Data center headlines have been filling newspapers each and every week. Among the myriad proposed developments across the state, one project in Ferguson stood out.

Ferguson officials recently rejected a tax subsidy proposal that would have granted substantial incentives for a data center project at the former Emerson campus. Specifically, the package included up to 15 years of tax abatements on real estate, personal property, and sales taxes.

Rejecting this tax subsidy for the development was the right decision. I want to stress that the Ferguson City Council did not reject the data center; it rejected the requested tax subsidy only.

For years, Show-Me Institute writers have been noting the problems with economic development subsidies. Governments should not be picking winners and losers, and data centers are no different.

However, many ignore these arguments and think that using incentives to attract a project could bring substantial jobs, invite tourism, and boost public morale. While maybe (strong emphasis on maybe) some could argue this about other projects, these arguments don’t apply to data centers.

The Emerson Campus formerly employed more than a thousand workers manufacturing automation products and providing engineering services. Modern data centers simply do not require that scale of employment.

At the same time, the concerns over electricity, water, and sound from data centers are well-known.

However, despite this, data centers can still provide a major benefit: significant tax revenue. They can provide so much revenue that local residents could see property tax cuts.

That is precisely why offering large tax abatements for these projects is especially misguided. Along with the cyber and electronic services we all use, tax revenue is the core benefit a data center can bring to a community. If local governments dramatically reduce those revenues through incentives, they are asking residents to absorb a lot of costs with little benefit.

A data center project at the Emerson campus could still be successful and economically beneficial without requiring massive local tax incentives. But too often, Missouri communities negotiate as though they have little to offer unless subsidies are attached.

They should think bigger than that. I wrote a recent op-ed on this very topic.

As debates around data centers continue across Missouri, policymakers should carefully weigh both the benefits and drawbacks these projects bring. Local governments should not rush to give away the primary benefit data centers can provide: tax revenue. Ferguson made the right decision.

The post Ferguson Denies Incentives for Data Center Project appeared first on Show-Me Institute.

“We have gone from about 80 properties to about 480 properties,” Hulshof explained. “My cup runneth over.”

Like supporters of government-managed economic development programs everywhere, backers of the plan in Charleston think that if the government approves the right plan here, with the right subsidy there, with the right government agency approval soon, that government plans can magically turn a struggling city into a boomtown. As economist Dick Netzer once mocked these eco devo officials, “Who needs oil wells, when a state can be another Kuwait just by increasing the budget of a tiny agency?”

A Chapter 353 plan with mass property tax abatements would not help Charleston. It would, in fact, almost certainly hurt it more. If property taxes are too high for businesses in Charleston (which I doubt, to be honest), then the city, school district, county, etc. should lower the rate for everyone, not give some property owners in downtown Charleston a big tax abatement that will almost certainly force tax increases on everyone else to make up the difference.

There are a multitude of studies that demonstrate the fallacy of believing that government economic development agencies can successfully engineer economic growth through various subsidies. Here is one simple summary from two economists who have looked at the question thoroughly: “The best case is that incentives work about 10% of the time and are simply a waste of money the other 90%.”

There are other economists who wouldn’t even agree they work 10 percent of the time. As one economist said after he reviewed a similar tax-subsidy laden plan for north St. Louis:

Among the most vocal critics of the NorthSide plan was the chair of Washington University’s Department of Economics, Prof. Michele Boldrin, who testified at the trial that the benefits promised by McKee such as new jobs and increases in property value were “dreamy,” “out of thin air,” “unreasonable,” and “completely arbitrary” and further stated that “if an MBA student came up with it, I’d throw him out of my office.”

St. Louis and other cities in Missouri have been using tax incentives as a prop for politicians to claim they are “doing something” for decades. How has it worked out for St. Louis? As author Colin Gordon wrote in him study on that precise question in his book, “Mapping Decline”:

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.

If you think the results in Charleston are going to be any different, I have a bridge over the Mississippi to sell you. A Chapter 353 plan for Charleston will allow politicians and planners to claim they are doing something, it will benefit the politically connected and the lucky, and it will empower city government to get more involved in the local economy. All of these things are, by the way, bad things. What a 353 plan won’t do for Charleston is help revitalize the city or grow the economy.

The post A Chapter 353 Tax Abatement Plan is the Last Thing Charleston Needs appeared first on Show-Me Institute.

In St. Louis County, parts of the county are still recovering from the tornado, the county executive is under indictment (everyone is innocent until proven guilty), and county government’s 2026 budget forecast says there is an $80 million budget shortfall. The last part is the focus of this post.

Every government budget can be cut, and in every government budget there is enough waste and fat to be trimmed to make a difference. That said, cutting government spending is hard (I wish it weren’t). County governments in Missouri are not bloated bureaucracies wasting money hand over foot. They tend to operate fairly efficiently, at least by government standards. So, while making cuts should be the highest priority for the budget shortfall, I doubt that there is $80 million in waste and fraud to be trimmed. Some tough choices are going to have to be made. So, beyond cutting all the waste that it can, what should St. Louis County do?

First, if you are in a hole, stop digging. St. Louis County continues to inexplicably grant tax abatements and other subsidies that never live up to their promises. If these subsidies worked—and by “worked” I mean generated long-term revenues that outweighted the short-term costs—then St. Louis County wouldn’t be in this predicament in the first place. St. Louis County needs to stop giving away taxpayer money as part of a delusion that government planning grows the economy. And yes, this includes getting rid of the senior property tax freeze among other subsidies.

Privatization and outsourcing some services are always an important option for local governments. St. Louis County’s options here are limited, in that the county doesn’t operate any public utilities and it already provides many services via outsourcing. (This is, of course, all a good thing.) The biggest mistake county government has made in recent years is the debacle with the animal shelter. The county should never have taken the animal shelter back in-house. St. Louis County officials should admit their mistake and once again outsource management of the animal shelter.

One of the reasons St. Louis County is in this situation is that it has gone over a decade without a qualified county auditor catching mistakes and making suggestions for fiscal improvements. Hopefully, the recently hired county auditor can change that.

Now let’s talk about the revenue side. Nobody likes tax increases, but sometimes they are necessary. If the county were to consider raising taxes, what taxes should it either institute or increase?

St. Louis County voters have rejected a use tax several times, most recently in April, 2022. A use tax (which is a sales tax on online purchases) is probably the best tax option for the county from a revenue perspective. Two other options could be imposing a small county gas tax to help fund roads or a modest property tax increase. Both of these would be politically complicated.

Beyond all of this, cuts will have to be made. Those may be cuts to services people like, such as the police department or highway projects. But elected officials are there to make hard choices.

The post What Should St. Louis County Do about Its Budget Shortfall? 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.

One thing I noticed about all the cities that I listed is that they contain lots of “U’s” and “L’s,” so I guess we know who the patron saint of this blog post is.

A use tax is simply a sales tax imposed on goods you purchase online or via catalogue and have delivered to your home. Municipal use taxes in Missouri actually predate the internet, but not surprisingly, most cities didn’t pass them until online shopping took off over the past fifteen years or so.

I am generally unsympathetic to the idea that these cities need a tax increase. If Creve Coeur needs more tax revenue, why did it just pass an enormous tax abatement in a very prosperous area that absolutely does not need tax subsidies to encourage development? If Festus needs more tax revenue, why did it put the fix in to sell its water system to another public entity without going out for bids as good government principles require? I don’t have any specific criticisms of Ladue, but I highly doubt the city is in financial trouble. This famous doggerel about Boston Brahmins could easily have been written about Ladue:

And this is good old Boston,
The home of the bean and the cod,
Where the Lowells speak only to Cabots,
And the Cabots speak only to God.

My view is that use taxes are a good way to expand the tax base, level the playing field for businesses, and raise local revenues. However, this last point is key. They should not be used simply as a way for cities to get more revenue. Cutting other taxes after the use tax is imposed (should voters pass it)—especially if you have a particularly harmful tax — is a great way to achieve the above benefits without a tax windfall for the city. Cities can lower their property tax rates, reduce their utility tax rates, or adjust other sales taxes (altering sales tax rates is much trickier than other types of taxes).

I don’t know if any of these cities have pledged to reduce other taxes if the use tax passes. Without such a pledge, the use tax would likely be a significant revenue gain for the city. If you think your city, town, or village actually needs that revenue, then so be it. But I’d be hard-pressed to buy that for the cities listed above, especially Ladue, Creve Coeur, and Festus.

The post Use Taxes on the Ballot in Missouri This November appeared first on Show-Me Institute.

The especially galling aspect of this property tax abatement by Wildwood—and many other deals like it—is that Wildwood does not levy a property tax. There is nothing wrong with that, but a city that doesn’t levy a property tax deciding on abatements that affect the school district, county, and other taxing districts that do depend on the property tax is terrible policy. You need to have skin in the game, and cities rarely have much skin in the game when it comes to property taxes. Missouri municipalities depend primarily on sales taxes, not property taxes. Again, there is nothing automatically wrong with that, but we don’t let school districts give out exemptions on local sales taxes (which they don’t impose), so I don’t know why cities get to abate property taxes.

The evidence that local tax subsidies fail in their ostensible goal of economic growth is overwhelming. Among the myriad problems:

• Local officials can’t predict the future
• Local officials allow politics to influence their decisions
• Companies and developers rarely need the subsidy (they ask because the money is there for the taking)
• Greater use of subsidies leads to increased local economic planning

Please read these reports and articles if you would like a detailed summary of these arguments.

It’s frustrating to see Wildwood go down this path. History shows that once a city approves one of these subsidies, the dam usually breaks, and they become common. I hope that doesn’t happen in Wildwood.

The post Wildwood’s Big Mistake appeared first on Show-Me Institute.

That truce, however tenuous, is now over. And the legislative safeguards that underpinned it? Those are collapsing too. Missouri’s border war limitations on cross-state tax subsidies are set to expire in August. Earlier this year, legislation was introduced to preserve the truce by eliminating the expiration date entirely. Lawmakers added it to Senate Bill 10, which passed both chambers independently—but couldn’t get reconciled before session’s end. So the bill died, and with it, hopes for ending the economic arms race.

Kansas Governor Laura Kelly indicated last year she was never really serious about the truce. But now Missouri has let the truce expire. And in doing so, our lawmakers joined Kansas in an economic race to the bottom. It’s bad policy. Worse, it’s profoundly unserious governance.

Economic development isn’t war. It’s not supposed to be a battlefield where neighboring states trade artillery in the form of publicly issued bonds and tax abatements. Yet here we are again, watching legislators in Jefferson City and Topeka dress up like Civil War reenactors—reenacting the Border War with new costumes and worse math.

Meanwhile, Missouri public officials continue their own subsidy spree, throwing tax breaks at data centers and entertainment districts while the state is unable to keep the streets repaired or safe. If lawmakers were serious about our state’s economic health, they’d rein in their own giveaways first.

Instead, we’re back to playing an expensive, performative game—one that enriches developers, flatters politicians, and drains public coffers. Legislators in both states want to be seen as “fighting” for jobs, but all they’re doing is trading fire in border skirmishes that make the region poorer.

The original truce was imperfect, but it pointed in the right direction. It said we could grow the region without cannibalizing each other. That we didn’t have to subsidize the illusion of progress. That good policy could also be good politics.

By breaking the truce or letting it expire, politicians on both sides demonstrated they are not interested in sober economic stewardship. They may win a few headlines or ribbon cuttings. But the public—taxpayers, students, local governments—will be left paying the bill.

If this is a reenactment, let’s at least admit it: The weapons are new, but the economic costs are the same.

The post Border War is Back On! appeared first on Show-Me Institute.

A recent article in The Beacon highlighted “Historic renovations, new buildings and empty lots. Twelve projects to watch along the streetcar extension.” These projects may well be real, and perhaps even partially spurred by the streetcar—though that’s a bold assumption. (Consider, for example, the claim years ago that a company moved to be nearer to the streetcar, only to find out the claim was  specious.)  But more to the point, the story misses a crucial journalistic opportunity: comparison.

What if development along the streetcar line is proceeding at the same rate as development elsewhere in the county? Wouldn’t that be a critical piece of context for readers? Unfortunately, the article doesn’t address it.

The piece features an enthusiastic architect praising the streetcar and predicting continued growth—but offers little else in the way of evidence. There are no supporting data or comparative figures, just optimism.

Yet when we look at property value increases within the streetcar development district, the growth mirrors that of the broader county. If the streetcar were truly driving development, we’d expect the district to outperform. But so far, it hasn’t.

In fact, the full picture is more sobering. The city has layered on economic development incentives—tax abatements and similar tools—specifically to attract investment along the line. Still, there’s little sign they’re making a difference.

So, as more coverage emerges touting the streetcar’s economic magic, it’s worth pausing to ask a foundational economic question: “Compared to what?” That kind of framing—rooted in evidence, not enthusiasm—might offer readers a more accurate view of what’s really happening.

The post Don’t Believe the (Streetcar) Hype 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.

Due to its great location, the neighborhood is undergoing gentrification as new, wealthier homeowners move in, leading to property value increases and higher taxes on long-term residents. In order to combat this, the neighborhood organization proposed turning the entire neighborhood into a Chapter 353 abatement plan designed to refund a percentage of property taxes to current residents based on their incomes.

I genuinely understand the desire for people to stay in their neighborhoods and not be taxed out by rising property values. But I think this enormous neighborhood abatement plan is a very bad idea. If it were copied throughout Missouri, it would lead to increased reliance on sales and income taxes (that is a bad thing), an increase in the abuse of abatements as certain people get special deals and other people pay higher rates, and a general increase in the involvement of government in the simple act of owning a home, since a government body has to vote on plans like this. Make no mistake: if this practice becomes common everyone, on average, is going to end up paying higher property taxes.

An article in support of this plan states that it is only available to current residents. That is deeply troubling (emphasis added):

These benefits accrue only to existing West Side residents. New people coming in would not receive any of the benefits, so the plan would not produce further gentrification.

There is a name for this type of tax policy. It’s called “welcome stranger.” That simply means that new property owners pay higher tax rates for comparable properties than current owners. The U.S. Supreme Court ruled against it in 1990, but I strongly suspect that the lawyers behind this Westside 353 plan crafted the plan to try to avoid legal challenges. Even if that is the case, is this good public policy? Absolutely not. This is going in the entirely wrong direction. We need to end tax abatements and other tax subsidies throughout Missouri so that the tax base is broader for everyone—and rates thereby lower—to fund the government services we want.

I had hoped the mayor of Kansas City would veto this bill, but he did not. I now expect the lawyers who drew this plan up to start passing out business cards at every neighborhood meeting in Missouri where there is a colorable claim for using Chapter 353. The short-term gain for the Westside community may produce long-term harms for Missouri.   ­

The post Kansas City Westside Community Goes All-in on Abatements appeared first on Show-Me Institute.

Analysis of what companies actually do, as opposed to what they say they require, tells a different story. Shockingly—I know this is going to stun many of you—those same companies often don’t need the subsidies as much as they claim. Here is an article that discusses one study out of Texas:

Nathan Jensen, a University of Texas at Austin professor, analyzed businesses’ applications for school property tax relief. His findings suggest that just 15 percent of participating firms needed the incentives in order to make an investment in Texas. Furthermore, many of the other firms were uncharacteristically open that incentives were not a necessity.

Just fifteen percent. And sure, Amazon received substantial subsidies when it decided to build its sought-after second headquarters in Virginia, but it received far fewer subsidies there than had been offered by other states.

Which brings us to Clayton, Missouri and Centene. Several years ago, the City of Clayton passed an enormous incentive package for Centene as part of its major expansion plans within the city. From a St. Louis Post-Dispatch story on the topic:

Clayton and state officials signed off on a sizeable incentives package: $75 million worth of property and personal tax abatement over 20 years in Clayton and tens of millions more in state incentives, most of which would be dependent on the number of jobs Centene would add in the region.

Not surprisingly, “ . . . Centene said then that it could not build the project without public subsidies.”

But that was 2016, when it was time for asking. Now it’s 2022, and it’s time for doing. And Centene has changed its mind. The company is not going to build many of the parts of the proposal that justified the tax incentives, including a civic auditorium in downtown Clayton (emphasis added):

“A civic auditorium is no longer in Centene’s plans regardless of any incentives to proceed,” the company said in a statement to the Post-Dispatch.

Centene almost certainly didn’t need the tax subsidies in the first place, and it threw in the civic auditorium promise as a political victory for the local politicians who like to delude themselves as to their own importance in creating downtown Clayton.

As long as Clayton holds firm and takes back the subsidies now, fairness demands we give the city some credit here. But the precedent has been moved further along by the subsidies Clayton gave out in 2016, and that part of the damage has already been done—all over tax subsidies that were likely not needed in the first place.

The post Centene Says the Quiet Part Out Loud appeared first on Show-Me Institute.

In 1977, the Chicago Sun Times newspaper bought a bar. They didn’t just buy it to serve people drinks. They bought it—under a fake name—for the purpose of loading it up with video and audio recording equipment to expose the rampant political corruption in Chicago. For months, as the bar went through the standard process of getting permits, licenses, and so on, the operators recorded the unending stream of bribe requests, kickback demands, and more that were (and arguably still are) commonplace in Chicago.

Even though news of corruption in Chicago was hardly earth-shattering, the series of stories released in 1978 caused a sensation. Rarely had the political cancer been so clearly documented via media, and the constant brazenness of the corruption startled the people of Chicago, who until then may have thought they’d seen everything.

Which leads us to last week’s news about the federal indictments of three St. Louis City aldermen on corruption charges. I may work at a think tank, but I know a little about bribery attempts. Back in 2001, I got a first-hand look at an attempted bribe for then-County Councilman John Campisi. He had just finished a meeting with a taxicab operator who, as he departed, left a brown paper bag on the Councilman’s desk. Suspicious, Campisi asked me (at the time a council aide) to come to his office so that we would both be present when someone (me) opened the bag. Sure enough, the bag had a bribe in it. The next year, that taxicab operator, another councilman who had arranged the meeting, and a few other county employees involved in the racket were convicted of bribery. That was the biggest scandal Clayton had seen until Steve Stenger decided to turn the 9th floor of the county building into a live-action RICO performance.

A part of me is delighted with the bribery charges. I have spent years decrying (including in the pages of this newspaper) the abuse of precisely the two things that appear to be at the heart of the corruption charges: tax abatements and the city land bank. Rest assured, I am going to update my talking points on these two issues, and trust me when I say that audiences pay a lot more attention when the lead is “politicians take bribes” than when the lead is “studies show . . .”

But on a more serious note, a much larger part of me is angry and depressed over the allegations. While everyone is innocent until proven guilty, the main question I ask is not about the guilt or innocence of these three politicians, but whether we have a system that enables corruption in St. Louis and the rest of our state (paging Tom Pendergast, please). I have to think the answer is a very dispiriting “yes, we do.” The ease with which tax subsidies, abatements, and so on can be handed out has long made them susceptible to this risk.

The tax subsidy rot is not limited to the minnows. Never forget that, for all Governor Eric Greitens’s flaws and self-inflicted wounds, the tax-credit industry apparently mobilized a political hit squad for him after he had the audacity to kill their golden goose in the low-income housing tax credit program. And while large-scale developers around the state may be smart enough to ensure their payments to elected officials are done as perfectly legal political donations instead of unreported cash-in-a-bag, one strongly suspects that the abuse of tax-increment financing (TIF), special taxing districts, and other forms of corporate welfare is greased by the legal version of just what got the three aldermen indicted. I have no doubt that some of the people at St. Louis’s country club bars who are most appalled by bribery charges in the city are standing next in line to get their own special tax credits or floodplain TIF deals.

The stench of corruption, both now and in the past, carries with it very real harms for our region. So back to Chicago: Studies have shown (see, I can’t avoid that phrase) that corruption costs Illinois $550 million a year. That represents the cost of not only the direct bribery, but, much more so, the decreased economic growth and lost investment that result from the fear of corruption. Ask yourself: would you think twice about investing in Mexico now? Of course you would. The endemic violence and corruption would make any rational person think twice. The same thing is true for cities and states known for corruption in our own country. Under Steve Stenger, some bidders undoubtedly thought twice about bidding on St. Louis County projects, knowing as they did that a winning bid was not going to be finalized until the county executive received a large campaign donation. Accounts of corruption in the City of St. Louis give residents and investors one more reason to keep themselves and their money out of the city. That’s the last thing the city needs right now, but that’s what it has.

As is often said, when the business of buying and selling is controlled by the legislature, the first thing to be bought and sold will be the legislators. Good government types (of which I am one), must do more than simply call for “electing better people.” We need to remove the incentives and opportunities for corruption. In the latest instance in the city, we should respond by completely eliminating the ability of politicians to dole out tax subsidies, credits, and abatements. Gambling addicts shouldn’t hang out in casinos and hope they aren’t tempted. The problem of corruption in our community will continue until we reduce the involvement in government in our daily lives and shrink the number of things that can corrupt politicians in the first place.

The post Corruption Allegations: Disappointing but Hardly Surprising appeared first on Show-Me Institute.

The cities covered in the report are:

• Ballwin
• Blue Springs
• Cape Girardeau
• Chesterfield
• Columbia
• Florissant
• Independence
• Jefferson City
• Joplin
• Kansas City
• Lee’s Summit
• O’Fallon
• Springfield
• St. Charles
• St. Joseph
• City of St. Louis
• St. Peters
• University City
• Wentzville
• Wildwood

Click here to read more, or download the report by clicking on the link below.

The post Tax Burden in Missouri’s 20 Largest Cities appeared first on Show-Me Institute.

The post Tax Burden in Missouri’s 20 Largest Cities appeared first on Show-Me Institute.

It’s been said many times that there is nothing as permanent as a temporary government program. While it may be a partisan campaign remark, it contains a simple truth. Each new program generates its own newly entrenched bureaucracy and special interest groups that have an interest in expanding and perpetuating the program. We can see this with big, bold programs, but often that plan to maintain or expand power happens behind the scenes in ways the public never knows about. That is exactly what is happening now with the EEZ program before the Kansas City Economic Development Council, a city advisory committee that makes recommendations regarding tax subsidies.

Kansas City gives away enormous sums in tax subsidies—an estimated $175 million in 2018 alone. The development community and its allies in finance, law, and politics (hereafter the developer-subsidy complex) do not view these subsidies as a program to be used in occasional, necessary instances. Developers view them as their hereditary birthright, to be exploited with all the subtlety of King Henry “asking” if he could have another divorce.

Just as current Kansas City leadership is taking steps to place modest limits on tax subsidies—better known as corporate welfare—the developer community is taking steps to keep the spigot flowing. What steps has the city has taken? The city lowered the maximum property tax abatement developers can receive from 75% to 70% for 10 years, and from 37.5% to 30% for five more years. While this change is commendable, it is hardly a major decrease in subsidies. But try telling that to the developer-subsidy complex.

It’s latest maneuver regards EEZs, an all-too-common business incentive package that is tied to job creation aims. EEZ tax credits have always been focused on jobs and business activity—the explanatory language on Missouri’s website is clear on that—but the development community is now trying to argue that large apartment complexes should also quality for new tax subsidies through the EEZ program. While there is no evidence that EEZs work at growing the economy—the EEZ program was a major part of the failed Waddell and Reed downtown development—they do work (all too well) at shoveling tax dollars to influential developers.

It is important to note that major residential developments like apartment buildings already qualify for plenty of incentive programs: low-income housing tax credits, historic tax credits, the above-mentioned property tax abatements, tax-increment financing, and other programs. What they have not been able to access are EEZ tax subsidies. That, apparently, has to change.

Lawyers for housing developers have been quietly arguing with EDC officials for months that the tax credits and abatements previously reserved, as intended, for businesses that create jobs should also go to housing developments. The EDC officials have resisted, but the developers are now appealing to the city’s lawyers. If the lawyers change the interpretation of the law to include housing—which it has not previously been used for—then all of the progress, modest as it may have been, in reducing the use of tax subsidies in Kansas City will be undone.

No matter how the developer-subsidy complex tries to spin it, this is a naked attempt to take more money away from taxpayers and government bodies, like the school district, and put it into the private hands of developers and their advisors.

Hopefully, someone in Kansas City government will have the courage to say “No” to these demands by the developers. If that happens, we hope it works out better for them than it did for Thomas More.

The post Kansas City Needs a Patron Saint of Tax Subsidy Reform appeared first on Show-Me Institute.

The main veto was for a new 300-unit apartment complex right by St. Louis University. The new apartments will be marketed toward students, of which there are many nearby because it is right next to a major university. The developers were asking for a 10-year, 95 percent tax abatement. A 95 percent tax abatement on an $80 million project is a lot of money for the developers, and that money will inevitably be offset by higher taxes on other residents and businesses. The idea that a development such as this at this location needs a huge tax subsidy is absurd. I commend Mayor Jones for these two vetoes and hope it sends a signal for the rest of her administration.

Don’t get me wrong. I think taxes in the City of St. Louis are too high. But if Mayor Jones and the new generation of city leaders can substantially reduce tax subsidies for the lucky few and expand the tax base by doing so, then we might be able to get a tax cut for everyone. If the taxes on commercial development are too high, then lower the commercial property tax surcharge for all businesses. Giving away generous tax abatements to some (who, shockingly, tend to be politically connected) is not the solution.

This is a positive step for Mayor Jones’ term.

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Are the funding levels from state and county taxes (more on that in a subsequent post) enough to provide the right level of public health services? Federal emergency funds sent to the state stabilized funding issues for many departments during this crisis, but are we properly funding public health efforts in Missouri aside from that?

Well, I don’t know what the proper level of public health funding is, but I do know that the rampant abuse of tax-increment financing (TIF) and other tax abatement programs takes a very large bite out of local public health funding. Local governments in Missouri have given out over $7 billion worth of subsidies for TIF alone over the past few decades. Most of those subsidies come from property taxes, the precise taxes used to primarily fund our local health departments. If you add in property tax abatements and other types of tax subsidies, the number would be substantially higher.

I don’t know what percentage of that $7 billion in TIF would have gone to local health departments (both past, present, and future subsidies), but while it would likely be a low percentage, a low percentage of $7 billion is still a lot of money.

So, on top of all the economic, fiscal, social, and environmental damage TIF has caused, we can add in reduced public health funding during a pandemic. We can’t pass massive subsidy reform in Missouri fast enough.

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Ulysses S. Grant was known to say that in war, anything was better than inaction or indecision. Doing something was always necessary to make sure that the enemy was responding to you, not dictating to you. Even doing the wrong thing was preferable to inaction, as you could realize it was wrong, stop what you were doing, and do something else. General Grant may have saved our Union and helped free millions from bondage with those beliefs, but clearly he never served on a TIF commission.

That key part about realizing that what you are doing is not working and doing something else could be a vital lesson to the members of the various Kansas City tax incentive boards. Kansas City, like many other American urban areas, has been generously handing out tax incentives like candy on Halloween for decades now. These subsidies include tax-increment financing (TIF), enhanced enterprise zones (EEZ), subsidies offered through the Land Clearance for Redevelopment Authority (LCRA), and several property tax abatement programs authorized under Chapters 100 and 353 of Missouri law. Over the past decades, Kansas City has given out billions of dollars in total incentives to attract and retain business and development. In 2018 alone, the total tax abatements in Kansas City were worth $175 million in foregone taxes.

Do these incentives work? If by “work,” you mean giving economic development officials and politicians the appearance of “doing something” for the voters, then I guess they do work. But if you’re asking whether the incentives grow the economy in a way that both exceeds the cost of the incentives and extends beyond the growth that would have happened without them, the answer is decisively no.

In 2018 the Kansas City Council requested a study of the impacts of economic development programs such as the subsidies described above on Kansas City. The council wanted an independent, comprehensive review of the costs, benefits, and risks of the use of these subsidies. That is not what the council received. The report presented to the city council by the Council of Development Finance Agencies (CDFA) was biased propaganda with indefensible and wildly exaggerated claims of huge fiscal benefits from subsidies. The CDFA study stands in stark contrast with the overwhelming majority of economic studies about the benefits of local tax subsidy programs. The independent academic research into local economic tax subsidies has been consistent in finding that such programs produce either no benefit or very limited benefits that in no way justify the expenses.

Ordinance No. 200497, now before the city council, would tighten limits on the amount of tax subsidies included in the many types of economic development incentives used by Kansas City. The proposal would cap the maximum subsidy at 70 percent of the tax otherwise owed. This would guarantee that, at a minimum, the person or entity who received the incentive would pay at least 30 percent of their taxes. Maintaining a wide tax base to support public services is important in order to avoid high tax rates, and these reforms will help to accomplish that. The ordinance would guarantee that future economic growth would support local taxing districts with at least 30 percent of future tax revenues. This would lessen the consistent demand to increase taxes on the many people and businesses that do not have a tax subsidy. While these reforms would still allow for generous incentives and subsidies, the tighter limits on them would be a worthwhile change.

It is long past time for Kansas City to adopt significant revisions of the use of tax subsidies within the city. Tax subsidies such as those that would be limited by this ordinance do not grow the economy. Instead, they reduce the tax base and they favor politically connected entities over the majority of citizens. They are part of a failed race to the bottom. Ordinance 200497 would be beneficial to the overall Kansas City community. With it, the various boards that oversee tax subsidies could at least slow down the harm they are doing and start walking the right direction. Ulysses S. Grant would approve.

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So I am excited by some recent, positive steps in the area of local tax subsidies. For too long, state and local governments in Missouri have erroneously believed that tax subsidies spur growth. In fact, the opposite is true. They almost always fail in their purpose of increasing economic growth. Slowly but semi-surely, more people seem to be realizing that.

In Kansas City, there is a serious debate over a bill to further tighten the subsidies offered by the city government (here is my testimony on this bill). When it was first introduced, the bill was stronger. The current version does not go far enough, but, hey: baby steps, man, baby steps. If the bill tightens up subsidy rules at all—and it does—then I think it would benefit Kansas City.

I have already written about Chesterfield rejecting a community improvement district (CID)recently. Hopefully, this is part of this larger trend, both in St. Louis County and statewide.

Earlier this week, the St. Louis County Council delayed a proposal to use tax dollars to support a private youth sports development in Hazelwood. This is a slightly different issue. The tax money at issue here is not an abatement or tax break. St. Louis County would be using hotel tax money raised via measures passed by voters to support tourism-related projects. Nonetheless, the questions raised by those on the council are valid. They want to be certain that if there is a shortfall in hotel tax money (a very reasonable concern in the present environment) that the developer is on the hook for any shortfall, not St. Louis County taxpayers via general revenue tax dollars.

That said, this is fundamentally a private development. While I wish the developers well as they attempt to replace the fiscal, environmental, and totally predictable disaster that was the Hazelwood Mills Mall, they should rely on private funding, not public tax dollars. The fact that elected officials of both parties are questioning the spending is heartening.

Now, time for that tonic and gin . . .

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