Tax Credits Don’t Always Create Jobs

Posted on by Maurice Harris

An article in today’s Kansas City Star discusses the rewritten economic development bill, which was just approved in the special session of the General Assembly. As been stated in a previous blog, interest groups lined up for a chance at a government subsidy for their industry:

A long line of interest groups urged lawmakers Tuesday to approve new
and expanded subsidies for developers, cattle ranchers, small business,
rural business and numerous other types of business.

Also, in response to testimony by Tom Kruckemeyer, chief economist for the Missouri Budget Project, about possible damage the tax credits could cause the Missouri budget, state Rep. Will Kraus said something that throws economics out the window:

“Economic development is driven by tax credits"

Kraus should know that lasting economic development is driven by smart tax policy — i.e., lowering taxes and simplifying the tax code. Reducing taxes across the board allows all businesses to benefit, rather than  just a few industries. This would cause job expansion in all parts of the economy.

The harms of tax credits for targeted industries have been discussed on this blog and at the the Show-Me Institute frequently. The fact that other states are offering tax incentives does not mean we should do it as well. Missouri should take the lead in showing how economic growth happens through broad-based, common-sense tax and economic policy, not through giving handouts to favored industries.

Great Eminent Domain Column in the News-Leader

Posted on by David Stokes

Our former editor Tim Lee , now an adjunct scholar with the Cato Institute, wanted us to be sure to link to this excellent article from Sarah Overstreet of the Springfield News-Leader, on eminent domain abuse in Missouri. Look out for the Show-Me Institute’s own study on eminent domain, which is coming out in several weeks, authored by none other than Mr. Lee himself. 

Tweaking the Judicial Selection Process

Posted on by Eric D. Dixon

Our newest policy analyst, David Stokes, spent years involved with local and county government, and other area organizations, before joining us. He recently applied the breadth of his experience and insight to the judicial selection process, in an op-ed we posted to our site yesterday (also picked up by the Missouri Political News Service).

Anybody paying attention to Missouri news recently will know about the recent controversy over judicial selection, with each side claiming that the other wants the process politicized in its favor. Some have called the legitimacy of the Missouri Plan into question, but David thinks the system has a great deal of value that a few important tweaks would enhance:

Missourians amended our state constitution in 1940 to change the ways judges were selected for the Supreme Court, the Court of Appeals and the circuit courts of Jackson County and Saint Louis City. This was done in response to public concerns about the power of political machines in electing judges under the previous system. Dubbed “The Missouri Plan,” it has been expanded to include circuit judges in Saint Louis, Clay, and Platte Counties. The amendment’s provisions replaced elections with a judicial commission, which reviews applicants for open positions and narrows the list down to three choices. The governor then selects a new judge from that panel. The system has worked very well for Missourians, taking some of the politics out of judgeships and efficiently filling vacancies. However, a few important changes could make the plan work even better.

Read more about David’s proposed changes on the Show-Me Institute website.

Clay County’s Noble Experiment May Come to Judicial End

Posted on by David Stokes

It seems that Clay County — the only county in Missouri, I think, that forgoes use of the property tax in favor of the sales tax — might be forced to return to the property tax because of a judge’s decision in a lawsuit. According to this article on Missourinet (link via Combest), the county now has to return to paying for several funds it had stopped covering, and a property tax appears to be the likely method it will use to meet those demands. (I saw some TIF payments in the budget, so I am gonna guess that Clay Co. has a number of new malls, which would help explain this sales tax decision.) While at first glance it may appear that this is another case of a judge taking the Legislature’s place by ordering a tax increase, I don’t know the details of this lawsuit — so I have no idea whether or not this is a good decision by the judge.

As you can see from this budget summary, sales taxes do indeed form the basis of government funding in Clay County. For you St. Louisans, Clay is very comparable to St. Charles County here. While I’m not opposed to property taxes (hell, we have three studies encouraging them, in the form of land taxes), sales taxes can also be constructed fairly — and both are enormously preferable to taxes on income or "earnings."

I trust that the leaders of Clay County — who, from what I have learned, have shown themselves to be good stewards of taxpayer money — will come up with a solid solution to fund these additional tasks via an extremely low property tax on the people of the county. Retail sales taxes from malls + low property taxes for residents + zero earnings tax = good local tax policy for a county like Clay.

Big Bad Wal-Mart is Coming … Watch Out

Posted on by Maurice Harris

An article in the St. Louis Post-Dispatch today discusses Wal-Mart’s decision to expand some of its discount stores to Supercenters, which include a full-service grocery, and to challenge the local grocery industry. Whenever Wal-Mart opens a new store or expands to challenge a new market, it causes consternation in some, because of their views on Wal-Mart’s business practices. This is happening in the St. Louis area, where some people — especially those who are employed at Dierbergs, Schnucks, and Shop ‘n Save — fear that Wal-Mart, whose workers are not unionized, will spur job cuts at other area stores with unionized workforces:

"The impact of Wal-Mart Supercenters on the local grocery industry is
an insidious attack on the region’s economy," Jim Dougherty, president
of Local 655 of the United Food & Commercial Workers, said Monday.
"Over the years, we’ve lost several thousand good-paying jobs because
Wal-Mart has siphoned off part of that business."

Yet grocers are taking steps to remain competitive with the coming Supercenters:

Among their moves: upscaling, in which the supermarkets have been
adding in-store gourmet coffee bars with Wi-Fi access; expanding
take-out food selections and areas; boosting the selection of organic
produce and natural foods; and upgrading wine and liquor departments.

Wal-Mart has been the recipient of both affection and hatred in the many years it has been a widespread chain store. One effect that cannot be denied, though, is the effect its competition has on prices — lowering them across the board when it opens a new store. And as difficult as competition can be for smaller competitors, in most cases this process doesn’t cause all the other grocery owners to shutter their stores.

In a free-market economy, people have the choice of where to shop, and that decision is based on individual tastes and preferences. For example, I go to Target frequently because I have a better shopping
experience there than at Wal-Mart, even though it’s a little more expensive. Businesses have survived competition with Wal-Mart because they have adapted — and continued to make a profit. I’m sure local grocers will do this even with Wal-Mart in town.

It’s the free market at work. Some people even enjoy it.

One Step Forward, Two Steps Backward

Posted on by David Stokes

Last night, University City voted to approve a new driving range facility at Ruth Park. We wrote about this yesterday here at SMI. I was not able to attend the council meeting, as, coincidently enough, the golf tournament I was playing in ran long, but as we shot 11 under as a team, it was well worth it.

As I said yesterday, there are good arguments on both sides, for and against the driving range, but the real disaster is that as part of the vote, the city decided to take control over the golf facility:

Residents who opposed the project extracted some concessions. The council voted Monday in favor of more oversight of the golf course operation and agreed to change it from a privately run operation to a city-run one.

Unbelievable. Cities all across America are selling or leasing their golf courses, including St. Louis, and we move in the other direction. Now the city gets to be responsible for employee pensions and other long-term costs. Just an absolutely terrible decision. U. City would have been much better off working out an agreement for a larger share of the profit if the driving range is a big success, as it well might be. That is very common in public-private partnership agreements, and would have served the city taxpayers well in both the short- and long-term.

Another Change of Schedule

Posted on by Sarah Brodsky

There’s big news about the St. Louis Public Schools on the Post-Dispatch website:

As of mid-morning, the start of the new school year began without any glitches, said district spokeswoman Deborah Sistrunk.

Administrators from district headquarters were on hand at many of the schools to assist the principals on opening day, Sistrunk said.

I’m surprised — not that the first day went smoothly, but that the administrators left district headquarters to get a taste of real life in the schools. The district employed 196 administrators in 2006.

The Cost of Enforcing Immigration Laws

Posted on by Sarah Brodsky

Missouri’s hard-to-enforce policy toward illegal immigrants is in the news again. The St. Joseph News-Press reports on the uphill battle to prevent illegal immigrants from working:

The governor is asking the commission to use a computer database administered through the Department of Homeland Security to ensure the legitimacy of workers at the site. He wants the commission to terminate contracts or tax credits with developers who knowingly allow contractors to use illegal workers.

Proponents of these regulations argue that there’s a cost in unemployment or lower wages when we allow illegal immigrants to work. Even if that’s true (and it’s not clear to me that it is), we should also consider the costs of identifying illegal immigrants and tracking them down.

Ticket Scalping – A Great Idea

Posted on by Sarah Brodsky

Readers of Show-Me Daily already know that ticket scalping is a good thing. Here is an article in the Post-Dispatch about Gov. Blunt’s proposal to make it legal:

Current state law prohibits individual ticket holders, as well as teams, from reselling their tickets at more than the face value.

California-based Ticketmaster has been pushing for the repeal of ticket scalping laws nationwide so that unused tickets can be sold over the Internet.

Our economy would be completely shut down if everything had to be sold at its “face value.” Imagine what would happen if retail clothing stores couldn’t mark up T-shirts to cover the costs of transportation and rent, or if your valuable antiques had to be sold for the $3 your grandmother once paid for them. In those examples, the number that was once stuck on a product is no longer the market-clearing price. T-shirts and antiques are readily available because their prices are allowed to change. Consumers would benefit if ticket prices could change, too.

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