The city is suffering under a $55 million operating deficit. The mayor pointed out in a 2023 budget letter that “The demands of a City this size in square miles and infrastructure age far exceed affordable options for residents and available resources.”

What to do? The answer is obvious: dedicate more public tax dollars to private corporations. And not just baseball, but women’s soccer, too!

Kansas City leaders are once again proposing public subsidies for a sports facility. This time, the beneficiary is the Kansas City Current and the continued development of the Berkley Riverfront.

According to reporting by The Kansas City Star, the city may create a new tax-increment financing (TIF) district and issue up to $235 million in bonds to support expansion of CPKC Stadium and surrounding development. The project would increase stadium capacity from 11,500 to 18,000 seats and add parking, retail, and mixed-use development to the riverfront.

Why? Why is it the responsibility of taxpayers to fund this? Projects like this can be good. They can even be great! But it’s not on par with, say, public safety or infrastructure, or education—which will all lose money because of the subsidy.

Supporters of the proposal point to the team’s success. Lucas told Fox4 that Kansas City must position itself for future events such as a potential Women’s World Cup and noted that there are limits to what an 11,500-seat stadium can host. He also emphasized that the proposed financing would not come from the city’s general revenue fund.

Let’s be careful about that last point. TIF does not create money out of thin air. Without a deal, the Current owners would pay taxes on their development—just like you and me. The proposal is to change that and let them keep that money. Money that we are told the city doesn’t have enough of.

Perhaps the most revealing thing is that Lucas can’t even be bothered to make a coherent defense of this spending. When asked about public subsidies for the Current, he told Fox4, “We’ve been through this before with another professional team that plays in Kansas City.”

But in an April 17, 2026, live interview with the Kansas City Stack Substack, Lucas said about public financing for a Royals ballpark: “this is like the incentive arrangements that we’ve done in other places. Probably the most stadium-like discussion is the stadium we built on the riverfront for the Kansas City Current. That, of course, was an incentive arrangement where you had votes at city council at one of our incentive agencies, that being the Port Authority, and you had state participation. I expect that to be the same.” [3:36 mark]

In other words, we’re giving public money to the Current because we’re giving money to the Royals because we gave money to the Current. That’s his argument.

I was reminded recently of other reporting from Fox4 in which Lucas defended himself for accepting secret gifts from the Royals, among others, to pay for tuxedos and trips to the Super Bowl. He said, “my goal is always to save taxpayer dollars.”

Lucas may have lots of reasons for accepting gifts. But given his willingness to spend public funds on stadiums, it’s hard to believe he cares about saving taxpayer dollars.

The post Kansas City Mayor’s Circular Reasoning on Stadium Subsidies appeared first on Show-Me Institute.

A version of the following commentary appeared in the Mound City Messenger.

A bad idea doesn’t get better with age. Bad ideas aren’t wine, jeans, or your high school memories. The tax subsidies for the Post-Dispatch building redevelopment in downtown St. Louis were a bad idea back in 2019 when the development was proposed, and they are a bad idea now.

Using tax subsidies for economic development rarely benefits the public. Instead, it lowers the risk and increases the returns for private investors. Under a capitalist system, the relationship between risk and reward for investors can be a wonderful thing, but in recent decades the government has somehow decided the public should get involved in private business dealings through tax subsidies and incentives. Taxpayers in St. Louis were left holding the bag for the failed St. Louis Marketplace tax increment financing (TIF) plan, the tax subsidy package for the Renaissance Hotel that was literally sold on the courthouse steps, and numerous other failed, subsidized enterprises. Most economic development schemes are like an expensive game of musical chairs in which the taxpayer is always the one with nowhere to sit.

The tax subsidy package for the old Post-Dispatch building at 900 N. Tucker on the northern edge of downtown St. Louis was approved by the Board of Aldermen in 2019. It primarily consisted of a $12 million TIF package. The summary included with the legislation featured the normal jargon required for such bills, and it included a statement that the development “will have approximately 1,250 jobs with an average salary of $76,500.”

How has that jobs promise worked out? Well, OK at first. The most recent annual TIF report (2024) filed by the developers with the state auditor repeated the same number of 1,250 estimated jobs created. It also listed 830 jobs created so far. There are two ways to look at that number, and both are accurate. The first is that, once again, developers exaggerated their job creation in order to get the subsidies they wanted. That often happens, and it may have happened here. The second is that getting to two-thirds of the promised jobs is actually better than many other subsidized developments, and maybe the developers deserve some credit. Not enough credit to justify all the subsidies in the first place, but, you know, some.

Except that recent actions indicate that the development is highly unlikely to ever get to 1,250, and it may quickly move in the other direction. The largest tenant in the redevelopment at 900 N. Tucker is Block, formerly known as Square. As you may have read, Block recently announced that it was laying off 4,000 people companywide, almost half of its total workforce. How many of those layoffs will be in St. Louis in unknown at this time, but the company previously announced much smaller layoffs in Missouri in both 2024 and 2025, so it seems unlikely that its St. Louis office will be unscathed.

I am not judging the company about the layoffs. If artificial intelligence is making some employees obsolete (the company’s stated reason for the move) then those people should be let go so they can do something else with their lives. That’s the creative destruction of capitalism. But this situation is a perfect example of why cities and counties should not give subsidies to private companies based on promises of employment, growth, renewal, or whatever the vibe of the moment is.

Numerous economic studies have disproved the belief that tax subsidies lead to economic growth. If tax subsidies worked, the City of St. Louis would already be awash in riches. Tax incentives have been piled on top of tax subsidies under every acronym under the sun for decades. None of it has worked. The city should focus on keeping tax rates level and low for everyone, not high for most and low (because of special exemptions) for the politically connected. A reliance on subsidies rewards cronyism, over-promising, and political grandstanding, but it doesn’t lead to real economic success. Just ask the Block employees who may be laid off soon.

The post Tax Subsidies Are a Mistake We Can’t Seem to Learn From appeared first on Show-Me Institute.

When Congress created Opportunity Zones in 2017, the goal was simple: use tax incentives to steer private investment into distressed communities. Investors could defer or eliminate capital-gains taxes if they reinvested those gains in designated census tracts.

The hope was that these incentives would spur development and expand opportunity in struggling neighborhoods. But new research suggests the program may suffer from the same problems as Tax-Increment Financing (TIF).

In a recent paper from the National Bureau of Economics, “Understanding the Employment Effects of Opportunity Zones,” the authors examine employment outcomes through 2023. They find that jobs located within Opportunity Zones did increase modestly. But most of those gains appear to come from nearby communities rather than representing new economic activity. Sound familiar?

The authors estimate that job growth inside Opportunity Zones is largely offset by job losses in adjacent low-income tracts. Their overall conclusion is that the program mainly results in a “spatial reallocation of jobs and households” rather than broad economic gains.

The distribution of those jobs also matters. Most of the new positions in Opportunity Zones are filled by workers who live outside the zones—often in more affluent neighborhoods. Meanwhile, the economic circumstances of existing residents show little improvement. Employment among residents rises slightly, but median earnings and poverty rates do not change significantly.

These results should sound familiar to longtime readers of the Show-Me Institute. I’ve argued that programs like TIF often fail to generate new economic growth. Instead, they tend to shift development across neighborhoods or municipalities. Projects still get built, but just in a different place.

The evidence on Opportunity Zones suggests something similar may be happening at the federal level.

Investment incentives can influence where development occurs. But that does not necessarily mean they create new economic opportunities for the people policymakers mean to help.

TIF is TIF is TIF, even at the federal level.

The post Are Opportunity Zones Just Federal-Level TIF? appeared first on Show-Me Institute.

In Kansas, Sales Tax and Revenue (STAR) bonds are a state-level form of tax-increment financing, similar to taxing districts created by municipalities in Missouri. The state issues bonds to pay for development costs and then repays that debt using only the additional state sales taxes generated inside the project district. The claim is that the project’s shoppers—not general taxpayers—will cover the cost.

The sheer size of the STAR bond being considered for the Chiefs is staggering, and Kansas leaders will likely need to be creative to satisfy the risk being taken by potential bond buyers. I don’t envy them in that task.

The tax question is another issue. The STAR bond will determine the base year of sales tax revenue. You might assume that the base year would be 2025 or 2026, but it could conceivably be 2020 or 2015. But whatever the year, once that dollar figure is determined, everything collected anywhere in the approximately 300-mile district in excess of that dollar figure will be dedicated to pay for the Chiefs’ projects for 30 years. Mind you, the cost of delivering public services will continue to rise due to inflation or, say, due to huge infrastructure projects developed to support the stadium. But the sales tax revenue to pay for those needs is frozen at the base year level.

What then happens?

In Missouri we got the answer in 2016. Due to Kansas City’s profligate subsidy culture, property tax revenue, which libraries depend on, was flat. And so the Mid-Continent Library system sought an increase in property taxes. In doing so, the library observed:

[T]ax incentives and abatements by local government have impacted the revenue that would generally result from the growth of the Library’s tax base. The Library’s budget has been essentially flat for the past 8 years.

Advocates of subsidies often argue that they are free, because they are paid for with funds that wouldn’t exist anyway. This is exactly the argument Kansas Governor Laura Kelly makes ad nauseam. But as we learned in Missouri, that just isn’t true.

Kansans might not see tax increases going to the Chiefs’ project, but they are very likely to see tax increases because of the Chiefs’ project.

The post Kansas’s Coming STAR Bond Tax appeared first on Show-Me Institute.

David Stokes, Elias Tsapelas, and Avery Frank join host Zach Lawhorn to outline what a responsible plan to eliminate Missouri’s income tax should include, from revenue triggers and spending restraint to rethinking other taxes. They also break down St. Louis County’s Bill 182 expanding prevailing wage and DBE mandates, Independence’s proposed TIF package for a new Wally’s gas station and what it says about corporate welfare, Missouri’s early literacy crisis and reforms like a universal third grade reading screener, mandatory retention, and banning three cueing, and what they are watching next on prefiled tax bills, data center policy, and rising property tax bills across the state.

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Timestamps

00:00 Introduction to Missouri’s Income Tax Elimination Plan
02:52 Strategies for Reducing Income Tax Reliance
05:19 Understanding Missouri’s Tax System
08:26 The Importance of Competitive Tax Policies
10:53 St. Louis County’s Prevailing Wage Bill Discussion
13:45 Economic Implications of Tax Subsidies
16:24 Independence’s Wally’s Gas Station Development
19:28 The Flaws in Tax Increment Financing
20:20 Addressing Early Literacy in Missouri
27:54 Looking Ahead: Legislative Priorities

Produced by Show-Me Opportunity

The post Eliminating Missouri’s Income Tax, Subsidies for Gas Stations, and Early Literacy Reform appeared first on Show-Me Institute.

Excessive use of economic development subsidies enriches developers at the expense of taxpayers, schools, and other public services.

The Solution

Eliminate or substantially reduce the use of economic development subsidies by local governments, including tax-increment financing (TIF), community improvement districts (CIDs), transportation development districts (TDDs), and the use of subsidies for professional sports franchises.

Key Facts

• The border war truce legislation between Missouri and Kansas expired in 2025.

• Five counties in Missouri now use county-level TIF commissions instead of municipal TIF commissions.

An Abysmal Track Record

Subsidies like TIF rarely deliver promised economic benefits. Research shows that 84% of firms would choose the same state no matter what subsidies and incentives were offered by other states. Nationwide studies show that these subsidies typically fail to keep their promises of job creation and economic growth.

The Border War

In 2019, Missouri passed legislation that renewed the agreement with Kansas limiting the use of tax subsidies by both states in the Kansas City metropolitan area. The agreement expired in 2025. The use of tax subsidies to lure businesses across state lines had been shrinking the tax base of the region without leading to any economic growth (as happens with almost all subsidies). The truce, which was first passed in 2014 and renewed in 2019, had been a success. Despite Kansas’s recent, awful decision to use subsidies to lure the Chiefs and Royals across the state line (which was a violation of the spirit, if not the letter, of the agreement), Missouri should still renew the border war truce legislation. (If Kansas chooses not to renew its part of the deal, then Missouri’s renewal does not go into effect anyway, and both sides will lose out.)

It would be appropriate for Missouri to clarify that the Chiefs, Royals, and other professional sports teams are included in the border war truce legislation as part of this renewal.

Change the Decision-Making Process

A major flaw in the TIF process is that in most cases, cities decide on tax subsidies that affect other taxing districts. Cities can approve a TIF project or property tax abatement that may benefit the city but is harmful to other taxing districts, such as schools. School districts should be able to opt out of TIF just as fire and ambulance districts can. One way to address this problem is to move such decisions to county TIF commissions, where the county appoints most of the members. County officials are more likely to weigh the costs and benefits of the proposed subsidy for the entire region. Currently, there are county TIF commissions in five Missouri counties. That number should be much larger.

It is too easy to create a new TDD or CID. Currently, property owners (often just one) can vote by signature to create a district or create one through a simple court filing. The public can be excluded from the entire process by drawing CID or TDD districts that have no residents. With such little oversight and public involvement, malfeasance runs amok with these taxing districts.

Policy Recommendations

• Renew RSMO §135.1670 (the border war truce legislation), which expired in 2025.

• Move TIF decision-making to the county level in many more counties around Missouri and allow school districts to opt out of TIF and other tax-subsidy programs as fire districts are allowed to.

• Require actual public votes by the entire city or county when new TDDs or CIDs are proposed and refrain from using state or local tax dollars for sports stadiums.

The post Economic Development Subsidies appeared first on Show-Me Institute.

In 2001, a group of very libertarian-minded activists launched the Free-State Project, which encouraged thousands of libertarian believers in minimal government to move to New Hampshire. The overall success of the project has been limited, for a variety of reasons, but if imitation is the sincerest form of flattery, then I’d like to see people in Missouri flatter the Granite State and try to do a similar thing here in one of our many cities.

What would such a limited-government, free-market oriented municipality look like in Missouri? To start with, it should be modeled on successful, small-government municipalities like Weston, Florida, and Sandy Springs, Georgia, which provide many local services by contracting with the private sector. It should not be based on the more radical, no-government “utopias” like Grafton, New Hampshire, where the removal of almost all government services led to an increase in bear attacks.

How many limited-government activists would it take to create a free city in Missouri? Not very many. There are hundreds of existing municipalities here with less than a hundred residents where, at most, a few dozen show up to vote in local elections. If, say, 50 true free-market believers moved into one city, what types of changes could they make to create that desired free city?

To start with, they could remove all municipal planning and zoning rules and replace them with private contracts managed by property-owner associations where allowed. Those property-owner associations could manage issues like short-term rentals, trash collection, and home-based businesses.

Municipalities, especially small ones, could focus on contracting with larger cities or counties to provide many services, like policing or building inspections. The new free city could contract with private companies to provide many other services, like trash collection and recreation management. It could similarly contract with nonprofits for some other services where profit opportunities are limited, such as animal shelters. If it had municipal utilities, it could privatize them into regulated, private utilities. The free city could reduce local code requirements, permitting rules, and occupational licensing to the largest extent possible. The important ones, like fire codes and elevator inspections, could be kept, while arbitrary or obsolete regulations, like television repairman licenses and pool-table taxes, could be thrown out.

None of these examples are farfetched. Every one of the above examples is already in place in a city somewhere in Missouri. Private utilities provide water, gas, and electricity to millions of Missourians. Cities contract with counties and other cities for services all over the state. In St. Louis County, every municipality (88 at last count) contracts with the county for at least some inspection services. Nonprofits provide important services to the public, like Pinnacles Youth Park near Columbia, and operate many animal-care facilities. Private businesses operate city-owned golf courses and manage municipal swimming pools throughout the state.

How would a free city fund these services? It would maximize private contracts between residents and companies and enact user fees to the largest extent possible. Low general sales and property taxes could fund the rest, along with revenues shared from other sources, like the gas tax. Importantly, such a city would avoid special deals such as tax abatements or tax-increment financing, for some businesses or people. Making the sales and property tax bases as wide as possible would allow the rates to be as low as possible for everyone. This free city would absolutely avoid the errors of a local income tax such as exist in Kansas City and St. Louis.

Overall, a Missouri free-city project would create a municipal government system not all that different from those in many rural, unincorporated parts of Missouri. It would just be in a more urban or suburban setting. It may seem unrealistic to expect hundreds—or even dozens—of people to make such a move based on political philosophy. But as a model of quality, low-tax local government, it is perfectly realistic. While no city may have enacted all of these ideas, each of them has been enacted with success somewhere. We just need the right number of people to put it together all at once.

I vote we try it somewhere near the Lake of the Ozarks.

The post The Free-City Project for Missouri appeared first on Show-Me Institute.

Port districts exist, in theory, to build and manage port facilities along rivers. When they actually focus on that job, I have no complaints. But in reality, many of the port districts are focused on other things, such as granting tax subsidies or engaging in government corruption. (The latter is less common, thankfully.)

The City of St. Louis’s port authority legitimately operates port facilities along the Mississippi. However, it is also substantially engaged in the granting of tax subsidies, usually for businesses that have absolutely nothing to do with rivers or shipping. For example, the port authority passed a one-cent special “port” sales tax for the St. Louis soccer team to be charged at the soccer stadium that the team gets to keep for its own purposes. (The soccer team has stated that it will use those funds to fix groundwater issues, so I guess it’s at least related to water.)

That was the city’s first “port” sales tax. Now there is a hotel, retail, and condo redevelopment downtown that also wants in on the game. The Jefferson Arms redevelopment has also requested a “port” sales tax of one percent. This is on top of the tax-increment financing subsidy it has already received, as well as the state and federal historic tax credits it got, and the community improvement district and transportation development district extra sales taxes it has applied for and will likely receive. Could it be that the developer wants to socialize the risk and cost, while privatizing the profit?

But a strange thing happened when the developer and its consultants tried to get the sales tax approved by the port authority. The port board said, “Wait, not just yet.” (Trust me, I wish I could say it said “no,” but the vote was tabled, not defeated.)

As Commissioner William Kay Jr. noted at the hearing: “If all three districts are approved, the Jefferson Arms building would have the highest sales tax rate in the city at 12.67%. We’ve got the CID, we’ve got the TDD—the tax rate right now will be 11.67%,” Kay said. “That’s the high mark for the city. I do not think the port authority needs to get into the business of subsidizing these projects.”

Let me reiterate: the Jefferson Arms project has nothing to do with a port. The use of port authorities to create one more tax subsidy opportunity in St. Louis, Kansas City, or anywhere else is terrible public policy. It’s great to see one agency say “not yet.” Hopefully, that “not yet” becomes a “no” in the future, both for this instance and many other subsidy proposals around the state.

Furthermore, the state legislature should remove the ability of port districts to issue tax subsidies or institute new sales taxes. Ports should be funded with user fees to the largest extent possible, and should not be another tool in the corporate welfare toolbox.

The post Denied Entrance at the Port of Call appeared first on Show-Me Institute.

Susan Pendergrass and Dominic Pino, the Thomas L. Rhodes Fellow at the National Review Institute, discuss the current state of U.S. tariffs and trade policy, tariffs as a hidden form of taxation, common misconceptions about trade deficits, provide historical context for America’s protectionist tendencies, and more.

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Timestamps:

00:00 Understanding Tariffs and Economic Perspectives
02:51 The Impact of Trade Deficits
06:05 The Role of Government in Trade Policies
08:59 The Consequences of Protectionism
12:02 Future Economic Predictions
15:05 Historical Context of Tariffs
18:03 The Confusion Surrounding Current Policies

Episode Transcript 

Download a Transcript of this Episode

Susan Pendergrass (00:00) Well, this is going to be interesting. Dominic Pino, thank you for joining us from National Review. Every day feels like a month now, but it was a couple of weeks ago that this all started, and since then so much has happened in our economy. This is a great opportunity for me as a non-economist. I have seen, as many people have, Thomas Sowell out talking about what’s happening in the economy right now and our current economic approach. And it doesn’t seem like he thinks it’s great. What’s your opinion? And can you explain what the potential upside is of how we are approaching tariffs right now?

Dominic Pino (00:34) Yeah, thanks so much for having me on. First thing — I’m not really an economist. I do have a master’s degree in economics from George Mason, but I’m a journalist. I write about economics. Thomas Sowell most certainly is an economist and he is someone we should be taking seriously. His book, Basic Economics, lays out some of the best arguments for free trade that anyone has ever put to paper. He was recently talking, as you mentioned, with the Hoover Institution at Stanford, where he is still located. He was talking about how these tariffs from Trump are not an exception to the rule — they are not a good idea. What the U.S. has been doing is unilaterally, through just the president acting alone under supposed national emergencies that quite frankly don’t exist, imposing tariff rates that are higher than any country in the developed world on basically every other country in the world, for the mere existence of a trade deficit. That is what they think is the problem. The formula they use to calculate those tariff rates is not based at all on other countries’ tariff rates. They try to say it’s a reciprocal thing based on other countries’ tariffs, but that’s not at all what they did. All they did was look at other countries’ trade deficits and say, based on that, there’s a national emergency that we need to solve with unilateral action from the president to raise taxes on Americans. And it’s probably the largest peacetime tax hike in U.S. history.

Susan Pendergrass (02:00) Yeah, so the Show-Me Institute — we’re firmly on the books as being a free market policy think tank. That’s what we do. We talk about free market state policy for the most part, and we are pretty anti-tax and limited government. The idea that tariffs are taxes — why is it such a leap these days? Why are tariffs now seen as not taxes but as a skilled negotiating tool? How did that come to be, do you think?

Dominic Pino (02:22) Mostly because Donald Trump just believes it to be true. And he’s believed it to be true since the 1980s. You can look back — this is a pre-political thing for him. He just thinks that tariffs are a good idea. And he thinks that foreign countries pay them. It sort of sounds that way when you describe it as, say, a United States tariff on Japan — that makes it sound like Japan is the one paying it. But it’s really a tariff on Japanese goods, and that tariff is paid by Americans who buy Japanese goods. The fact that these are a tax increase is not in dispute. And you know it’s not in dispute because even the White House says it’s going to raise a ton of new revenue from these taxes. Where’s that revenue coming from if it’s not a tax? And why are American businesses upset about having to pay this tax if the tax is actually paid by foreigners? It doesn’t make a lot of sense.

Susan Pendergrass (03:13) So then why the trade deficit as the boogeyman? The way I see it — and again, we’re free trade, free market — trade deficits exist because we have a comparative advantage in some industries and other countries have a comparative advantage in others. I want to be able to buy all of it. I want to buy my vanilla from Madagascar. What is the problem with a trade deficit, or how did it become such a boogeyman?

Dominic Pino (03:37) Donald Trump seems to believe that a trade deficit means you’re getting poorer. And I just don’t know how you can get there. The United States is the richest country in the world. We have the world’s largest economy. We have that despite increased competition from China, and China has been slowing down while the United States has continued to plug along. We’ve seen countries that adopted free trade after being protectionist become very rich in a very short amount of time — places like Hong Kong, Singapore, or even those supposedly socialist Nordic countries like Sweden and Denmark. They have very liberal trade regimes, and they do that because they know it makes them richer. For the United States, we should absolutely be embracing free trade. We have actually embraced free trade less than a lot of other countries have, if you look at the proportion of our economy that is due to international trade. We’re in the low 20s as a percentage of GDP when you add up imports and exports. The world average is 63%. Most other countries are much more exposed to trade than the United States is. And we could be even better off if we reduced a lot of our own trade barriers, which there doesn’t seem to be any appetite for the president to do.

Susan Pendergrass (04:54) So walk me through what would be, from what you can understand of whatever the plan is — let’s say this is a plan — what would be the optimum outcome that the administration gets out of the approach they’ve taken?

Dominic Pino (05:07) Well, from my perspective, the optimum outcome would be that other countries remove their tariffs and we remove ours and we all get along. I think that would be great. There is a case to be made that you can use the threat or imposition of tariffs in this way to do that. That is a thing that we have in law and it makes sense in theory. It’s just not what the administration is actually doing. For example, Israel, in anticipation of these tariffs, removed all of their tariffs on U.S. goods. Now, they basically didn’t have any to begin with because we’ve had a free trade deal with Israel since 1985, but the few that were left — a couple of stragglers on some agricultural products — they got rid of them before Trump made his announcement. Trump comes out and puts 17% tariffs on goods from Israel. So why are we doing 17% if they’re doing zero? That’s not reciprocal at all. And it’s not being used to get a new free trade deal because we already have a free trade deal with Israel. If the administration had exempted the 12 countries with which the United States already has bilateral free trade deals, and the other countries that are part of multilateral trade deals, and said that’s what we want, then you could bring other countries to the negotiating table and say, hey, we want a free trade deal with you too. But if countries are learning the lesson that even having a free trade deal with the United States doesn’t protect you from U.S. tariffs, then what incentive do they have to come to the table in the first place?

Susan Pendergrass (06:38) You may have seen the news today about a potential extra 50% tariff on China, which seems a little impulsive. I’m just going to read what Thomas Sowell said in the last couple of days. He said, “It’s not a bad idea if you’re doing this within a system of rules. If you are the one who’s making the rules, then all the other people have no idea what you’re going to do next. And that’s a formula for having people hang on to their money until they figure out what you’re going to do. And when a whole lot of people hang on to their money, you get the results you got during the Great Depression of the 1930s.” I would say more than anything, we don’t know what’s going to happen next. Wednesday, supposedly the tariffs go into effect unless there’s a pause or some minds get changed. Don’t you think that’s what’s really driving the chaos right now — how unpredictable it is? You open the news and it’s like, maybe 50% more on China. What do you think?

Dominic Pino (07:33) For sure, I think that’s a big part of it, absolutely. This is why the founding fathers put the tariff power in Congress. They didn’t want one president, one guy by himself, to be able to do this kind of thing. They wanted tariffs to have a democratic legitimacy coming from the legislature that’s elected by the people. They wanted it to involve other voices from around the country so that certain regions aren’t left out. And they wanted it to go through two branches of government so that it’s more difficult to change. Congress over the past several decades has given away large portions of its power over trade. There were some good reasons to do that because it was done under the assumption that the president was going to use that power to liberalize trade — there were lots of public choice problems when Congress had control over the trade agenda by itself. And so for several decades, presidents of both parties did use that power to reduce U.S. barriers to trade and to negotiate lower barriers for other countries. That process played out and worked very nicely. Now we’ve had the last two presidents — both Trump and Biden — use a lot of those powers to increase trade barriers. And they’re doing so at a time when polling shows that trade is actually more popular than ever. The Gallup survey has been asking this question for many years: do you believe that international trade is more of an opportunity for the United States, or more of a threat? The number of people saying opportunity is at an all-time high right now, at about 80%. And yet politicians have convinced themselves that Americans are demanding protectionism. Really, it’s good for politicians because when they have the power to determine which exemptions get made, which tariffs apply to which industries, that creates lots of opportunities for lobbyists to come in and say, hey, you should give me that exemption. We’re already seeing that happening. Tim Carney at the Washington Examiner wrote a piece today saying there are about 160 new lobbying organizations that have spawned so far this year to lobby about international trade, and that’s only the tip of the iceberg.

Susan Pendergrass (09:44) So they’re coming in and saying, we want you to exempt our industry, our country, our region. They’re being paid millions of dollars to get the carve-outs. Have any carve-outs happened?

Dominic Pino (09:58) For the Canada tariffs, they put a lower rate on energy and on fertilizer than on other things. For some of the auto parts stuff, it’s not entirely clear exactly what’s going on at the moment, but there does seem to be some exemptions made there. But yeah, the exemptions are going to get made, and they’re going to get made not based on what’s best for the country in general — they’re going to get made based on who’s the most politically connected, because that’s how politicians work. That’s their job. That’s what they do. It’s in the name: politics. And so when there’s all this high talk of the national interest and national security — we’re going to bring back defense industry and things like that — it’s all cover for what they’re really doing, which is redistributing profits from companies they don’t like to companies they do like, and destroying a lot of wealth along the way from all the inefficiency that comes about.

Susan Pendergrass (10:48) So where do you see this headed? If you could fast forward to summer, where do you see this going? A lot of experts — Jamie Dimon and others — are talking about what they’re seeing in the tea leaves right now around the economy. What do you think?

Dominic Pino (11:01) I don’t think the stock market is done going down yet. I think traders are still holding out hope that the president is going to see the mistake here and reverse course. I’m not really optimistic that’s going to happen because during the first term there were a lot of voices saying contrary things, a lot of discussion and debate going on. And you also had a vice president in Mike Pence who was much more free market and much more traditionally conservative, and his team did a lot to run the policy decisions that were being made. This time around, JD Vance is an unabashed protectionist — he’s not making any secrets about that. And the people who are close to the president on this are people like Peter Navarro, who just really believes in protectionism. He finally has a chance to achieve his lifelong dream of raising taxes on Americans for having the nerve to buy stuff from other countries. Trump has other advisors who do know better, but they’re not going to be super likely to speak up because quite frankly, a lot of Republicans are just afraid of Trump and afraid of the consequences of speaking out against him. They would really be helping Trump to speak out. Republicans in Congress hopefully will realize this eventually, because these policies are going to be damaging for the American worker and the American consumer, and Trump shouldn’t want his name associated with that. Republicans shouldn’t want their party’s name associated with that. So Republican members of Congress should man up and be willing to override a presidential veto if they need to, to get rid of these damaging policies.

Susan Pendergrass (12:32) They tried somewhat, right? They tried with the Canadian tariffs. Rand Paul did, but it didn’t really make a difference.

Dominic Pino (12:39) Yep, they tried. Four Republicans voted with the Democrats to overturn the national emergency declaration on Canada. That’s a real thing that our federal government has right now. And it’s still in place because the president says so.

Susan Pendergrass (12:53) Yeah, I don’t know why I’m laughing because it’s not funny — a national emergency with Canada. What about this idea that we’re going to quickly move all production of autos back to the United States? During COVID, we were able to quickly ramp up production of masks and PPE. Can we do the same with cars?

Dominic Pino (13:20) It’s a whole lot easier to make a fabric mask than it is to make an automobile. That’s the first difference. The second is, you can look at the investment decisions that car companies make — they always take many years. That’s true of foreign automakers that build plants in the United States, which lots of them have done, and it’s supposed to be the point of this tariff policy. But they’ve done it without the tariff policy, so that should lead you to ask, well, if they were already doing that, why are we trying to make it harder? Those decisions take a long time. They’re reliant on the existence of a skilled workforce, and those skilled workers absolutely exist in the United States, but a lot of them are already employed doing other things. You have to pull them off of those other things to move them into car factories, which in many cases are going to be less productive than the jobs they were doing before, because the jobs they were doing before existed without the government taxing people in order to make them possible. It’s not that the United States doesn’t have a skilled labor force — we have an amazing labor force. They’re just already doing stuff. The unemployment rate continues to be very low, and that’s something we should be happy about. But we’re acting as though we’re in the middle of a depression and need the economy to rebound, when really we just need to build on some successes we already have.

Susan Pendergrass (14:35) Yeah, it’s so perplexing to me because at the Show-Me Institute, we talk a lot about governments trying to use levers to induce people to behave in certain ways — tax increment financing and things like that. If the government just pulled back and stayed out of the way, these things would happen organically. Baseball stadiums would go where the owners think they’re going to make the most money. These things will happen on their own rather than having the government step in and try to make them happen the way it wants. We talk about that all the time. And then this policy to me seems so counterintuitive — the idea that you hurt something so badly that giving a little relief becomes leverage. As a human being that just doesn’t make intuitive sense to me. We’re going to beat this dog, and when we give it a little water it’s going to be so grateful — it won’t be. That dog will hate me if that’s how I treat it. And I feel like that’s what we’re doing. We’re not bringing Canada around to our side.

Dominic Pino (15:38) No, not at all. And Canada was already on our side. They’re a NATO ally, they are our number one trading partner, and we basically have the world’s largest unguarded border with them. And it works fine — it’s great. There’s really no issue. The trade deficit issue there is also crazy. Even if you think trade deficits are bad — which, to be clear, they aren’t — but even if you do, the only reason the United States has a trade deficit with Canada is because of cheap imported Canadian energy. Canada has the thick tar sand oil out in Alberta, and it’s very difficult to refine because of its chemical makeup. The United States — the richest country in the world — has the best petroleum engineers and the best refineries in the world. We have some of the only refineries on the planet that can refine that type of oil. Canada is willing to sell it to American refiners at a discounted rate below the global price because that’s the only way they can get it out of the country. Then the United States refines that oil and turns it into a valuable product, because crude oil by itself is not very useful — you can’t run a car with it, you can’t make plastic with it. You have to refine it. And then we export the refined products out of the Gulf of Mexico, out of Louisiana, and it creates all sorts of economic value for the United States the entire way. And for some reason, that’s the reason for our trade deficit with Canada. How is the United States losing there? How is Canada losing there, for that matter? Both countries are better off. Canada can sell their oil, we can sell the refined products, everybody’s better off.

Susan Pendergrass (17:06) Yeah. I know there are some smart people around the president, and I think I must be missing something. I must have a blind spot. To me, this mostly seems crazy and damaging. So when I read Thomas Sowell and I listen to you and others, maybe I’m not crazy. I just assume there’s some big master plan that I’m not privy to. And all of this is starting to make sense of why I had to give up 15% of my retirement savings when I’m really close to retirement age. Maybe there’s some big plan, but I feel like I hear you saying there may not be a plan.

Dominic Pino (17:50) I’m not seeing one, unfortunately. And it’s not an encouraging sign when you can’t even get the administration to be on the same page with itself when talking about these things.

Susan Pendergrass (17:59) Yeah. What is the base rate? They’re all over the map. I think there was a leak today that there was going to be a pause, and then the White House said there’s not going to be a pause. They don’t even seem to know what page they’re on. Do you think we are heading towards a recession?

Dominic Pino (18:18) I don’t know that, but it’s certainly not going to help our GDP growth. We still have decently strong GDP growth — we have since COVID, and we had before COVID too. COVID was sort of an aberration. We’ve been growing at around two and a half percent a year since about 2018, give or take, which is pretty solid for a developed country as advanced as the United States is. So we still have some room before we get into recession territory. But it’s not going to make GDP growth do better, that’s for sure. And once people start to lose jobs from this, once people start paying more at the store, you’re going to see a lot more backlash. Quite frankly, if you have a recession that you can pretty clearly attribute to one person — which is Donald Trump, because again, he’s doing this unilaterally — it’s going to be hard to argue to voters that it wasn’t his fault.

Susan Pendergrass (19:11) Yeah, and I think it’s interesting that people used to use gas prices as a gauge because you just drive by them and see them every day. But now we all have our bank accounts and our 401ks on our phones, and we’re not waiting for a quarterly statement to find out. We see it going up and down like gas prices. And I believe that’s causing more of the backlash, the anxiety, the angst — we can just see it in real time.

Dominic Pino (19:35) Yeah, for sure. The guys from Americans for Tax Reform talk about how market research shows that people who are actively engaged in the stock market are much more likely to be Republicans. And that’s not just true of rich people — that’s true across the board. Even casual retail investors are more likely to be Republicans than Democrats. So in more ways than one, this is hurting Trump’s own voters.

Susan Pendergrass (20:01) Yeah, that’s perplexing. I know you’re probably in high demand now because people want information about what’s going on. Tariffs — it’s just not a word I ever thought I’d be saying so much. I think of them as very much a thing of the past. Anyone who knows about Smoot-Hawley knows that’s a long time ago. Just give us a little refresher course on what happened in the 30s.

Dominic Pino (20:24) Sure. In the 1930s, there was a big stock market sell-off that spurred a recession that then became the Great Depression over time. In large part it became that way because of government policies — including the Federal Reserve making some terrible decisions on monetary policy that guys like Milton Friedman and Anna Schwartz have written entire books about. The federal government made some bad decisions, including New Deal programs that were basically make-work jobs that were drags on productivity. But also the Smoot-Hawley Tariff Act didn’t help things either. The theory at the time was: we need high tariffs to protect America from unfair foreign competition, and once we rebuild our domestic economy we can go out and engage with the world again. It was completely wrong. Not only was it completely wrong for the United States, but it spurred a global wave of retaliatory tariffs that really helped to wreck free trade that had been growing as a global norm. This happened right between World War I and World War II — obviously not a happy time in world history and not a time we should look back on fondly. It was really bad.

Susan Pendergrass (21:35) It was 100 years ago too. We should have learned from it.

Dominic Pino (21:40) Yeah. But the average tariff rate under Trump’s plan is now higher than the average tariff rate under Smoot-Hawley. So if the tariffs stay in place for any extended period of time, you can expect — and I’m not promising another Great Depression — but it’s certainly not going to be good.

Susan Pendergrass (21:54) Yeah. I think one thing I can say confidently is that people’s impatience is escalating. The “don’t worry, we have a plan” response is wearing very thin. This idea that it’s going to work and you just have to take your medicine — when you haven’t really asked people to step up and sacrifice for a policy that most people don’t even really understand or want to get behind, that’s starting to really wear down. Republicans and — well, Democrats clearly don’t like it — but even some Republicans are coming around. If we were in a war and we all had to get blackout curtains, that’s one thing. But asking everyone to sacrifice their savings for something that no one has explained very well is not going to last. I think there’s going to be backlash.

Dominic Pino (22:50) And that style of argumentation is one that Democrats use all the time. They use it when they talk about clean energy and the transition to green energy. They say, yeah, there’ll be higher energy prices for now as we transition, but it’ll be better in the long term because we’ll have zero emissions and it’ll all be domestically made. They say it’ll help us get off foreign oil, and so on. Now, when Democrats make that argument, Republican voters recoil — and they vote for Republicans. But now Republicans are in office making the same kind of argument. It’s not about the environment, it’s about the global trade system, but the structure is identical: sure, in the short term there’ll be some higher costs, but don’t worry, the government has a plan. That’s just a Democrat style of argument. This is a situation where I actually wish there were a little bit more partisanship — Republicans just having the instinct to say, wait a minute, that sounds like what Democrats say when they’re talking about green energy.

Susan Pendergrass (23:48) Yeah, and another thing I wonder: people I know who are defending this approach — at what point is somebody going to say the emperor has no clothes? I’m a little bit dialed in, but I think most people are seeing it and wondering why people are going on the news every night and defending this approach. It’s confusing. It’s just confusing.

Dominic Pino (24:11) Yeah, absolutely. It’s confusing to all of us. And it’s confusing too because the justifications that get trotted out by different supporters can’t be true at the same time — and this is really the giveaway that it’s nonsense. For example, if the point of the tariffs is to bring back manufacturing jobs, to benefit domestic producers by allowing them to charge higher prices because they don’t face foreign competition, then the tariffs need to stay in place permanently. They can’t go away after negotiation. Similarly, if the purpose of the tariffs is to raise revenue to pay for other tax cuts — which is something the president has been talking about — that means the tariffs have to stay in place not just for now, but for 10 years, because that’s the budget window. So that would mean it’s not a negotiating tool. Now, if it is a negotiating tool, then you need to be willing to remove them. But if we’ve already made a commitment based on projected revenue over 10 years, we can’t remove them now because that would blow up that part of the plan. And if it’s a negotiating tool, it can’t protect domestic industry either, because if we remove the tariffs and foreign goods keep coming in, domestic industry will be right back where it started. The fact that these justifications can’t all be true at the same time should help you understand that there’s actually not a plan here. What’s unfortunate is that I think the administration is taking the keep-them-in-place-for-a-long-time strategy, because they’ve been talking much more recently about how it’s not a negotiation, how it’s going to raise revenue, and how the purpose is to restructure global trade. Those are their words.

Susan Pendergrass (25:47) Yeah, so it’s going to raise $6 trillion over 10 years — the amount they need to extend the Tax Cuts and Jobs Act, basically.

Dominic Pino (25:55) Yeah, $6 trillion. So we’re going to do the largest tax increase in American history to pay for keeping the tax rates the same. Because again, extending the TCJA just means keeping the rates what they are right now.

Susan Pendergrass (26:09) So to do that, we have to raise taxes. That’s incredible. Well, Dominic, thank you so much for coming on and talking to us. I do understand it better now. I’m still perplexed, but I wake up every morning, look at the headlines, and think, now what’s happened? The chaos factor is getting on my nerves, but I appreciate you coming and explaining it in such a concise and clear way.

Dominic Pino (26:32) Good, I hope it helped. And if it makes you feel any better, I’m probably just as confused as you are.

Produced by Show-Me Opportunity

The post Tariffs, Trade, and Economic Risk with Dominic Pino appeared first on Show-Me Institute.

First Ward Councilman Tom Oldham commented that he feels that Chapter 353 is a great tool, as evidenced by his visits to Elm Springs, a community that also took advantage of the Chapter 353 program. Elm Springs went from blight to beauty as a result, Oldham said.

(Note: I assume he meant Excelsior Springs, which has a 353 plan, and not Elm Springs—I can find no municipality in Missouri with that name.)

Did a 353 urban redevelopment plan really turn Excelsior Springs (or Elm Springs?) from blight to beauty? Of course not. Granting some properties in a designated area a tax abatement if they undergo the required legal process isn’t going to grow the economy. If you want to cut taxes, great—cut taxes for everyone, not just a designated few. The idea that politicians are qualified to pick the right companies or properties is absurd.

Economist Dick Netzer once mocked the exaggerated claims of success by economic development officials and politicians by writing, “Who needs oil wells, when a state can be another Kuwait just by increasing the budget of a tiny agency?” Those claims of subsidy success often border on the absurd. I once heard a Clay County economic development official claim that “all of the growth” in the town of Liberty—a fast growing, exurban community north of Kansas City the likes of which have been growing across the nation for decades—was due to a tax increment financing (TIF) package. All of it, he stated with certainty, as if suburbanization didn’t exist until Missouri’s TIF law was passed in the late 1980s.

Economists Alan Peters and Peter Fisher studied tax incentives closely and concluded that they work about ten percent of the time (as measured by job creation), and the other 90 percent are simply a waste of money. They added that, like the Clay County official mentioned above, economic development officials often credit all new employment and growth to tax subsidies.

The City of Saint Louis has been using tax incentives like 353 urban redevelopment plans, Enterprise Zones (EZs), TIF, and other subsidies as redevelopment tools for over half a century. How has it worked out? Colin Gordon, in his 2008 book Mapping Decline, documents the decline of the City of Saint Louis. The book’s research is exhaustive. The dominant theme of the book is the use of urban renewal tools and tax subsidies—and their absolute, total failure. From his conclusion:

The overarching irony, in Saint Louis and elsewhere, is that efforts to save the city from such practices and patterns almost always made things worse. In setting after setting, both the diagnosis (blight) and its prescription (urban renewal) were shaped by—and compromised by—the same assumptions and expectations and prejudices that had created the condition in the first place.

The dirty little secret that nobody seems to want to recognize is that 353 Plans, EZs, TIF projects, , tax abatements, and other subsidies do not work. They don’t succeed in growing the local economy, be it urban, suburban, or rural. The panoply of subsidies that come into play when a large area is declared blighted can have a number of adverse side effects. They shrink the local tax base, introduce more cronyism and favoritism into the economy, encourage more government planning of the economy, and increase the chances of eminent domain abuse. As a famous Swedish economist once said:

It is not by planting trees or subsidizing tree planting in a desert created by politicians that the government can promote . . . industry, but by refraining from measures that create a desert environment.

The Chapter 353 urban redevelopment plan didn’t help grow Excelsior Springs. It didn’t help grow St. Louis, nor any of the other cities that have such a plan. It won’t help grow Sedalia, either, but it will be great for the politically connected parties who get the tax subsidies they are after.

The post Sedalia Doesn’t Need a 353 Redevelopment Plan appeared first on Show-Me Institute.

This is just the latest example over the years of City Hall favoring wealthy, connected corporations with taxpayer subsidies and special treatment.

Port KC CEO Jon Stephens framed the incentives as a “small, supportive element” aimed at ensuring Kansas City retains high-quality jobs. The project promises to add 150 jobs with an average salary of $126,000 while retaining 600 current employees. Yet no precise value for the tax exemptions was disclosed. Its not clear if PortKC attached performance requirements to the deal, but Friestad indicates there was no such discussion of it among the commissioners when the subsidies were approved.

Readers may recall Stephens backed subsidies for an independent baseball team in Kansas back when the team couldn’t pay its utilities. If nothing else, he is consistent in his apparent desire to redirect taxpayer money to private corporate interests

Such a deal is nothing new for JE Dunn. The company received a lucrative incentive package when building its headquarters in 2009. That project fell under the East Village tax-increment financing plan, redirecting $19 million in public funds for a parking garage, demolitions, and blight removal.

This latest deal follows a familiar script in which major corporations, including Cerner, H&R Block, Burns & McDonnell, and Commerce Bank have secured public funding for their private office projects. Research has indicated for years that such incentives do not significantly impact corporate decisions on location.

Port KC has repeatedly played a central role in funneling public dollars into private hands. Its recent involvement with JE Dunn reflects a long history of negotiating deals that often leave taxpayers holding the bag, such as the millions each year taxpayers must fork over to cover bond payments on the Power & Light District owned and operated by Cordish Company. (Stephens is a former manager of that project.)

As Kansas City grapples with persistent infrastructure needs, ballooning public debt, and limited funding for essential services, its continued reliance on subsidies for corporate renovations raises questions about priorities. For now, Kansas Citians can only watch as the city’s public funds are diverted to underwrite private gains.

The post KC’s Corporate Welfare: JE Dunn’s HQ Renovation Gets Public Support appeared first on Show-Me Institute.

Why Is This Proposition Being Brought to Voters?

This proposition is intended to address concerns about STRs affecting housing affordability. In fact, a St. Louis City alderman had this to say about Proposition S:

As we’ve seen a proliferation of short-term rentals, we’ve also seen rents and mortgage rates also climb as a result of that. . . . This [Prop S] is kind of a drop in the bucket to try and offset some of that.

Concerns about the effect of STRs on the housing market are not unreasonable, as some studies have indicated that STRs drive up housing costs by decreasing the supply of owner-occupied housing stock and long-term rental units. However, other studies have found that STRs bring increased tax revenue, supplemental income, residential renovation, business growth, and tourism to underdeveloped areas.

The City’s Previous Efforts on Short-Term Rentals

Last year, concerns with STRs arose following numerous horror stories of out-of-control parties. A slew of regulations (some reasonable and some harmful) were enacted through Board Bills 33 and 34, on which my colleague David Stokes and I testified.

Here is a list of the regulations added to STRs in the City of St. Louis last year:

• Annually, STR Agents must acquire an STR permit, with a $150 fee.
• Minimum stay of 2 nights.
• No STRs in a place benefited by tax-increment financing or tax abatements.
• In structures between 5 and 23 units, no more than 25% of units can be STRs.
• In structures with 24+ units, no more than 12.5% of units can be STRs.
• No single owner can receive a permit for more than 4 units.
• The owner must be a natural person.
• An STR Agent must be physically present at the address within one hour if required.
• Three-strikes rule for bad conduct within 24 months (suspension can last for one year).

Adding a new tax on top of the numerous regulations from Board Bills 33 and 34 is likely to make things more difficult for the STR industry, which could in turn make it harder for the city to bring in substantial tax revenue from STRs. Alleviating rising housing costs is a worthy goal, but is this approach the right solution? It also raises the question of whether STRs should be taxed more than hotels in the City of St. Louis. These are issues for voters to consider as they decide on Proposition S.

The post Short-Term Rental Regulation May Again Be Changing in The City of St. Louis appeared first on Show-Me Institute.

If Cerner fails to live up to the promises that made it Missouri’s top recipient of taxpayer subsidies according to Good Jobs First, what are the consequences? Did the issuing agencies insist on clawbacks? Were subsidies issued on a performance basis? Or did taxpayers’ representatives just believe what they were told and not insist that Cerner actually deliver on its promises? If experience is any indication, it’s likely the latter.

Now we have an answer. According to a story in the Kansas City Business Journal, the Kansas City Council requested a report from the Tax Increment Financing Commission on the status of the Cerner development, now owned by Oracle. According to the author:

Cerner pledged 15,000 new jobs ahead of its TIF plan’s 2013 approval, and 16,000 with revisions through 2018. A Bloomberg report in April found Oracle Health had 40% of that count, or 6,400 employees, designated in Missouri, where the Innovations Campus is its lone metro location. However, the commission’s report did not discuss the campus’ job creation or retention, as its redevelopment terms do not have binding job thresholds.

The job creation promises were not binding. Our representatives, including members of the city council and the mayor, just took the company at its word. And what’s more, they didn’t even ask for any guaranty. We apparently just handed Cerner the money. Kansas City leaders should have set up measurable markers and demanded Cerner meet them lest it lose the subsidies and potentially face additional penalties.

As my colleagues here can attest, researching public policy will make you a skeptic. Often, one needs to resist becoming a cynic. But rarely—though maybe not as rare as we’d hope—you find out the truth is as bad or worse than you feared. This is one such occasion.

The post Apparently, Failing to Meet Promises Is Not a Violation of K.C. Subsidies Regime appeared first on Show-Me Institute.

Taxing bodies that depend entirely on property taxes get crushed by the choices that cities make. Often, voters in those taxing bodies don’t live within the city that makes the decisions and cannot punish or reward elected officials with their votes. The most obvious example of this was in Shrewsbury, but it happens all over the place. With county TIF commissions, voters can hold elected officials responsible for the subsidy choices that they make.

Five counties currently have county TIF commissions: St. Louis, Clay, Cass, St. Charles, and Jefferson. Counties that use the county TIF commission mechanism have been more careful and judicious in the use of TIF than counties where municipalities dominate the decision-making process. This is particularly true in St. Charles and Jefferson counties, but even in St. Louis it has been better overall. St. Louis County thankfully rejected the odious Maryland Heights proposal, but it has also approved other bad subsidies (e.g., the Chesterfield TIF). Clay County and Cass County are fairly new to this list, so it remains to be seen if they will be better or not.

The exact statutory language is in RSMO: 99.820.3(1). Personally, I think that Greene, Platte, Franklin, Boone, and Camden counties should be the next five added to this list. Earlier this year in Osage Beach (Camden County), I testified at a hearing where all 6 members of the TIF Commission from the city instituted a TIF over the objections of the representatives from the county and school district. That is how TIF works, and it is terrible.

The post TIF Decisions Should Be Made at the County, Not City, Level appeared first on Show-Me Institute.

Opportunity cost. The concept is so simple that a first-grader could understand it. I know, because I used to teach it to first-graders. Had you walked past my classroom at just the right time, you might have heard 20-something first graders chanting, “Opportunity cost is the opportunity lost.” The students understood that our decisions have consequences. It was a lesson they learned every time they went out to recess. If they chose to play kickball, they couldn’t play basketball. This basic life lesson bears some repeating for the adults who set policy in our state.

Though the term opportunity cost was not coined until 1914, French economist and writer Frédéric Bastiat provided one of the most salient examples of the concept in his 1850 work, “What Is Seen and What Is Not Seen.” Using the parable of the broken window, Bastiat explained how money being spent on one activity is money that cannot be put to more productive use elsewhere. Imagine that a pane of glass is broken at a baker’s shop. Obviously, the money that the baker must pay to have it repaired becomes revenue for the window repair man. Anyone walking by can see the repair man doing work and recognize that he’ll be paid for his labor. But it makes no sense to look at the repair man’s good fortune in isolation. Doing so would lead to the harebrained conclusion that breaking windows leads to economic growth! Instead we need to remember that, had the window stayed intact, the baker could have done something else productive with the money. The problem is that we can’t see what the baker could have done with the money—only what he actually did with it.

Unfortunately, our board of aldermen and other policymakers regularly make decisions based on what they see without accounting for what they can’t see. Take for example the earnings tax in Saint Louis. Policymakers can see the revenue generated by the tax, but they can’t see the economic activity that has been lost. They can’t see the jobs that might have been created had those dollars been reinvested by the businesses. Nor can they see the economic activity that might have been generated if those dollars had remained in workers’ pockets.

Think about opportunity cost the next time you see a ribbon-cutting at some new development that has received tax breaks or some other form of support from the government. Whether it is a property that has been blighted and given property tax abatements for development in the Central West End or a big box store that receives tax-increment financing, we can see the product of those government actions. We cannot see the harm they do to other businesses through unfair economic competition.

I was reminded of these ideas when I read Lindenwood economist Howard Wall’s most recent paper for the Show-Me Institute, “Is Growth in Outstate Missouri Tied to Growth in the Saint Louis and Kansas City Metro Areas?” Wall uses an econometric model known as Granger-causality to estimate the impact of employment growth in Saint Louis and Kansas City on the rest of the state. He finds a statistically significant downstream relationship between Saint Louis and the rest of Missouri. That is, employment growth in Saint Louis leads to employment growth in the state. He estimates that a 1 percentage point increase in growth in Saint Louis would lead to an increase of 0.35 percentage points in outstate Missouri within two or three years. Why this connection exists (he doesn’t find a similar relationship in Kansas City) is a matter for some hypothesizing or future research. Nevertheless, the point is clear—Saint Louis is an economic driver for the state.

While Wall’s paper does not deal directly with the idea of opportunity cost, his findings make it all the more important for policymakers to understand the importance of their actions. When they support an earnings tax or other policies that harm the city’s economic growth, they are hurting the economic growth of the entire state.

Missourians, not just those who live in the city, benefit from a thriving Saint Louis economy. That’s why we need policymakers to put in place pro-growth policies that create the economic conditions for the market to thrive.

The post Opportunities Squandered in St. Louis Affect All of Missouri appeared first on Show-Me Institute.

The post The Lakeport Village Tax-increment Financing Proposal appeared first on Show-Me Institute.

The Osage Beach TIF Commission will meet on April 17, 2023 regarding the Oasis at Lakeport project. More information here.

Does Tax-Increment Financing Pass the But-For Test in Missouri? Read the full Policy Study: https://bit.ly/3mkuFw8

The post WATCH: Developer Seeking $60 Million TIF in Osage Beach, Missouri appeared first on Show-Me Institute.

In July 2010, Missouri politicians joined the state’s economic development agency to announce the awarding of $17 million in state tax incentives, along with $39 million in local tax subsidies, to the Mamtek project in Moberly. The project called for making artificial sweetener using a process that would start in China and finish at a new plant in Moberly, creating 600 local jobs here. There was just one problem—it was all a scam.

It may seem unfair of me to criticize a government agency for falling victim to a criminal conspiracy, albeit one that really wasn’t that sophisticated, but government economic development agencies are a catch-22 for taxpayers. When they do a bad job—as they did in Mamtek—they waste our tax money. As with the St. Louis Marketplace or the Olde Towne Plaza in Ballwin, we can list plenty of private business projects government had no reason to get involved in but did, to the detriment of taxpayers. But we can only wish they always did a bad job. It’s when they do their jobs right that taxpayers and average citizens really get burned.

When economic development officials do their jobs right, all they are really doing is subsidizing economic activity that likely would have happened anyway for the benefit of politically connected companies. As the old joke goes, economic development officials are great at creating jobs for other economic development officials. For everyone else, not so much. For all their skillful use of political buzzwords and claiming credit when none is deserved, it remains true that “government is a bad venture capitalist,” to quote President Obama’s economic advisor, Larry Summers. Summers was being polite. Government, in the form of local, state, and federal economic development agencies, is a terrible venture capitalist. It’s not that government officials don’t get their bets right often enough; it’s that they actively get them wrong because economic development officials are heavily influenced by the political incentives to reward supporters of the politicians who employ them. A short-term political payoff is more important than long-term success.

St. Louis Mayor Tishaura Jones came into office two years ago pledging to make changes to the city’s economic development process. To a small degree, her administration has reduced the subsidies it is giving out to companies, and for that she deserves credit. But they also figured out a way to somehow make a bad process even worse by imposing an “economic justice” imperative on it. So now, instead of listening to development officials fabricate how their corporate welfare led to jobs, growth, and so on, we get the additional pleasure of hearing how tax subsidies lead to more “equity.” Death can’t come fast enough.

Economist Dick Netzer mocked the exaggerated claims of success made by economic development officials when he wrote, “Who needs oil wells, when a state can be another Kuwait just by increasing the budget of a tiny agency?” Claims of subsidy successes often border on the absurd. The author once heard a Clay County economic development official claim that “All of the growth” in the town of Liberty—a fast growing, suburban community north of Kansas City, the likes of which have been growing across the nation for decades—was due to a tax-increment financing (TIF) package they passed. Chesterfield officials talk about the Valley TIF there in much the same way, as if suburbanization hadn’t existed until Missouri’s TIF law was passed in the late 1980s.

The self-aggrandizement of the economic development industry would be understandable if the system worked, but it doesn’t. The East-West Gateway Council of Governments (EWG) did a major study of TIF and other subsidies a decade ago and concluded that they created one job for every $370,000 in tax subsidies. That is a terrible return on the subsidy, as EWG stated. Economists Alan Peters and Peter Fisher studied tax incentives closely and concluded that they work about 10 percent of the time and are simply a waste of money the other 90 percent. They added that, like the Clay County officials mentioned above, economic development officials often credit all new employment and growth to tax subsidies. Yet our region continues to pass out tax subsidies like other people’s candy, evidenced by the atrocious decision of the St. Louis County TIF commission to approve $300 million in subsidies for the “blighted” part of Chesterfield just last month.

If we really wanted to help our community grow, residents of the St. Louis-area could get no better gift than the elimination of state and local economic development agencies. They are a blight on capitalism and an actively harmful influence on the civic and economic life of our state.

The post St. Louis Should Eliminate Its Economic Development Agencies appeared first on Show-Me Institute.

In July 2010, Missouri politicians joined the state’s economic development agency to announce the awarding of $17 million in state tax incentives, along with $39 million in local tax subsidies, to the Mamtek project in Moberly. The project called for making artificial sweetener using a process that would start in China and finish at a new plant in Moberly, creating 600 local jobs here. There was just one problem—it was all a scam.

It may seem unfair of me to criticize a government agency for falling victim to a criminal conspiracy, albeit one that really wasn’t that sophisticated, but government economic development agencies are a Catch-22 for taxpayers. When they do a bad job—as they did in Mamtek—they waste our tax money. As with the Bass Pro Shop in Independence and the Jamestown Development near Springfield, we can list plenty of private business projects government had no reason to get involved in but did to the detriment of taxpayers. But we can only wish they always did a bad job. It’s when they do their jobs right that taxpayers and average citizens really get burned.

When economic development officials do their jobs right, all they are really doing is subsidizing economic activity that likely would have happened anyway for the benefit of politically connected companies. As the old joke goes, economic development officials are great at creating jobs for other economic development officials. For everyone else, not so much. For all their skillful use of political buzzwords and claiming credit when none is deserved, it remains true that “government is a bad venture capitalist,” to quote President Obama’s economic advisor, Larry Summers. Summers was being polite. Government, in the form of local, state, and federal economic development agencies, is a terrible venture capitalist. It’s not that government officials don’t get their bets right often enough; it’s that they actively get them wrong because economic development officials are heavily influenced by the political incentives to reward supporters of the politicians who employ them. A short-term political payoff is more important than long-term success.

Late to the subsidy game but catching up fast, Springfield—having seen how St. Louis and Kansas City have operated their own subsidies and failed by every measure—has decided to follow in their footsteps. The trucking industry has long been important in Southwest Missouri, and there are numerous companies, stations, and stores in Springfield to service the various fleets. But not enough for the City of Springfield’s Department of Economic Vitality (that’s its actual name), which decided to use over $4 million in taxpayer funds (along with other subsidies) to entice an enormous new gas station company, Buc-ee’s, to locate in town.

The head of another local convenience store company, Rapid Robert’s, rightfully took issue with the plan. He didn’t object to the competition, but rather the use of tax subsidies in a field full of local companies that had grown without them. His objections fell on deaf ears, and likely would have been meaningless to the members of the city’s “economic vitality” department. They, like economic development officials everywhere, care nothing about history, propriety, or capitalist theory. They care about getting the forms marked up, the tax money spent, and the deal done so that they can claim credit, add it to their resume, and start searching for the next job.

Economist Dick Netzer mocked the exaggerated claims of success made by economic development officials when he wrote, “Who needs oil wells, when a state can be another Kuwait just by increasing the budget of a tiny agency?” Claims of subsidy successes often border on the absurd. The author once heard a Clay County economic development official claim that “All of the growth” in the town of Liberty—a fast growing, exurban community north of Kansas City, the likes of which have been growing across the nation for decades—was due to a tax-increment financing (TIF) package they passed. As if suburbanization hadn’t existed until Missouri’s TIF law was passed in the late 1980s.

Economists Alan Peters and Peter Fisher studied tax incentives closely and concluded that they work about 10 percent of the time and are simply a waste of money the other 90 percent. They added that, like the Clay County officials mentioned above, economic development officials often credit all new employment and growth to tax subsidies.

As Christmas approaches, Springfield residents could get no better Christmas gift than the elimination of state and local economic development agencies. They are a blight on capitalism and an actively harmful influence on the civic and economic life of our state.

The post Springfield Should Eliminate Its Economic Development Agencies appeared first on Show-Me Institute.

In most instances, the timing of the TIF project would not matter. It would start when passed by the TIF commission and city council and last up to 23 years from that date. But apparently, it really matters here, as the special city council session indicates. Why?

Probably because the work on the project has already begun, and if the work has already begun, there is risk of the property being assessed at a higher value in the looming 2023 reassessment cycle. If it is assessed at a higher value, that limits the size of the tax subsidy available. Don’t get me wrong, it would still be an enormous TIF project, but hey, every few million dollars counts.

Of course, the fact that the work has begun before the TIF proposal is finalized is important, because the justification for this abomination of a TIF project is that the area is “blighted” and that the project would not happen at all “but for” the tax subsidy. It is hard to claim that it would not happen “but for” the subsidy when construction has already started before the subsidy is approved, but this appears to mean nothing to Chesterfield, the St. Louis County TIF Commission, and the various planners and lawyers who are all in on the tax subsidy largesse. (See appendix C of this document for the relevant affidavits.)

There’s another way to interpret construction starting on this project before the money was even approved. The developers were so confident that the TIF commission and the Chesterfield City Council would approve the money that there was simply no need to wait. This attitude, if true, would conform with the broader subsidy culture in our state, where local governments often just rubber stamp tax subsidy requests.

Will the city further contort itself to do the bidding of the developer and get this all approved before 2023 when the reassessment clock will strike midnight? Or will the city protect taxpayers and the other affected taxing jurisdictions, such as the Parkway and Rockwood school districts, by dealing with the reality that the developers used the system to extract taxpayer money for a project that never needed subsidies to begin with?

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