A recent report from business resource AdvisorSmith analyzes population data of cities with more than 250,000 residents. With a compound annual growth rate of −1.1 percent, St. Louis tops the list as the fastest-shrinking city. This means that St. Louis City’s population fell by an average of 1.1 percent each year from 2014 to 2019. That’s a huge difference from the fastest-growing cities; Henderson, Nevada, and Irvine, California, both grew by an average of 3.1 percent each year over the same period.

So why is St. Louis shrinking?

It’s probably a combination of many things. High crime   and poor school performance certainly play a part, but there are other problems. Policies that place onerous burdens on businesses and residents can prevent both economic and population growth. The city’s earnings tax means that city residents and workers lose an additional 1 percent of their income to taxes. Numerous special-taxing districts make sales taxes as high as 11.679 percent in some areas of the city. Stringent business regulations make it harder for businesses to operate and hire workers. Does this sound like an attractive place to live, work, or start your business?

Our city continues to make headlines for losing population. If we want to stop this trend and attract residents and businesses to St. Louis, action is needed. Addressing the crime rate and poor schools will be challenging, but other cities such as Indianapolis (with a strong school choice environment, some crime rates trending down, and a growing population) have done so. With respect to taxes and regulatory policy, repeal the earnings tax, cut red tape, and rein in special-taxing districts. With a focused effort on doing the basics well and getting government out of the way of business, St. Louis City might start to grow again.

The post St. Louis Is Shrinking. Let’s Reverse the Trend appeared first on Show-Me Institute.

The Kansas City Star reported that smaller businesses previously considered nonessential will be able to open but,

will have to follow the city’s new rules, dubbed “10-10-10,” for the foreseeable future: They must operate at 10% of their normal capacity or have 10 people in the establishment, whatever is greater. That includes the employees needed to run the business.

Businesses or gathering places with more traffic, such as restaurants, libraries, community centers and gyms, will stick to the May 15 opening date but must also follow the new rules.

The plan also requires that “customers who are in a business for more than 10 minutes will have to register their name and contact information.” The requirement of registering names caused an outcry and on May 5 city leadership reversed the rule, making registration merely a recommendation.

Even without a government mandated collection of names, restaurants cannot operate at 10 percent capacity. The mayor apparently had not consulted with restaurant owners before promulgating the plan. Restaurant owners objected, and on May 11, the Star reported that the city again retreated:

In a notice to its members Sunday night that was obtained by The Star, the Greater Kansas City Restaurant Association said it had worked with Lucas to ensure restaurants were subject to a social-distancing requirement rather than a limit on their capacity.

Under the new rules, tables must be spaced 10 feet apart and/or parties must be seated six feet apart — “as measured from back of chair to back of chair.” Workers and patrons who are exhibiting coronavirus symptoms must be turned away.

Of course, essential—and potentially crowded—businesses such as grocery stores are not subject to any parts of the 10-10-10 rule. And the list of what constitutes an essential business seem pretty broad. In his May 4 proclamation, Mayor Lucas wrote (page 5),  “Essential Businesses’ include, but are not limited to, for-profit, non-profit, and educational entities, regardless of corporate or entity structure, which provide services in,” twenty-three different subcategories. This includes, “xvii. Businesses that supply other essential business with the support or supplies necessary to operate.” That seems like a pretty big loophole.

Any well-meaning business owner can and should be forgiven for running afoul of these Byzantine rules and standards. It doesn’t help that city leaders imposed impossible regulations on some businesses without bothering to consult with them first. If city leaders want their orders adhered to, they should do a better job drafting them.

The post 10! 10. 10? appeared first on Show-Me Institute.

The study, published by ASU’s Center for the Study of Economic Liberty, ranks St. Louis 31 out of 115 cities in North America in regulatory competitiveness. That ranking doesn’t seem half bad, but 31 out of the 66 U.S. cities included in the study isn’t great. Among American cities, St. Louis is just middling.

The table below shows how St. Louis fares in the various categories. St. Louis ranks 12 overall in “Paying Taxes,” but sales taxes are not included in the scoring. Anyone who’s shopped in the city knows how steep the city’s sales taxes are; St. Louis’s ranking would likely be lower if they were included. In addition, “resolving insolvency” is a ranking where all American cities are tied for first place, so not much should be made of that stat in this context.

In two critically important categories, St. Louis is less than impressive, ranking 60 in “Starting a Business” and 47 in “Employing Workers.” These scores incorporate regulatory costs to business owners, including compliance fees for mandatory procedures and wage regulations like overtime requirements and probationary periods. As our low rankings indicate, starting and staffing a business is a costly and onerous process in St. Louis—and that’s not the inviting economic environment that we want.

Policymakers must recognize that all business regulations carry costs for business owners, and St. Louis’s costs are too high. 46 other major U.S. cities have found less costly ways to meet their public policy objectives for employing workers. And St. Louis was outranked by cities in the U.S., Canada, and Mexico when it came to ease of starting a business!

All this suggests that St. Louis has a lot of room for improvement when it comes to business regulations. Policy changes like lowering licensing requirements, taxes, or procedural costs are just a few things that may get St. Louis a better ranking. Without reform, St. Louis will continue to be mired in mediocrity.

The post St. Louis Ranks Poorly in Ease of Doing Business Study appeared first on Show-Me Institute.

First, it’s worth recalling that in 2018 the National Bureau of Economic Research (NBER) demonstrated how tax rates affect innovation. Looking at state-level taxation dating back to the early twentieth century, the NBER concluded, “A one percentage point higher tax rate at the individual level decreases the likelihood of having a patent in the next 3 years by 0.63 percentage points.” Specifically, they found that, “higher personal and corporate income taxes negatively affect the quantity, quality, and location of inventive activity at the macro and micro levels.” This should not surprise anyone; resources that might be put toward innovation can’t be used for that purpose if they are spent paying taxes.

The new study from Arizona State University, titled “Doing Business: North America“ looked at 115 cities in the United States, Canada, and Mexico and rated them in six different categories. Those were “starting a business,” “employing workers,” “getting electricity,” “registering property,” “paying taxes,” and “resolving insolvency.” (All U.S. cities tied for first place regarding insolvency.)

While St. Louis ranked 31st overall out of the 115 cities in Canada, the United States, and Mexico (no other Missouri cities were included in the study; Chicago scored 45th overall), the areas where it scored less impressively—starting a business and employing workers—feature significantly in attracting entrepreneurs and innovation.

St. Louis scored 60th on “starting a business” (46th among U.S. cities). This ranking resulted from a “study of laws, regulations, and publicly available information on business entry,” along with consideration of the time and cost of complying with applicable regulations.

Regarding “employing workers,” St. Louis ranked 47th both for the whole sample and among the 66 U.S. cities examined. This ranking was more involved and is described on page 177 of the report, but it reflects the cost of wages and wage regulations such as probationary periods, overtime requirements, and sick leave.

Policymakers can debate the value of local and state mandates and regulations associated with starting a maintaining a business, but all should acknowledge that each one imposes a cost on the employer. Forty-six other U.S. cities have formulated less costly ways to meet their public policy objectives when it comes to employing workers. And St. Louis was outranked by cities in in all three countries examined when it came to ease of starting a business!

All this suggests that when working toward the important goal of taking advantage of St. Louis’ “innovation districts” in the agri-tech, biomedical and technology fields, city government could do a lot more to help entrepreneurs take advantage of what the city may already offer.

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The Tax Foundation’s rankings are a composite based on each state’s corporate, individual income, sales, property, and unemployment insurance taxes. Missouri ranks in the top ten for three of the taxes (corporate, unemployment insurance, and property), but 25^th for the remaining two (individual income and sales).

Despite the generally favorable ranking of Missouri’s tax climate from the Tax Foundation, the state’s economic growth continues to lag. In 2017, Missouri was ranked 37th among states with a paltry 1.1 percent real Gross State Product (GSP) growth rate, while the average growth over the previous ten years is even worse at only 0.48 percent. The tax climate is certainly not the only contributor to economic growth, but the difference in state rankings raises the question of whether the Tax Foundation’s index may be missing something.

To evaluate the applicability of the ranking results to Missouri, it is helpful to consider what makes a business climate attractive to new businesses, and whether the index attempted to capture those criteria. Studies show the main determinants of business climate are the tax and regulatory burdens each business must bear. From the outset, the Tax Foundation index does not measure regulatory burden, and also excludes most local taxes from their calculations. If the Index is missing several important components, should the state’s Department of Economic Development be touting the results?

The Tax Foundation’s rankings offer valuable information about Missouri’s business tax climate, but should not necessarily be the basis for future policymaking. If lawmakers are serious about improving Missouri’s business climate, reducing the regulatory burden and reforming local taxes should be part of the discussion.

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Bathhouses, detective agencies, and pool rooms.

Horse-drawn vehicles, junk dealers, cattle dealers, and street railways.

Vault cleaners.

Sound like the backdrop of a novel set at the turn of the century, or maybe the establishing shots of the newest period drama on HBO? How about Saint Louis City’s business regulations? All of those business models of yesteryear, along with many others, are part of the city’s antiquated regulatory code.

Unfortunately for Saint Louis, the city’s ordinances are almost comically outdated, concerned with protecting the public from businesses that no longer exist or are no longer considered dangerous to the public peace. Does anyone think that we should still require public petitions to set up a pool hall or open a tattoo shop? Should a transient photographer still have to apply for a specific license? Is it necessary that city officials should have, from the front door, an unobstructed view of the back wall of an arcade? Most residents would laugh at these laws, but they are laws. And the fun and games end when real people are prevented from starting businesses because the city has not reformed its licensing rules for decades.

The good news is that a much-needed overhaul of the business code may finally happen. A bill before the Board of Aldermen, BB 110, would eliminate or significantly alter specific license and operating requirements for more than 40 types of businesses, reportedly reducing the total length of the city’s business code by 75 percent. Much of the streamlining comes from eliminating regulations on business models that barely exist in the city anymore, like bathhouses, street railways, and motor carrier transportation brokers. However, some of the changes would eliminate outdated and ill-conceived regulations on a variety of businesses that still exist, including photographers, real estate agents, and massage therapists. For example, barbers would be able to stay open past 6:30 p.m. and work on Thanksgiving, if they so wished. Bed and breakfasts, pool halls, and tattoo parlors would no longer need neighborhood consent to open up shop.

Two related bills before the Board of Aldermen, BB 108 and 109, would supplement the reforms in BB 110 by making it easier to open a small business. Currently, registering a business with two or fewer employees costs $200 annually. Under BB 108 and 109, micro-businesses or home occupation operators would only have to pay a $25 fee. That could make Saint Louis a more attractive place for start-ups with shallow pockets.

While the proposed reforms to the city’s code represent progress, policymakers could go further. For example, the bills would not eliminate dated regulations that govern alarm businesses, brick dealers, laundry/dry cleaning, and pawn shops, among others. The city could also benefit if the business code were reworked to have a permissive attitude toward licensing—an attitude where, instead of a new company having to jump through hoops to start up, officials would have to jump through hoops to shut it down.

Saint Louis City’s greatest concern should not be how new business activity is controlled, but rather that there is too little activity to start with. While the proposed reforms go a long way toward updating the city’s regulations, there’s more that can be done to make it easier to invest in the city, whether that investment is a restaurant or a bed and breakfast or a private bus route. Or even a miniature pony track.

The post Modernize Saint Louis’ Outdated Business Code appeared first on Show-Me Institute.

When entrepreneurs are asked what Saint Louis can do to make itself more competitive, they often point out that navigating city regulations and obtaining business licenses is time consuming and expensive. Too often, start-ups with little capital don’t know what they need to do to start a business and ultimately face regulatory “surprises.” Making regulations understandable and affordable for entrepreneurs can make Saint Louis a place where more businesses set up and survive.

How outdated is Saint Louis’ existing code? As an example, let’s look at the city’s public petition requirements for new business licenses. In Saint Louis, attempting to set up certain types of stores, regardless of zoning, requires the majority consent of local property owners. These “petition requirements” exist to protect neighborhoods from businesses that might be nuisances. These types of businesses include: arcades, billiards and pool rooms, tattoo parlors, bed and breakfasts, pawnshops, museums, junk shops, auction places, shows, theaters, dance halls, exhibitions, used goods stores, retail liquor stores, and (my personal favorite) intelligence offices.

The first thing to point out is that this list of nuisance-creating establishments looks like it was written by the Music Man. Pool halls, arcades, and used goods stores do not seem like businesses that should require majority community approval. As for intelligence offices, that’s not referring to the National Geospatial Intelligence Agency; it’s actually an antiquated way of referring to head hunting offices or temp agencies. It’s not good for business when the city’s code is so outdated that it not only solves problems that no longer exist, but is simply difficult to understand.

Aside from being written for a different time, the very principle of petition requirements harms business formation. City zoning and nuisance ordinances already make it difficult to keep a truly community-damaging operation open. But instead of taking a hands-off approach and solving problems when they crop up, city regulations are attempts to preemptively control start-ups. In doing so, they make the city a less attractive place to set up shop.

Some city leaders finally appear ready to take a more market-friendly regulatory approach. That’s good news for Saint Louis.

The post Saint Louis City Hall Getting Serious About Reducing Regulation appeared first on Show-Me Institute.

Kansas was viewed favorably for its support of small business, improving upon last year’s A- ranking. The state graded well for the ease of starting a business, especially its regulatory systems.

Missouri slipped slightly in 2013 after earning a B- a year ago. That decline can be attributed partly to issues with licensing and permitting requirements.

You can find an interactive map that looks at all the aspects the survey examined — including regulations, health and safety, licensing, and more — here. As with any index, all of the survey’s findings have to be put in the proper context: survey methodologies, assumptions, and objectives do matter, so your mileage may vary on whether you think Thumbtack.com and the Kauffman Foundation are balancing their factors credibly. In that context, I think it is still worthwhile to highlight their topline results, visually represented in the screenshot below and available on Thumbtack’s website.

That Midwestern section sure looks like the kind of growth corridor I have discussed in the past, but unfortunately, Missouri sticks out like a sore thumb on the map. The question is, will Missouri be a part of this growth corridor? Will Missouri go the way of Kansas . . . or of Illinois?

The post Small Business Friendliness Survey: Kansas Gets ‘A,’ Missouri Gets ‘C,’ Illinois Gets ‘D’ appeared first on Show-Me Institute.

At first, I thought this legislation was a bad idea. After all, it will certainly make it more expensive to operate a food truck. The bill would require every food truck (and restaurants and warehouses that store food truck supplies) to pay $100 each year to the Missouri Department of Health and Senior Services.

Costs associated with complying with the proposed licensing law could result in some food trucks closing or increasing their prices. Some would-be food truck entrepreneurs may even be discouraged from ever trying to open a food truck company in Missouri.

This law would also require food truck operators to list, on their applications, the location of all warehouses or restaurants that supply their food and where they repair and store their food trucks. Perhaps some restaurant owners or food truck operators who have the right connections could get a sense of how best to undercut their competition with this information.

Food truck operators would even have to make sure that records of the “specific locations of the specific itineraries” for the food trucks are readily available for inspection. Could food trucks that announce their lunchtime locations, like @PiTruckSTL, @falafelwich, and @whereschacha, submit those tweets as the required “itineraries”?

This law does sound bad for food trucks.

But, then I read the provisions of the food truck law that require inspections. Did you know that food trucks would have to provide “samples of food, drink, and other substances…as often as may be necessary” to inspectors to determine if the food is “unwholesome?” Or, that inspectors would be granted “access…to the interior of all mobile food units…at such times as the department considers necessary?”

Department inspectors could have access to Pi Pizza, Falafelwich, Cha Cha Tacos, and a litany other of food trucks as often as “necessary.” They might be able to participate in ridealongs if they demand to have access to the interior of a food truck while it drives.

You know, this legislation does not sound so bad. Where do I sign up to be an inspector?

By the way, check out our video about city regulation of food trucks.

The post The Food Truck Stops Here appeared first on Show-Me Institute.

Kansas City officials deserve credit for wanting to update and revamp the city’s business and occupational licensing system. Economic activity benefits the city whenever it occurs, whether directly or indirectly. Many of the changes proposed here will positively benefit Kansas City’s economy by simplifying many parts of the system.

Related Links

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