State vs. State vs. State Ad Nauseum

Posted on by David Stokes

There is a very reasonable editorial today in the Southeast Missourian (link via John Combest) regarding the tax dispute between Kansas and Missouri, over the deductibility of various state taxes. My first thought was that it seemed like some sort of summit between Kansas, Missouri, and Illinois would be an ideal opportunity to hash out this dispute and come up with a solution everyone can live with. But as I thought (that’s what they pay me to do here) about it, I realized it is much more complicated than that. The knee-jerk reaction I briefly had would be for the IRS to come up with rules for interstate taxation. But aside from the fact that this would violate federalism, every state has its own situation and is going to adjust its tax system accordingly. A federal solution would penalize some states and help others by not adjusting to those differences.

It would seem Illinois could work with Missouri on this, because more Illinois residents work here than vice versa, but you also have to consider the number of Wisconsin and Indiana residents who work in the Chicago area (Chicagoland, as they call it). A solution that might benefit residents of the Metro East might hurt Illinois tax collections up north. Play along with me for a moment, as if I cared about a reduction in the state’s tax collections.

Or take Michigan. It’s famous for its property taxes, particularly in the counties and townships along Lake Michigan. Why? Because people from out of state, mostly Illinois and Missouri, own the vacation homes in those lake communities and having a large property tax is a good way for Michigan to fund its governmental entities. They can make it up to the locals in other ways.

Every state and local community is different, and each is going to come up with a unique tax structure to benefit its residents. Missouri has more employees coming into the state to work than leaving it, so Missouri benefits from a structure that realizes this. I am not saying we shouldn’t be good neighbors — heck, I agree with our study that says we should get rid of the state income tax entirely, and the earnings taxes as well. I am saying this is a complicated issue that would best be served by each state folowing an across-the-board low-tax strategy, and coming up with one-on-one compacts in situations where that would best serve the interests of two states that share a surprisingly large number of commuters — be it Kansas and Missouri, or Hawaii and Kentucky.

Amtrak is Successful … I’m Surprised!

Posted on by Maurice Harris

An article in today’s St. Louis Post-Dispatch discusses the increasing ridership of Amtrak between Chicago and St. Louis. Last year, the State of Illinois increased funding for Amtrak to add two more trains to service between St. Louis and Chicago, and apparently people are taking advantage:

Passenger train ridership in the St. Louis-Chicago corridor is up more
than 40 percent since October, when Amtrak added two trains to the
three that already offered daily round-trip service.

I am semi-glad that Amtrak is doing well, since people are taking advantage of the increased service. I use Amtrak frequently, myself. As a college student who doesn’t want to spend a ton of money driving from home to school, Amtrak is a great option to save some dollars. Yet the problem I have with Amtrak is that it requires heavy ongoing subsidies from federal and state governments, because it’s been unable to turn a profit. One major reason is that it is prone to delays, because it doesn’t have a right-of-way — freight trains have priority. Hopefully, one day taxpayers won’t have to subsidize Amtrak, and private rail service that operates at a profit will return.

AT&T Cable Is Spreading

Posted on by Maurice Harris

AT&T cable is coming soon to Missouri, according to an article in today’s Springfield News-Leader. AT&T is entering the market now because individual cities can no longer negotiate cable franchises, thanks to legislation Gov. Blunt signed in March. That bill made it so cable companies only have to apply through the state’s Public Service Commission.

Legislation like this, which removes regulations that limited choices for cable subscribers and competitors of existing cable franchises, opens the door to fair competition and better array of services that people can choose from. As we have discussed here at the Show-Me Institute, unleashing the Missouri cable industry will bring many great benefits.

Tax Rollback Right Thing to Do

Posted on by David Stokes

Protesters, including several elected officials, gathered outside the county council last night to demand a rollback of St. Louis County’s property taxes this year. This is an assessment year in Missouri, as I am sure you are all aware, and the average assessment went up 22 percent in St. Louis County. Now, this does not mean that the county budget will go up 22 percent, as property taxes are just a portion of that budget, but it does mean that the county’s take from property taxes will increase significantly this year because of the assessment alone. And assessment, and you also probably know, is supposed to be revenue-neutral.

If you are wondering why St. Louis County is not legally required, like many other governmental entities, to roll back its rates, it is because the county’s tax rates are so far below the authorized maximum that the Hancock provisions do not apply. Now, that, of course, is a good thing, and many county leaders, past and present — including Charlie Dooley — deserve a great deal of credit for maintaining that low tax rate. However, as Senator Mike Gibbons has repeatedly said for several years now, just because you are not required to roll back rates doesn’t mean you shouldn’t. (How is that for a triple negative?)

Even a slight rollback of the county property tax rates would send an important message to county property owners that St. Louis County is not going to just take the extra money and keep all of it. Some of it must be sent back to property owners in the form of a tax cut. The county council did just that in 2005, led by Kurt Odenwald, and Charlie Dooley signed that legislation. The public would be well served if the council did so again, and Mr. Dooley signed it again.

University City Makes Wall Street Journal – Kinda Spooky, Huh?

Posted on by David Stokes

Before I go any further with this post, if you can tell me which famous St. Louisan said the last three words of this post’s title to which television personality some time back in the ’80s, or maybe early ’90s, then you will win some type of award, yet to be determined. (Probably just a mention on this blog, actually.) Answer to come later.

Back to the post. Today’s Wall Street Journal has an article on the cellular tax lawsuit making its way through St. Louis County Court. At issue is the contention by many municipalities that cellular companies should be paying the same utility tax on their customers’ bills as landline customers pay. University City is singled out by the Journal:

For example, University City, a suburb of St. Louis and the first to file suit against the carriers in this dispute, has seen its telecom tax revenue decline to $468,000 last year from $790,000 in 2000.

This is a tough issue, but I think the common-sense test goes to the cities. I understand the differences between the reasons for taxing the original phone systems and modern cellular systems, but still a phone tax is a phone tax. Ideally, the cities would win, the companies (and their customers, obviously) would only have to pay going forward — without back collections — and the various municipalities would use that additional revenue to lower rates on every utility tax, including phones. But if I really thought that would happen, I’d be living in a dream world instead of working in a think tank.

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.

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