate while Vrbo guests pay a lower rate. The time period of any theoretical “infant industry” argument is long past. The short-term rental industry is a major part of tourism and hospitality, and it should be treated the same as standard hotels for sales tax purposes.

Of course, I would like to see an expansion of the hotel tax base combined with lowering the tax rate, but saving money for tourists probably isn’t the top priority for local officials. I’ll have to be content with the hope that increased revenue from expanding the hotel tax base will remove pressure to raise the hotel tax rates in the future.

Like marijuana taxes and use taxes, hotel tax expansion can offer a method for new municipal tax revenues in an economically sound fashion. However, cities should not just use these new revenue sources to simply get and spend more money. They can also be used to replace other, more economically harmful taxes. These include local earnings taxes, high commercial property taxes, the ridiculous “economic development” sales tax, and personal property taxes on business equipment. (I am well aware that hotel taxes are usually dedicated to tourism promotion and not as readily exchangeable as use or marijuana taxes, but that is a choice that cities make [and a defensible one], not some order delivered via lightning bolt by Zeus himself that the cities can’t change if they wanted to.)

That would be a trade-off that would truly benefit cities in Missouri.

Will Open Enrollment Create High School Sport Powerhouses?

Posted on by Avery Frank

The Missouri Legislature is currently debating several bills that would create open enrollment for Missouri students. Evaluating open enrollment’s effects on high school sports does matter, as families and student athletes across the state cherish athletics—I still fondly remember high school football games on Friday nights.

Opponents of open enrollment argue that the gap between wealthy and poor schools will grow because of sports—athletes will want to transfer to bigger, wealthier schools that offer better facilities and have more competitive teams. Here’s how a Missouri superintendent put it:

If this bill goes through, we expect to lose 100 or more students. Some will go play softball at Sullivan because they have a state-contending team, some to Union because they have a beautiful gymnasium, and some to Pacific because of their weight room facilities. Our football team was undefeated in . . . the regular season but we’ll lose kids because our facilities are not as nice and we can’t afford to fix that.

Yes, some students will likely transfer to schools with more successful sports programs to improve their athletic careers. However, this already happens. There are plenty of stories of the families of elite athletes moving to a new district, paying for a private school, or receiving a scholarship from a private school. SB5 and HB253, two bills that would create open enrollment, include provisions that restrict transfer students from playing the sport they played at their previous school for 365 days from the date of transfer.

Transfers can also go the opposite way—kids at bigger schools can transfer to smaller schools. Students can transfer to a different school to get playing time, showcase their skills,  play in a system that caters to their strengths, or play for a different coach. For some, winning is not as important as getting to consistently play in front of your friends and family. Sometimes, a player just needs a new environment to enjoy a sport or unlock their full potential.

Iowa has had open enrollment for the past 30 years. A recent Columbia Missourian story quoted Margaret Buckton, professional advocate for Rural School Advocates of Iowa, on the state’s experience with sports and open enrollment:

Buckton said some rural schools would call open enrollment “the savior of their budget” because it has allowed them to afford programs they could not have otherwise. Buckton said many students prefer rural districts because they have smaller class sizes and sports programs, which gives a student a better chance of standing out on a team.

Both common sense and Iowa’s experience tell us that worrying about athletes transferring isn’t a good reason to oppose open enrollment.

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