There has been a lot of talk from legislators and others about how tax subsidies are an important policy tool that states can use to keep jobs within their boundaries. In recent weeks, both AMC Theaters and Jack Stack Barbeque made news because the companies moved from Kansas City, Mo., to nearby locations in the state of Kansas.

Previously, Missouri’s Department of Economic Development (DED) used the promise of more than $12.5 million in tax credits to lure the corporate headquarters of Applebee’s across state lines into Missouri.

But to what end? Jobs in the region are down, and the loss is nearly the worst in the country.

I was curious to see how the Missouri and Kansas bidding war fit within the job loss news. So, I looked at the Kansas City core metropolitan statistical area (the area that lost more than 12,000 jobs). I then checked the three companies that made news when they moved across state lines to see from where they moved and where they relocated. These three companies’ relocations resulted in elected officials calling for the use of tax incentives to lure companies from one state to another.

Jack Stack Barbeque: The company is located in downtown Kansas City, Mo., and announced plans to move just across the state line to Overland Park, Kan. It is not clear whether tax incentives will be awarded to the company. Both locations are in the Kansas City metro area.

AMC Theaters: The company announced that it was moving from downtown Kansas City, Mo., to Leawood, Kan., also just a short few miles. The state of Kansas reportedly offered about $47 million in tax incentives, or more than $100,000 for each job. Both locations are in the Kansas City metro area.

Applebee’s: The company moved its headquarters from Lenexa, Kan., to Kansas City, Mo., just across state lines. The state of Missouri offered about $12.5 million in tax incentives, or about $35,000 per job. Both locations are in the Kansas City metro area.

In the grand scheme of things, all of the taxpayer money used to lure one company or another a few miles doesn’t really matter when it comes to the health of the region. The Kansas City metro area still lost more than 12,000 jobs, including those jobs that moved across state lines. Moving companies a short distance merely rearranges the deck chairs, it doesn’t accomplish anything productive.

In fact, given the administrative costs of running tax incentive programs, the Kansas City metropolitan area actually loses when the states attempt to lure companies away. We take tax dollars from the private sector to give to bureaucrats in the public sector whose job it is to figure out (i.e., use discredited economic modeling to guess at) which companies to attempt to lure across state lines. The money certainly could be put to better use, especially in light of some of the DED’s recent failures.

It’s time to stop playing petty economic development games and work instead on implementing public policies that have been shown to encourage economic growth, rather than shuffle it around.

I know it’s September, but a good place for us to start would be the list of New Year’s Resolutions for Missouri Public Policy that Policy Analyst Christine Harbin put together last year. Maybe there’s still some time to get started.

The post A Race to the Bottom appeared first on Show-Me Institute.

Given the large crowds that form around these trucks, they seem to be a hit, but apparently this is not the case for everyone. This week, police have cracked down on food trucks in the area — allegedly in response to a complaint.

A regulation in the city code forbids street vending within the Central West End, but until recently the restriction had not been enforced. Earlier this week, officers and inspectors issued warnings to multiple food trucks asking them to leave the area or face fines for violating vending regulations.

Christine Harbin, a former SMI policy analyst, wrote numerous times on these restrictions on private enterprise. First spotting food trucks in the Central West End back in March, she later followed up on the issue in a video interviewing both food truck owners and their customers. The verdict is still clear: there exists a strong consumer demand for these food trucks. Why should government inhibit healthy competition and growth of consumer choices?

Some people worry about the safety and health concerns associated with food trucks, but like any other restaurant or food provider, they must undergo government health and safety inspections to obtain permits for legally selling their goods.

Another common concern is the potential increase in street congestion. In Dr. Donald Shoup’s book, The High Cost of Free Parking, he explains the best way to manage street traffic is to introduce market determined parking fees.  Parking is not a free good, and should not be treated as one. Busy streets with more traffic and higher demand would have higher parking fees, while quiet less crowded streets with lower demand would cost less. This would force food trucks to internalize the externality of over consuming street parking.  If the trucks wanted prime location they would have to pay extra for it.

These trucks may be “technically illegal” in the area, but clearly there is a demand here that the government is barring. Originally, the downtown area had this same restriction, but now it benefits from many popular street vendors and food trucks. Why should the Central West End or any other area be treated differently?

Consumers would benefit if this restrictive ordinance was repealed throughout St. Louis, allowing their preferences — not the preferences of bureaucrats — to dictate food trucks’ placement and success.

To follow this issue further, watch Christine’s other video on the subject in which food truck owner Jeff Pupillo and a number of customers weigh in on food trucks and the unwanted competition they provide for some local restaurants.

The post Local Government Strikes Down Yet Another Tasty Innovation appeared first on Show-Me Institute.

The post David Stokes on KMOX Radio Tomorrow Morning With Hancock and Kelley appeared first on Show-Me Institute.

The post Tune In to Charlie Brennan at 10:00 a.m. appeared first on Show-Me Institute.

A set of subsidies for the construction of warehouses around the Lambert–St. Louis International Airport are now buried about halfway through this lengthy tax credit bill. If you’re an avid reader of Show-Me Daily, you already know that Christine Harbin and I have highlighted these subsidies extensively.

After all, it doesn’t seem to make much sense to award hundreds of millions of dollars to subsidize warehouse construction in the hopes of attracting increased international trade — without a comprehensive study demonstrating that more warehouses could help the state economy.

I don’t want to rehash all that. Instead, I want to detail the changes made to the “Aerotropolis” legislation. To summarize: The bill is more about subsidizing construction near the Saint Louis airport than attracting international trade.

The Good: Reduced Costs

• The cost to taxpayers has been reduced by $120 million. The old legislation would have awarded $120 million in tax credits to reimburse warehouse owners for a majority of the interest costs on their debt. That has been completely stripped out of the new legislation.
• Special tax exemptions for companies operating within a warehouse have been removed. If the old version of the Aerotropolis legislation had passed, companies operating within the already subsidized warehouses would have been exempt from state income tax and corporation franchise tax. Those are no longer in the legislation. I took particular issue with those exemptions because there was no limit imposed. Who could know how much revenue the state would forgo? Don’t get me wrong, lower taxes are definitely a way to encourage economic growth, but the legislature needs to lower taxes for all Missourians, not just the favored few (in this case, companies operating out of subsidized warehouses near the Saint Louis airport).
• The legislation no longer has a provision that would allow employers to keep the state income taxes withheld from employee paychecks. Thank goodness. The proposed legislation didn’t limit this amount, and the fiscal note didn’t estimate how much revenue the state would lose as a result. Additionally, this particular provision within the Aerotropolis bill seemed to match up with state tax increment financing (TIF) that had already been awarded to the Lambert Eastern Perimeter Redevelopment Project in 2006, meaning that development in this area is already subsidized.
• The Aerotropolis legislation awards $300 million in tax credits to developers and owners of warehouses. Under the original legislation, owners could receive partial reimbursement for their closing costs, brokerage fees, attorney fees, and maintenance costs of a property before actually building a cargo warehouse. With the new legislation, those costs are not eligible for state reimbursement. Only the costs of construction and demolition are now eligible.

The Bad: Lower Standards

• Originally, for an owner of a warehouse to get tax credits, the warehouse had to have a certain level of international shipping activity. The new legislation drastically reduces how much international cargo activity that a warehouse owner must process in order to be eligible for state tax credits. According to this version of the bill, a warehouse could be eligible for state subsidy if as little as 10 percent of its operations consisted of sending cargo to international destinations. And remember, legislators used the prospect of increased international trade to justify handing out hundreds of millions of dollars in taxpayer money. Is this legislation really just an effort to have the state subsidize the poorly managed city airport, which is currently carrying about $900 million in debt?
• The new legislation exempts warehouse companies and employees from the Saint Louis earnings tax. The state tax exemptions were eliminated from the earlier draft, and the city tax exemption was added. Again, it’s true that lower taxes encourage more economic growth, but why award that exemption only to a politically favored few? And wasn’t the city saying only a month ago that losing earnings tax revenue would result in a loss of city services?

The Ugly: Subtle Admission That Increased International Trade Is Unlikely

• The new legislation would award even more in state tax credits for each international export flight. In some cases, the increase is as high as 25 percent. The cap on those air export tax credits is still $60 million. Why would legislators increase the payout per flight but keep the cap the same? The only reason I can think of is that they think there won’t be enough export flights to hit the tax credit cap. This all goes back to my concern that there isn’t a firm commitment in place from any international company that, if more warehouses are built, there will be more international cargo flights traveling to and from Missouri.
• The new legislation would award more in state tax credits for warehouse construction. Again, the cap on the warehouse tax credits stayed the same, at $300 million. But the percentage of warehouse construction costs that the state will reimburse has increased in the new legislation. Is this an admission that fewer warehouses will be built?

There you have it. Although revisions to this legislation lowered some costs, the new bill reduces requirements to get state subsidies, and lowers the amount of “new activity” needed to hit the $360 million tax credit cap. Based on the changes made to the “Aerotropolis” subsidies, I would suggest a new name. How about “Lambert Warehouse Tax Credits”?

The post Changes to the “Aerotropolis” Legislation: A Critical Review appeared first on Show-Me Institute.

(As you will see in the video of our testimony, which will be posted soon on Show-Me Daily, the committee members seemed aggravated by our presence and offended by the questions that Christine and I raised.)

Our testimony yesterday came down to a single concern: Why award $480 million in tax credits (and more) if tax credit programs in Missouri have a poor track record?

There are some indications that this particular proposal may be at greater risk of failure than other tax credit programs. It was proposed without any sort of study of the costs and benefits associated with this project. A closer read of the legislation also reveals many hidden costs above and beyond $480 million. There isn’t any protection for taxpayers if the hoped-for increase in air traffic does not materialize. Furthermore, part of the proposed legislative language takes care to account for other subsidies awarded in 2006, meaning that, at minimum, the area is already subsidized.

None of the facts Christine and I presented were disputed — the only argument was whether this proposal would cost taxpayers money. But tax credits are an actual cost to taxpaying Missourians, as we have explained before.

So, what safeguards do legislators say are in place for taxpayers? The line repeated during yesterday’s hearing was that the the tax credits won’t be awarded without an extensive review process, and that the award of taxpayer money will be spread out over a period of 15 years.

However, given human ingenuity, it certainly is possible that creative entities might find a way to receive more from the Aerotropolis subsidies than legislators think possible.

Just last week, the St. Louis Post-Dispatch reported that less than six months after Liberty Mutual was scheduled to receive $1.6 million in state tax credits, 45 employees were told that their positions had been eliminated. Those employees were invited to apply for new lower-paying positions.

From the Post-Dispatch:

Under the terms of the Missouri Quality Jobs program, Liberty Mutual will still qualify for the tax credits if, within 24 months of its agreement with the state, the insurer has added 100 “net new jobs” to its payroll at a salary equal to or exceeding the prevailing average wage in St. Louis County — $48,291.

The Liberty Mutual case illustrates that even the best-intentioned legislation can have unintended consequences.

Frankly, I appreciate that the Aerotropolis bill includes an attempt to slow the expenditure of tax credits, and proposes a review process. But hoping for an outcome does not guarantee it. It is almost impossible to account for every last detail. Giving away millions in taxpayer money each year certainly creates an incentive for recipients to meet state-imposed benchmarks with the least amount of effort.

The post Ms. Harbin and Ms. Spalding Go to Jeff City appeared first on Show-Me Institute.

Please tune in to AM 550 in St. Louis or listen live online!

The post Audrey Spalding and Christine Harbin Talk China Hub Tomorrow Morning appeared first on Show-Me Institute.

Of course, this news came out after the state awarded the company $2 million in state tax credits and other subsidies and after Gov. Jay Nixon traveled to Cape Girardeau to promote the project.

From the AP:

Nixon spokesman Sam Murphey said Friday that the governor’s office was unaware of Dickerson’s criminal probation before Nixon traveled to Cape Girardeau last week for the news conference with Dickerson and other local officials to announce the state aid. At the time, Nixon, a Democrat, described the project as “wonderful news for Cape Girardeau’s downtown and the overall economy of this region.”

I hope the governor isn’t surprised. Former felons are surprisingly frequently awarded state credits. And in Missouri, the state Department of Economic Development is known for mis-recording numbers provided by tax credit recipients (those mistakes result in an overstatement of a tax credit program’s success).

Even better for dishonest (or careless) individuals and companies, the department will correct a tax credit application (even working during the holidays) if you happen to substantially overstate the amount of money the state should pay you. After all, there’s no state law that specifically prohibits fraud in tax credit applications, right?

This lack of oversight will tend to attract individuals excited by the prospect of money that can be obtained by making promises — with little to no obligation to deliver on those promises.

This is the problem of government subsidy for “economic development.” Not only are such tax credits and other subsidies generally awarded to the least successful businesses, and not only are these subsidies usually extraordinarily bad at producing tangible benefits remotely worth the taxpayer cost, but if government officials aren’t even bothering to do the basic legwork it takes to discover whether an applicant has a record of fraud, how can tax credit programs be anything other than an excuse for press conferences to announce “jobs” that likely will never materialize?

From the Southeast Missourian:

Mayor Harry Rediger said he was not aware of Dickerson’s criminal past until earlier this week and that Dickerson had been upfront with city officials, telling them he had personal financial problems in the past.

“We knew earlier on that he had a previous bankruptcy. We did not know about a probation,” Rediger said Friday.

He had a bankruptcy? That wasn’t enough to spend a little more time and care reviewing the tax credit application? Is that type of past really the kind that should be glossed over when awarding state money?

Rediger continues:

“We are not really concerned about his past record. What we are concerned about is that he and his entity meet the state standards required to receive this funding.”

Of course. With such stalwart watchdogs over taxpayer money, who needs theft, waste, or corruption? I know I am not the only Missouri taxpayer upset that the state spends money so carelessly. When the legislature reconvenes in January, I hope that legislators consider the bad track record of state credits in general and the recent failings of Missouri’s administering of tax credits specifically.

The post Surprise! Freely Given Away Taxpayer Money Attracts Criminals appeared first on Show-Me Institute.

I countered with the idea that when analyzing the effect of taxes at the margin, we must consider that, although sales taxes push consumption into other states, income taxes reduce production. It is also true that income taxes will push some production into other states, but for people near the border it’s easier to keep your job and change the state in which you shop. Holland responded to this with a highly unexpected comment: “I [believe] that higher income taxes cause people to work more in order to secure more take-home pay. This would increase production.” He went on to say, in a later comment:

On the income tax question, think through the following thought experiment. You are earning a certain income, with certain tax deductions and therefore a certain take home pay. From that take home pay, you have developed a certain spending pattern. Now your taxes go up. You can either reduce your standard of living, borrow money or earn more income. One thing you would prefer is to earn more income, and that means more work and therefore more productivity in society.
At some point. of course, the extra work won’t be worth it–but I would bet that is when you hit 80 per cent or so. In any event, not many people would work less, even the well off who are basically type A people to begin with

The idea that people will work more when their take-home pay is reduced is obvious at face value, but begs for analysis, because it falls apart on deeper examination.

The work that anyone does — the thinking, lifting, moving, and showing up — are the price that you pay in exchange for something you want: your paycheck. Workers then use their paychecks to get things they want or things they need, always aware of their limited resources: time and money. To suppose that someone will work longer hours when their wage is reduced is analogous to saying that people will buy the same number of potatoes when the price of potatoes rises. It will be true for some, and not true for others. Very important in this analysis is the idea that leisure time has value. When you work, you get value from the wages your receive; when you are not working, your time is your own to spend in a way that allows you to get the most enjoyment out of it that you can.*

If somebody has the option of working 41 hours instead of 40, and they earn $10 per hour, they must consider that extra $10 worth giving up their time to work that 41st hour, rather than going home to do chores, say, or spend time with friends or family. If the employer is willing to pay that amount for that much work, it reflects that the employer is getting at least that much value out of the worker’s efforts, and the worker can thus make the decision to work or not to work. At the margin, things are efficient in this scenario. Workers work until their leisure-time value exceeds their work-time value, and no more.

Now let us introduce an income tax. If suddenly each worker’s take-home pay is reduced by 5 percent, should we assume that everyone will work more to make up the difference? If you have the choice between working an extra half day at work every week, in order to make up the lost money, or reducing consumption instead — for instance, by staying home instead of going out one weekend per month — many people will choose to spend less rather than work more. In fact, the reduction in pay will likely make many people work less than they did before, because the relative value of their free time has increased in comparison to their new, lower net wages.

It would be wonderful from a benevolent planner’s perspective if every income tax increase led to a commensurate increase in productivity, but this is not the case — and, indeed, it would be lamentable if it were. We are fortunate that we live instead in a world where people can work fewer hours for more money as time goes on. The contention that people will work more hours if their pay is cut is, in economic terms, an argument that the supply of labor is inelastic — that is, that a decrease in the price for labor will result in very little decrease in the quantity of labor supplied. Different types of labor have different elasticities, and different people at different times have different levels of willingness to sell their labor at different prices.

One last point: Holland brought up the idea of taxing wages instead of sales in response to the idea, often repeated by our scholars, that Missouri would experience faster economic growth if it were to replace its state income tax with a broad-based, revenue-neutral sales tax. For the reasons I have just said, income taxes are problematic, but there’s one other reason that Missouri should prefer sales as a source of revenue: volatility. Any responsible state budget must account for the volatility of revenue streams. If your revenue in a given year is half of what it was in the previous year, budgeting becomes very difficult. The relative stability of sales taxes, compared to income taxes, is one of the best reasons to prefer them for state revenue.

* A slightly more technical point about the value of leisure time: Everybody can spend their time in two broad ways — working or taking leisure. We assume that people derive some utility from their leisure and some utility from the money that they receive for working. If their pay is cut, the relative value of their leisure hours goes up, subject to diminishing returns. Therefore, for many people, we can expect that they will work less when their pay is reduced.

The post “We Need You to Work on Saturday, So We Cut Your Pay” appeared first on Show-Me Institute.

But did you know that there is an entire journal devoted to explaining what tax credits are and how to get them? And, yes, you can subscribe to the print version.

The existence of this journal makes sense. After all, if governments are giving away relatively easy-to-obtain public money, we would expect businesses to crop up in order to make a profit by helping others access taxpayer money. This journal, and all the other companies and websites dedicated to encouraging others to apply for public tax incentives are illustrative of the strange activity that is a byproduct of government-manufactured incentives.

(special thanks to Christine Harbin for suggesting that I shamelessly copy Tyler Cowen.)

The post Fake Markets in Everything appeared first on Show-Me Institute.

Tightening restrictions in Missouri gives an automatic boost to the strip club industries along Missouri’s borders, which in some cases may be even more unsavory. Closing the Missouri clubs earlier than in other states will also unwittingly create more post-midnight (including cross-river) traffic — a public safety concern that effects more people than the clubs’ patrons.

Well-intentioned measures frequently have unintended consequences.

Consider Springfield’s proposal to ban smoking in workplaces. Most workplaces are smoke-free by choice, but some businesses — like cigar bars and hookah lounges — are built around smoking customers. Although it’s likely that the ordinance will make some exceptions, those exceptions themselves create a tilted playing field for competition.

If you don’t like strip clubs and smoking (and I certainly do not), the simplest solution is not to smoke and not to patronize strip clubs or smoky bars. This an example of how the over-regulation of an industry potentially creates conditions favorable to further problems — while solving none of those it was intended to solve — and, in the process, harming the livelihoods of people who have elected to work in affected industries (after all, erotic dancers need to eat, too).

The fairest (and most effective) way to kill an unsavory business remains not to patronize it.

The post The Smoke-Free Cigar Bar and the Fully Clothed Revue appeared first on Show-Me Institute.

IBM could bring $4.3 M to schools, slow budget cuts

In the article, reporter Molly Harbarger writes that at a press conference, Columbia’s mayor claimed that the new service center could bring in an additional $4.3 million in tax revenue for the Columbia Public School District during the next decade. District Superintendent Chris Belcher said that would amount to about $400,000 of extra income for the district per year.

Yet the school district, the city, and the state are forgoing large amounts of tax revenue to bring IBM to Columbia — that’s what this $31 million incentive package represents. To say that the school district will see its property tax revenues increase as a result of this project is, at the very least, to rely on uncertain and disputed methods to calculate the economic benefit of a new development.

As research analyst Christine Harbin wrote on Monday, the total $31 million price tag is actually an understatement of all the incentives awarded to IBM. Because the city owns the property where IBM will locate its service center (and will be leasing it to IBM for only $1 per year), the company will not have to pay property taxes on that property. In Harbin’s words, “this is a bigger subsidy than the $3 million the city paid for the building.” Furthermore, she noted, the $31 million does not include the sales tax exemption on personal property or the 50-percent property tax abatement on personal property awarded by Boone County.

So, at this point, there is no additional money going to the school district. After all, the city owns the building in which IBM will locate. Because the city will be leasing the property to IBM for the next 10 years, any improvements to the building will not bring additional tax revenue to the school district. In fact, it is a likely bet that some other company would have bought that building in the future, which means that the school district is not simply forgoing additional tax revenues, it is also missing out on the future property tax revenues that another, unsubsidized, company would have paid.

So, where exactly did the projected $431,000 in additional revenues for the district come from? The Missourian article doesn’t say. A quick search of Columbia’s website reveals a presentation from Regional Economic Development, Inc., about the purported benefits of the project, including the $431,000 figure — but no supporting research or background about how REDI came to that number is included.

In fact, as the Columbia Tribune reported, some government officials have suggested that the approval process for the IBM service center was less than transparent. Former city council member Karl Skala told Tribune reporter Jodi Jackson that “he was critical of Regional Economic Development Inc. for not providing more information to the Columbia City Council earlier in the economic recruitment process.”

I am skeptical of the claims made by Columbia’s mayor and district superintendent about the increase in property tax revenues. If nothing else, the school district cannot expect those benefits to accrue immediately. Had IBM itself paid for the building, the school district would have seen an immediate increase in its property tax revenues, to the tune of about $47,000.* Instead, the district appears to be banking on revenues that have yet to materialize — and probably won’t for a number of years, if at all.

In fact, most subsidized projects such as this fail to deliver on the promised economic activity. The Mackinac Center for Public Policy, a nonprofit think tank in Michigan, reported, after conducting an extensive survey and review of Michigan’s tax credits, that of 127 incentive packages awarded by the state, only 10 actually created the number of jobs initially promised within the expected time frame. That comes to less than 8 percent of projects that actually delivered the total number of jobs that had initially been pledged.

If projects supported by tax credits do such a poor job of delivering on job creation, we can likely expect similar errors to be made in the estimates of increased property tax revenue. There is a good chance that neither a total of 800 new jobs nor the additional tax revenue will come to fruition.

In short, the claimed future benefits of this project are promises, and nothing more.

* The $47,000 figure is based on the price that Columbia paid for the property. The purchase price of a property is not a perfect estimate of the appraised value of a piece of commercial property, but it is a good place to start.

The post I Take Your Bank Before I Pay You Out 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.

The post Saint Louis: Home of the World’s Largest Laffer Curve appeared first on Show-Me Institute.

As if enough taxpayer money weren’t already going toward banks!

The expenditure for all of Missouri’s government agencies combined increased from $381,553.98 in 2008 to $2,047,457.28 in 2009, which represents an increase of 436.61 percent.

The breakdown between agencies is particularly puzzling. In 2009, the Department of Conservation in Missouri paid $1,818,208 in credit card fees. This represents an increase of 1,141.25 percent from 2008’s expenditure. It dwarfs the amount of credit card fees that the secretary of the state’s office and the Department of Natural Resources paid, which was $183,894 and $30,854, respectively. The amount paid in credit card fees by the other agencies combined was $14,501, which is nevertheless $14,501 too much.

Total of Spending on Credit Card Fees by Agency (in 1,000s)

When I look at the trend of this information over time, I am speechless. What is going on here?

Trend of Spending on Credit Card Fees by Agency (in 1,000s)

I discovered a similarly disturbing trend when I looked at the amount of Late Payment Penalty Charges by government agency. The public safety department spent $17,494.22 in 2009, which represents an increase of 43,168 percent over the previous year! The total for all Missouri government agencies in this category increased from $327,432.60 to $17,940,490 during this period, which is an increase of 5,379 percent.

Total Spending on Late Payment Penalty Charges by Agency (in 1,000s)

In my opinion, this is the quintessential example of government waste and fiscal irresponsibility. The amount of money that the government spends on things like credit card fees and late payment penalty charges should be zero. This figure doesn’t include the amount of products and services that these government agencies purchased. It also doesn’t include the amount of interest that they were charged. This number consists solely of the extra fees that were incurred on government credit cards. Can any of our blog readers explain the dramatic increase in either of these numbers? I’m really interested to know.

I discovered this information while playing with the Show-Me Institute’s recently-launched web tool, “Show-Me: The Spending.” I encourage our blog readers to play with the site and see what else they can uncover related to Missouri’s government spending.

The post Government Agencies in Missouri Spent $2,047,457.28 on Credit Card Fees and $17,940.49 on Late Payment Penalty Charges During 2009 appeared first on Show-Me Institute.

The Post-Dispatch editorial used a loaded term, “public safety tax,” to describe the earnings tax, not because it pays for the Metropolitan Police Department — it doesn’t — but because its revenue is coincidentally equal to the Police Department’s budget. This is not the first time the Post-Dispatch has taken a contrary position regarding the earnings tax than Show-Me Institute writers, though it has toned down its rhetoric since August. The new article discusses a need for a replacement tax for the earnings tax revenue, neglecting to mention that the Show-Me Institute has suggested a replacement: the land tax.

Specifically, Show-Me Institute publications have suggested a two-tiered land tax that would impose separate taxes on property and buildings. Land is fixed in quantity, so this would encourage long-term development. In the long run, rescinding the earnings tax could cause the St. Louis city population to double.

Both St. Louis and Kansas City have watched their city populations and businesses stagnate while their suburbs have grown, and the earnings tax is one contributing component that needs to be addressed. Petition proposals have been approved to collect signatures for the St. Louis earnings tax to be reconsidered on the ballot, with the stipulation that a revenue replacement needs to be found. For St. Louis, the land tax makes the most economic sense as that replacement. When an editorial claims that eliminating the earnings tax is infeasible, it’s important to take into account the potential of the land tax to provide a less-distortionary source of revenue and ultimately promote future economic growth.

The post More About the Earnings Tax appeared first on Show-Me Institute.

Now here’s a worse idea: Fiddling with tax credit programs so that a larger percentage of available credits goes to companies that were located in Missouri to begin with (as opposed to out-of-state businesses that came here to get the tax break). If all companies in an industry have a chance at getting a tax credit, it’s possible that the most productive one will win it. It would still be a wasteful use of tax dollars, but the waste would at least be kept to a minimum. If, however, the tax credit program is rigged so that it favors preexisting Missouri companies, the state ends up picking a winner once, in singling out an industry for the subsidy, and then it makes yet another arbitrary choice based on location rather than merit. That compounds the inefficiency.

The post “Missouri First”: Tax Credits Go From Bad to Worse appeared first on Show-Me Institute.