As I wrote about a few weeks ago, Missouri is also facing a demographic decline. Recent college graduates or businesses looking to relocate will be more likely to choose a state with a promising economic outlook. When I wrote about demographic decline in St. Louis, I mentioned that Austin, Texas, and Orlando, Florida, have experienced substantial growth. One likely reason for these cities’ success in attracting new residents is their lack of a local or state income tax, which serves as an incentive for businesses and individuals to move to those cities.

So what can policymakers do? Show-Me Institute analysts have written extensively about the benefits that an income-tax cut could have for Missouri. States such as Texas, Florida, and Tennessee have cut their income tax to zero and also consistently fare well in ALEC’s economic outlook and performance rankings.

While Missouri has made incremental progress on cutting taxes, we still lag behind the true national leaders. This year’s legislative session is almost over, and so far we haven’t seen any significant tax reforms become law. Lowering taxes could help both our economic and demographic woes. But we need more urgency from our elected officials on this issue, or Missouri will only continue to fall further behind.

The post Two Birds, One Stone: Could an Income Tax Cut Help Missouri Reverse Two Declines? appeared first on Show-Me Institute.

 You have to understand this aspect of defined-benefit pension systems when you consider the recent report, “Unaccountable and Unaffordable,” produced by the American Legislative Exchange Council. They estimate that state-administered pension plans have more than $6 trillion in unfunded liabilities. That is the difference between the amount we’ve promised workers and how much we have in the retirement accounts to pay for those promises. This figure is up $433 billion since 2016. (These figures use a risk-free discount rate.)

 Missouri ranks 31st in total unfunded liabilities with more than $107 billion across the state’s pension plans. This translates to $17,642 per capita. That is, each Missourian would have to pay more than $17,000 to meet the obligations we’ve already promised. Unfortunately, these liabilities look like they will keep growing.

 I don’t want to take away anything that we’ve promised to a public-sector worker, but we need to realize two things. First, pension benefits are not simply a function of how much workers contribute. Second, we must do something about these mounting unfunded liabilities. Either employees and employers must contribute more (which is asking a lot when they already contribute the equivalent of 29 percent of a teacher’s salary), we must hold down benefits, or we must move to a different system. If we don’t, these unfunded liabilities will eventually wreck Missouri’s finances.

 You can check out the full report here.

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According to the National Institute of Corrections, “The crime rate in Missouri (2015) is about 18% higher than the national average rate.” Missouri is also eighth in the nation in its incarceration rate, imprisoning 530 people per 100,000 population in 2015.

Then there is the cost. The Department of Corrections budget has grown from $580 million in 2006 to $710 million in 2016. In the last five years that growth has been driven chiefly by adult institutions. The only good news in Missouri’s prison data is that as of 2012, Missouri paid $22,350 each year per inmate, well below the national average of $32,142.

Missouri is not alone in struggling with crime and incarceration rates. High crime rates in the 1970s led many state legislatures to adopt harsh sentencing guidelines, including mandatory minimum sentences for various crimes. The states embarked on “throw the key away” crime control measures that increased the prison population at great public expense. But research has shown that there are diminishing returns to harsh sentences—they don’t always result in a reduction in crime. States have been reexamining their sentencing laws, and the results are promising. Early research from around the country suggests that some criminal justice reforms, such as those that address mandatory minimum sentencing, can reduce crime rates and save states money. The American Legislative Exchange Council (ALEC) has published an excellent paper on the matter.

According to the Missouri Department of Corrections’ just-released Profile of Institutional and Supervised Offender Population (page 33), of the 30,754 members of the prison population, 41 percent are there for either nonviolent crime (7,377 inmates) or for drug-related crimes (5,403 inmates). These two offender groups, incidentally, are the fastest-growing populations since 2011. Imagine how much Missouri could save if courts had the flexibility to sentence these nonviolent offenders to treatment programs or probationary periods prior to locking them up—while still retaining the ability to treat violent or habitual offenders harshly.

Furthermore, imagine the benefit in human capital if nonviolent and drug offenders were sentenced to treatment or probation instead of being warehoused in state institutions with few opportunities for self-improvement.

The model reforms ALEC recommends are known at the Justice Safety Valve Act, and have been introduced in the Missouri general assembly as HB1037 and HB1046. If these reforms can do what they have done elsewhere—protect Missourians while avoiding unnecessary sentencing and costs—they are well worth consideration.

The post Criminal Justice Reform: Addressing the Costs of Incarceration appeared first on Show-Me Institute.

• Ted Dabrowski, vice president of Policy, Illinois Policy Institute
• Jonathan Williams, director of the Tax and Fiscal Policy Task Force, American Legislative Exchange Council
• The Honorable Larry Parman, Oklahoma Secretary of State
• Travis Brown, author of How Money Walks, who will also serve as our moderator

Our talk is tentatively scheduled to begin at 11:45 a.m., following speeches from former U.S. Sen. Rick Santorum and current Texas Gov. Rick Perry. Suffice to say, if you want to get a good seat . . . you may want to arrive early. And if the formal schedule changes between now and then, I will update this post with the new details.

It should be a fantastic event. I would be utterly delighted to meet our readers, so if you have time that day, I’d encourage you to register and attend our event. You can sign up for the conference here.

The post Meet Me In Saint Louie, Louie! Meet Me At CPAC (on Sept. 28) appeared first on Show-Me Institute.

For states, that is a huge distinction with major policy implications. Many employers under the ACA can be fined/taxed if they do not provide health insurance to individuals who qualify for the federal government’s subsidies. However, if a state does not build its own exchange, then no employee would qualify for the subsidy, and therefore employers in the state would not be subject to the tax because none of their employees would meet the criteria set out in the law.

Then there is the national implication. If the federal government cannot collect those taxes/fines from employers, then the ACA — already rife with budgetary gimmickry — becomes even less sustainable and more fiscally dangerous. If enough states choose not to create exchanges, the ACA would become basically unworkable. (Credit goes to Cannon for really hammering this point home over the last year. You can find his full study on the matter here.)

Not surprisingly, it was only recently that Washington woke up to this reality. The Internal Revenue Service has now put forward an administrative rule that would expand the subsidies and taxes to federal exchanges, despite what the law says. Of course, there are some barriers to the IRS just making up new taxes. Enter the Oklahoma suit:

Under Defendants’ Interpretation, [this rule] expand[s] the circumstances under which an Applicable Large Employer must make an Assessable Payment . . . with the result that an employer may be required to make an Assessable Payment under circumstances not provided for in any statute and explicitly ruled out by unambiguous language in the Affordable Care Act.

Plaintiff believes . . . that subjecting the State of Oklahoma in its capacity as an employer to the employer mandate would cause the Affordable Care Act to exceed Congress’s legislative authority; to violate the Tenth Amendment; to impermissibly interfere with the residual sovereignty of the State of Oklahoma; and to violate Constitutional norms relating to the relationship between the states, including the State of Oklahoma, and the Federal Government.

Earlier this year, Christie Herrera, formerly of the American Legislative Exchange Council (ALEC), and I wrote an op/ed for the Southeast Missourian on the issue of state exchanges. As we made clear, Missouri has not, and should not, implement a state insurance exchange under Obamacare for a variety of reasons. One of the most important reasons out there is that by declining to create the exchange, the state could avoid a bevy of burdensome taxes on employers. Granted, there is no telling exactly how a court will rule on this and to what extent the law could be saved despite itself, but the Oklahoma challenge begins the process of determining once and for all whether the law means what it says, or means something else completely.

The post Oklahoma Challenges Health Care Tax In Federally-Run Insurance Exchanges appeared first on Show-Me Institute.

In our new report Rich States, Poor States, prepared for the American Legislative Exchange Council, we compare the economic performance of states with no income tax to that of states with high rates. It’s like comparing Hong Kong with Greece or King Kong with fleas.

Every year for the past 40, the states without income taxes had faster output growth (measured on a decadal basis) than the states with the highest income taxes. In 1980, for example, there were 10 zero-income-tax states. Over the decade leading up to 1980, those states grew 32.3 percentage points faster than the 10 states with the highest tax rates. Job growth was also much higher in the zero-tax states. The states with the nine highest income tax rates had no net job growth at all, and seven of those nine managed to lose jobs.

There are many excellent analyses and anecdotes in Rich States, Poor States. From state-specific stats to broader policy discussions, RSPS serves as a fine starting point for assessing our states’ economic health.

But some RSPS history needs to be noted regarding the book’s specific discussion of Missouri’s “economic outlook” (RSPS‘s forward-looking metric). Laffer and Moore’s observations about states without income taxes bears repeating — they have grown significantly in contrast to other income tax-reliant states — but from the perspective of policymakers and legislators here, the view RSPS paints of the Show-Me State is starting to diverge from the book’s own backward-looking “economic performance” metric.

How has Missouri done according to RSPS‘s metrics over the book’s last five editions? Well, the state has risen to seventh from 25th of the 50 states in “economic outlook” over the last five years, even as its actual performance has languished by RSPS‘s standards around 40th (roughly consistent with BEA and BLS statistics).

As the chart shows, the disparity between “where Missouri is going” and “where Missouri has been” has never been greater. I think that is a problem with RSPS‘s “outlook” metric, not the policy Laffer and Moore advocated in the Wall Street Journal. More to the point, the state has continued to flail in growth, arguably in part because the state continues to cling to its income tax and tax credit system, rather than shifting to a more effective, and less destructive, taxing system that does not pick winners and losers and does not penalize income.

Unfortunately, that hugely important point could get clouded when people see Missouri’s “outlook” ranking, which only considers the impact of income taxes as fractional, evenly-weighted components among more than a dozen factors of varying real-life importance. Missourians across the ideological spectrum do not agree on much, but what they certainly do agree on is that Missouri’s economic status quo is unacceptable and is not improving. In substance, Laffer and Moore agree with that assessment, despite what RSPS‘s “outlook” metric suggests.

The pathway to state growth that Laffer and Moore articulate is a clear one; Missouri is lacking only the political will and leadership to take it over the finish line. The outlook for finding that sort of political leadership, unfortunately, is decidedly more mixed, and while it remains mixed, Missouri’s economic performance will continue to suffer.

The post Laffer’s Important Lessons For Growth, And A Note About Missouri appeared first on Show-Me Institute.

Supporters of the exchange claim they will lose their chance to create a Missouri-centric mechanism to provide affordable health coverage to the uninsured. But Missouri lost that chance nearly two years ago, when the federal health bill was signed into law.

The theory of a state-run exchange, designed to navigate and subsidize the purchase of health insurance, is simply that — a theory. Rules that officials in Washington issued to implement the law say that every detail of Missouri’s exchange must have the approval of federal bureaucrats.

And because federal grants and subsidies will flow through state-based exchanges, Washington will always be able to control Missouri’s exchange through ongoing regulation. This “my house, my rules” scenario underscores the new parent-child dynamic occurring between Washington, D.C., and the states, and the Missouri Senate was right to reject the governor’s ability to implement an exchange.

But if Missouri does not set up its own exchange, won’t the federal government do it for the state? The law says yes, but in reality, it is unclear. The Department of Health and Human Services (HHS) is still grappling with recent findings that the law does not technically provide any money to set up a federal exchange, nor does it offer subsidies to people buying insurance in the federal exchange.

Even if the glitches get worked out, it is doubtful that a federal exchange will be up and running by the 2014 deadline. To date, HHS has only doled out $150 million in contracts to build a federal exchange — a system tasked with coordinating the eligibility, subsidies, premiums, and benefits for tens of millions of people who will be forced to purchase health insurance thanks to the individual mandate. That is a tall order.

Meanwhile, we do not know just how much a state-based exchange will actually cost Missouri. The federal government is awarding grants to set up state exchanges, but that money runs out in 2014. Oregon has imposed new taxes on health insurance premiums to fund its exchange once the federal money dries up, and other states are considering similar measures. Indeed, research from the Mercatus Center suggests that every dollar of temporary federal grants leads to 40 cents of state and local tax increases.

Besides, federal money is not free — everyone pays federal, state, and local taxes, and increased federal spending on exchanges means more out of taxpayers’ pockets. In December, the New Hampshire House announced that it will return $333,000 in federal exchange funds to “pay down our national debt, which is a far better use of these funds than building healthcare bureaucracies here.”

Missouri has time to figure out how, or if, it wants to set up a health insurance exchange. Nationally, only 17 states have acted to establish exchanges — and many of those states have made only nominal progress in setting them up. In response, the federal government has delayed implementation timelines, extended grant deadlines, and even offered a “hybrid” model through which states and the federal government can share in exchange governance.

A lot can happen in the next year, with the upcoming Supreme Court decision on the federal health law, the 2012 elections, and the still-unfinished exchange regulations from HHS. Kudos to the Missouri Senate for blocking Gov. Nixon’s rush to act.

Patrick Ishmael is a policy analyst at the Show-Me Institute, which promotes market solutions for Missouri public policy.

Christie Herrera is director of the Health and Human Services Task Force at the American Legislative Exchange Council, a nonpartisan association of conservative state lawmakers.

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At the Show-Me Institute’s policy breakfast on Feb. 8 titled “Rich State, Poor States”, Jonathan Williams of ALEC said people are voting with their feet in this country, and moving to states that have the lowest tax burdens. . . .

“Rich States, Poor States” was the theme of the Show-Me Institute policy breakfast on Feb. 8. Show-Me Institute chief economist Joe Haslag said the data is clear. Missouri is falling behind the country.

The post policy bfast clips appeared first on Show-Me Institute.

Jonathan Williams' PowerPoint

Joseph Haslag's PowerPoint

The Missouri Compromise — An essay on comparative tax rates and economic performance among states by Dr. Arthur Laffer

The post Failing State Experiments: Taxing Their Way Into Poverty appeared first on Show-Me Institute.

Missouri public policy has its problems. Lawmakers have a terrible habit of trying to pick winners and losers in the market, even though they have such a bad track record of doing so. We’re relying on government to make the choices that individuals should be making for themselves in the private sector. Lawmakers are addicted to targeted tax credits and tax-increment financing (TIF) — even though these programs repeatedly fail to deliver on their promises.

Despite this state’s problems, Missourians have a lot to celebrate in public policy. Many great things are going on here. Missouri has fewer occupational license requirements than other states, which means that Missourians are more free to earn a living. Plus, Missouri has low state taxes on booze, cigarettes, and gasoline. It also has the Hancock Amendment, which limits state spending and requires that voters have the final say on tax hikes. (Wouldn’t it be great if the Hancock Amendment existed at the federal level?)

We’re taking many steps in the right direction toward limiting government and protecting individual liberty. For example, Missourians were among the first to oppose the federal takeover of their health care, and we haven’t given up. As another thing I find promising, the Saint Louis Land Reutilization Authority (LRA) is accepting more offers to buy vacant property (thanks largely to the efforts of my colleague Audrey Spalding).

I’m confident that Missouri, and other midwestern states, will be leaders in limiting government and getting the economy back on track. This change will be driven by individuals acting entrepreneurially in the private sector, however — not by the hand of government.

See you later, Show-Me State.

The post Ms. Harbin Goes to Washington appeared first on Show-Me Institute.

As unlikely as it may seem, this middle-aged, middle-income, Midwestern state is pushing the envelope on its way toward fundamental tax reform. […]

[A]lthough Missouri’s revenue replacement could prove difficult politically, the benefits from reform could be enormous if the process is administered well and the constitutional amendment is carefully crafted.

In their discussion, the authors cite Prof. Joseph Haslag and Abhi Sivasailam’s recent Show-Me Institute policy study, “Previous Estimates Overstate ‘Fair Tax’ Rates, Harms,” in the appendix.

Laffer, et al., also include a comparison of Missouri and Tennessee, and they provide evidence that Missouri would experience additional growth if it eliminated its personal income tax. From chapter 2:

During the past 10 years, if Missouri had just caught up with the average of the states with no income tax, the average Missouri resident’s income would be more than $12,000 higher. That is amazing. Taxes really do matter. […]

The evidence is clear: States without an income tax outperform in every conceivable fashion than their higher-taxed brethren and have more tax revenues.

Given the data at hand, it is hard to imagine any more conclusive results from a cross-section time series of states that could be obtained in favor of Missouri’s tax proposal. Like many states in our current economic climate, Missouri needs help, and from the looks of it, a switch from onerous income taxes to broad-based sales taxes is exactly what the doctor ordered.

This echoes what Jenifer Roland and Dave Roland concluded in their 2009 policy study for the Show-Me Institute, “All Caught Up: How Tax Policy May Have Allowed Tennessee to Outgrow Missouri.”

The state snapshot for Missouri contains some good news and bad news. In 2008, Missouri’s personal income per capita cumulative growth is higher than the national average, but the state experienced negative net migration for the first time in a decade. This indicates that, when voting with their feet, people are choosing to locate outside of Missouri. On the 2010 ALEC-Laffer State Competitiveness Index, where 1 is the best and 50 is the worst, Missouri has an economic performance rank of 35 and an economic outlook rank of 15.

The post Missouri and the Show-Me Institute Featured in Rich States Poor States appeared first on Show-Me Institute.

Finally, one attribute for which Missouri is probably most famous is its Gateway Arch in St. Louis. Admittedly, we have a special fondness for this architectural wonder: It’s the world’s largest Laffer Curve!

I hadn’t noticed it before, but it’s true!

Illustration by Christine Harbin. Photo source: Wikipedia.

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But all isn’t well. Missouri’s economic development and growth rates are chronically below average. During the past 10 years, employment has grown 8.8 percent nationally, while Missouri has boosted jobs by only 6 percent. In their study, Laffer, Moore, and Williams provide one explanation for the state’s lagging performance: Missouri’s personal income tax rates.

The post Why a Sales Tax Is Better for Missouri than an Income Tax appeared first on Show-Me Institute.

The “Missouri Plan” amended the state Constitution such that judicial nominations are selected — at least in part — through an independent nominating counsel (generally comprising state American Bar Association-appointed lawyers) instead of by popular election. Today, 26 states have adopted some form of the “Missouri Plan” for their judicial appointments.

The legal benefits of the “Missouri Plan” are debatable. Many studies have examined the impact of such plans on business-friendly legislation (the argument being that judicial nominations appointed by ABA members will be less friendly to issues that might limit the market for lawyers). In fact, in an upcoming policy report, the Show-Me Institute will examine the Missouri Plan in detail. (Stay tuned for the excitement!)

The Federalist Society’s research highlights at least one negative aspect, however. To date, 45 states have addressed education adequacy litigation. According to data gathered by Columbia University, about two-thirds of adequacy decisions in Missouri Plan states strike down the legislatures’ funding statutes. This means that courts have effectively commandeered the power of the purse — something clearly within the proper domain of the legislatures.

In addition, in a joint study by the Institute for Justice and the American Legislative Exchange Council, analysts found that school voucher systems are constitutional in 77 percent of states with popularly elected judiciaries, versus 50 percent in Missouri Plan states.

So I guess this was a long way of me saying that there is evidence that courts are friendlier to the school choice movement in states where judges are elected by the people themselves.

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