But what if that weren’t the case? What if the government only assessed the value of your land—and not any improvements you put on it?

That approach is called a land tax, or land value tax (LVT). By separating land from improvements and taxing them differently, governments can encourage property development. In downtown areas, often dotted with parking lots or undeveloped parcels, owners would be incentivized to build or to sell to someone who will.

This need not be an increased cost to owners. Taxes on improvements and land could be set at different rates (ideally zero for improvements) to ensure there is no net increase.

Show-Me writers have argued in favor of this approach for years:

• 2010: A Land Tax Is Preferable to the Earnings Tax
• 2010: Great Article About the Land Tax in the Kansas City Star
• 2012: Kansas City Should Expand, Not Remove, Land Taxes
• 2012: Kansas City Land Tax Should Be Expanded, Not Eliminated
• 2015: Land Taxes and Columbia
• 2026: It’s Time to Phase Out the Earnings Tax. Honestly, Nothing Else Has Worked . . .

The legislature in Kentucky, our neighbor to the east, is considering a bill that would, among other things, allow cities to separate property taxes into land and improvements.

In Missouri, such an effort likely would require a change to the Constitution. Currently, Article X, Section 3 states, “Taxes may be levied and collected for public purposes only, and shall be uniform upon the same class or subclass of subjects within the territorial limits of the authority levying the tax.” Later, Article X Section 4 defines real property as a single class with limited subclasses.

This could easily be changed, perhaps by inserting into Section 4, “Land and improvements upon land may be classified as separate subclasses of real property for purposes of taxation.”

Every city wants to spur development. The structure of our taxing system often serves as a disincentive to build. A land tax is a way for cities to encourage building and development without increasing taxes and without offering taxpayer subsidies. And it’s simple to understand and explain.

As Missouri and its cities look to encourage population growth and development, adopting a land value tax is a simple and straightforward way to do so.

The post Land Taxes: Will the Grass Be Greener in the Bluegrass State? appeared first on Show-Me Institute.

Missouri’s property tax system works best when the assessments are accurate, the tax base is wide, and the rates are low. That combination will help grow Missouri’s economy for everyone while properly funding the necessary functions of local government. However, a radical change in the system is being put before voters in Webster, Christian, Lawrence, and Dade counties in April. These four counties will vote on whether to prohibit any property tax increases due to reassessments. Current law requires local governments to roll back tax rates as assessments increase, but we all know that taxes still go up, sometimes substantially.

At the Show-Me Institute, we support low taxes, and I am well-aware of how tempting this will be to voters. But using market valuations in reassessment to set tax levels is a good system. While our property tax system needs reforms, eliminating any and all tax increases from reassessments will make Missouri more dependent on other taxes that hurt our economy far more than property taxes do. Hate them as much as you wish, but property taxes indisputably harm economic growth less than other taxes do.

These property tax limitations would reduce the ability of school districts to fund themselves and would make them more dependent on state aid. Consider the following: school districts in St. Louis County regularly receive at least 80% of their funding from local sources, primarily property taxes, and some are over 90%. It is nowhere near that level in Southwest Missouri. Nixa school district in Christian County is only 54% locally funded, while Marshfield school district in Webster is only 46% locally funded. Even Springfield school district, the largest school district in Greene County, where no property taxes changes are proposed, is only 58% locally funded. These changes would make school districts in these counties more dependent on state aid, not less. Again, I’m aware that many voters may view that as a benefit, but it is anything but.

Numerous other harmful effects would come from diluting the market forces (in the form of assessments based on market values) that form the basis of property taxation. California provides us with an example of the harms of these types of property tax caps with its famous Proposition 13, passed in 1978, which dramatically limited increases in property assessments and taxes. Proposition 13 certainly had its intended effect of lowering property taxes for California homeowners. However, it also reduced mobility, significantly increased alternative taxes, limited homeownership opportunities, and caused substantial tax disparities for similar properties receiving similar services. These negative consequences are exactly what these four counties would experience over the long run.

There are also significant constitutional concerns with this legislation. Missouri Constitution Chapter X, Section 3 states that “taxes . . . shall be uniform upon the same class or subclass of subjects within the territorial limits of the authority levying the tax.” So, consider the issue of the Logan-Rogersville R-VIII school district. This school district serves families in three counties. If voters approve these tax changes, the property tax system in one of those three counties would remain unchanged (Greene), while in the other two (Webster and Christian) it would be illegal to have a tax increase from reassessment. It would certainly seem unconstitutional for property owners within the same taxing district who own the same type of property (single-family homes) to face different tax and assessment systems for the same services.

We need property tax reform in Missouri, but this total limitation is too severe. If enacted, the property tax proposals before the voters in these four fast-growing counties would make the region’s overall tax system worse, not better. I hope voters will look past the easy appeal of a tax limit to think about the long-term harms.

The post The Wrong Way to Fix Property Taxes appeared first on Show-Me Institute.

A version of this commentary appeared in the St. Louis Business Journal.

Missouri’s property tax system works best when the assessments are accurate, the tax base is wide, and the rates are low. That combination will help grow Missouri’s economy for everyone while properly funding the necessary functions of local government. However, a radical change in the system is being put before voters in St. Charles, Jefferson, and Franklin counties in April. These three counties will vote on whether to prohibit any property tax increases due to reassessments. Current law requires local governments to roll back tax rates as assessments increase, but we all know that taxes still go up, sometimes substantially.

This change would also reduce the ability of school districts to fund themselves and would make them more dependent on state aid. Consider the following: Parkway school district in St. Louis County is 89% funded by local taxes. However, Fox school district in Jefferson County is only 51% locally funded, while Wentzville school district in St. Charles is only 64% locally funded, and St. Clair school district in Franklin is just 45% locally funded. These changes would make school districts in these three counties more dependent on state aid, not less. Again, I’m aware that many voters may view that as a benefit, but it is anything but.

At the Show-Me Institute, we support low taxes, and I am well-aware of how tempting this will be to voters. But using market valuations in reassessment to set tax levels is a good system. While our property tax system needs reforms, eliminating any and all tax increases from reassessments will make Missouri more dependent on other taxes that hurt our economy far more than property taxes do. Hate them as much as you wish, but property taxes indisputably harm economic growth less than other taxes do.

Numerous other harmful effects would come from diluting the market forces (in the form of assessments based on market values) that form the basis of property taxation. California provides us with an example of the harms of these types of property tax caps with its famous Proposition 13, passed in 1978, which dramatically limited increases in property assessments and taxes. Proposition 13 certainly had its intended effect of lowering property taxes for California homeowners. However, it also reduced mobility, significantly increased alternative taxes, limited homeownership opportunities, and caused substantial tax disparities for similar properties receiving similar services. These negative consequences are exactly what St. Charles, Jefferson, and Franklin counties would experience over the long run.

There are also significant constitutional concerns with this legislation. Missouri Constitution Chapter X, Section 3 states that “taxes . . . shall be uniform upon the same class or subclass of subjects within the territorial limits of the authority levying the tax.” So, consider the issue of the Meramec Valley R-III school district. This school district serves families in three counties. If voters approve these tax changes, the property tax system in one of those three counties would remain unchanged (St. Louis), while in the other two (Jefferson and Franklin) it would be illegal to have a tax increase from reassessment. It would certainly seem unconstitutional for property owners within the same taxing district who own the same type of property (single-family homes) to face different tax and assessment systems for the same services.

We need property tax reform in Missouri, but this total limitation is too severe. If enacted, the property tax proposals before the voters in these three fast-growing counties would make the region’s overall tax system worse, not better. I hope voters will look past the easy appeal of a tax limit to think about the long-term harms.

The post The Wrong Way to Fix Property Taxes appeared first on Show-Me Institute.

Somebody much smarter than I am is going to have to explain to me how sending this money to a private entity does not violate this section of Missouri’s constitution:

No county, city or other political corporation or subdivision of the state shall be authorized to lend its credit or grant public money or property to any private individual, association or corporation . . .

Stick with me here. This is county tax money being granted to a private business. Unless words no longer have meaning, this move by the council is legally dubious at best.

There has long been a fight about earmarks in the federal government. With earmarks, members of Congress can simply request that funding be added in for projects they wish, outside of the standard merit-based or competitive funds allocation process. This money for farms in north St. Louis County is an earmark, for all intents and purposes. Yes, it went through the legislative process, but it has not been subject to any of the other rules for how local governments spend money, such as competitive bidding.

Turning St. Louis County’s annual budget of more than a billion dollars into a grab bag of pet projects is the last thing we need for local government in Missouri.  I hope the county executive vetoes this bill and I hope his veto is sustained.

The post Earmarks Come to St. Louis County appeared first on Show-Me Institute.

Is this legal? Perhaps.

Is this wrong? Absolutely.

The Hancock Amendment clearly states that new taxes and tax increases have to be approved by voters. Here is Section 22(A) of the state constitution (emphasis added throughout):

Section 22. (a) Counties and other political subdivisions are hereby prohibited from levying any tax, license or fees, not authorized by law, charter or self-enforcing provisions of the constitution when this section is adopted or from increasing the current levy of an existing tax, license or fees, above that current levy authorized by law or charter when this section is adopted without the approval of the required majority of the qualified voters of that county or other political subdivision voting thereon.

However, there are a few exceptions. The one the city seems to be relying on here is in RSMO 137.073.5, which states that a city that has previously voluntarily lowered its property tax rate below the legal ceiling may raise it up to that ceiling without a vote of the people.

However, the state auditor’s annual report on property taxes (page 4) explains how this works:

Sections 137.073.5(3) and 137.073.5(4), RSMo, provide that a voluntary reduction taken in a non-reassessment year (even numbered year) results in a reduced tax rate ceiling during the following reassessment year (odd numbered year). These provisions also allow taxing authorities that voluntarily reduce a tax rate in a previous even numbered year to reverse the impact of the voluntary reduction to reinstate a higher tax rate ceiling in the following even numbered year. To increase the tax rate in the following even numbered year, the taxing authority must conduct a public hearing, and adopt an ordinance, a resolution, or a policy statement justifying its action before setting and certifying its tax rate.

That explanation makes clear that the laws above are intended for reductions and increases that occur in subsequent years. The idea that Town and Country could reduce its property tax rate to zero and then increase it 27 years later without a vote of the people is, frankly, absurd. It’s a total violation of the spirit of the Hancock Amendment.

While this may not be a violation of the law, it is appalling. The residents of Town and Country have every right to be angry that they are being denied their right to vote by the city. Furthermore, if it is legal (and I am hoping someone challenges it in court) this loophole needs to be addressed by the state legislature. A city or county should not be able to set a tax rate for 27 years at zero and then just raise it because two generations ago voters approved a higher rate the city just hasn’t used.

This sort of chicanery is an example of local government at its worst.

The post Does the Hancock Amendment Mean Anything to Town and Country? appeared first on Show-Me Institute.

In a UBI program, lower-income people are guaranteed an amount of money from the government. (In theory, that “guaranteed income” would apply to everyone, but so far most programs around the country have just been enacted for lower-income people.) UBI programs are different from the myriad other welfare programs in that there are generally no rules on how the money is spent and the requirements for admission into the program are easier. Compare this to food stamps and Section 8 housing vouchers, which obviously can only be spent on food and rent, respectively, and the general complexity of many other welfare programs.

Two studies have been released recently that actually tried to properly account for the success or failure of UBI programs in Denver, Texas, and Illinois. The results aren’t pretty. In Denver, the UBI program was focused on finding housing for the homeless. However, there was almost no difference in results between the groups that received significant sums of money and the control group that only received $50 per month. The control group did just as well at finding housing as the other two groups over the course of a year. While supporters of the program are trying to paint it as a success, the fact is that many homeless people eventually find housing, and the UBI payments made no difference in the results.

In Texas and Illinois, a UBI program gave some people $1,000 a month and a control group $50 per month. After the period of the program, the control group—who received less money—had a higher employment rate and were in better financial position:

The study, which began during the COVID-19 pandemic when unemployment was high, found that employment rates fell in the second and third years among recipients compared with the control group. On average, incomes rose significantly for all groups, though slightly higher for the control group. Incomes for recipients of the $1,000 rose from just under $30,000 to $45,710, while incomes for the control group started at a similar level but grew higher, to $50,970.

People responded to receiving free money by working less, which is exactly what you might expect. It’s also exactly the wrong way to help address poverty. The pilot program in St. Louis should be ended. The Missouri Constitution prohibits gifts to private individuals, and that is exactly what a UBI program is. But this would be a bad idea even aside from the legal issues. UBI programs just don’t work.

The post Universal Basic Income Programs Are Guaranteed Failures appeared first on Show-Me Institute.

First, Ferguson has decided that it is going to pull the business licenses of businesses that are behind on their property taxes. America learned in the late 1700s that it was a bad idea to throw debtors in prison because, well, how can they pay their debts if they can’t work because they are in prison? Robert Morris—one of the underappreciated founding fathers—was the poster child for these changes. If Ferguson policymakers were only considering pulling the licenses of businesses that owned their property, they would at least have an argument. But Ferguson has decided to pull the licenses of businesses that rent their space, meaning they aren’t late on their taxes at all because they don’t owe any property taxes—their landlords do. So, if the landlord doesn’t pay the tax, the rent-paying business will lose their license. That is, to put it bluntly, an atrocious policy.

Nearby in Bellefontaine Neighbors, the city has decided to address a budget deficit by instituting a fee to be a landlord in the city. It is a $300 annual fee per home or apartment being rented charged to every landlord. The fee was enacted in late 2022, but is in the news now because a landlord just sued over it. This fee is on top of the existing—and more understandable—inspection ($75) and occupancy permit ($40) fees that landlords and tenants already pay. Of course, they pay property taxes, too. The city was facing a projected budget deficit of a few hundred thousand dollars when it created the fee. I guess the easiest solution was to just stick it to landlords.

I hope both of these bad policies will lose in court. Ferguson shouldn’t deny a business license to people (the renters) who don’t even owe the property tax in the first place. Bellefontaine Neighbors’ voters did not approve the new tax, and I don’t know how the city can call it a fee when it already charges existing fees to cover the costs imposed by landlords and renters.

The Missouri Constitution says all local taxes have to be authorized under state law. Thank God for that. Cities, as seen in these two examples here, are constantly looking for opportunities to raise revenue improperly even with the state law (as the City of St. Louis successfully did with its payroll tax). I can’t imagine how bad local taxes and fees would be without it. We would probably be an entire state of Macks Creeks.

The post Prime Examples of Bad Government in St. Louis County Cities appeared first on Show-Me Institute.

Missouri’s problem is that more than 40 years after Hancock Amendment adoption, the state’s limit has grown obsolete and ineffective. In fact, as this report explains in detail, without reform, many of the amendment’s provisions will never provide a binding constraint on government growth again. Fortunately, thanks to decades of experience with TELs across the country and economic research into their design, there are a plethora of reforms available that could restore the amendment’s past protections and offer even stronger ones if Missouri voters so desire. This report provides an overview of the research on TELs, an in-depth discussion of Missouri’s Hancock Amendment, and an examination of ways in which the amendment could be improved to better serve taxpayers.

Click here to read the full text.

The post The Hancock Amendment: A Primer appeared first on Show-Me Institute.

I am going to take these one at a time because, frankly, this stuff is so hot I doubt you all can take any more than that. Let’s start with one of the most pressing issues where the voters are actually in charge.

As a relic of Kansas City’s famous school desegregation case, Kansas City 33 School District’s (KCSD) tax rate is managed by the constitution, not statute. Under the Missouri Constitution, article 10, section 11(g), KCSD is exempt from property tax rollbacks when assessments increase, leading to dramatic tax hikes on Kansas City residents in recent years. Trust me when I say that the KCSD has reveled in this fact and ostentatiously kept rates high despite enormous assessment increases during the past three (at least) reassessment cycles.

Here is the exact language:

Operating levy for Kansas City school district may be set by school board. — The school board of any school district whose operating levy for school purposes for the 1995 tax year was established pursuant to a federal court order may establish the operating levy for school purposes for the district at a rate that is lower than the court-ordered rate for the 1995 tax year.  The rate so established may be changed from year to year by the school board of the district.  Approval by a majority of the voters of the district voting thereon shall be required for any operating levy for school purposes equal to or greater than the rate established by court order for the 1995 tax year.  The authority granted in this section shall apply to any successor school district or successor school districts of such school district.

Voters need to repeal this section entirely. That means we need a ballot measure approved either by initiative petition or by the legislature allowing us to vote on a repeal. By repealing this constitutional provision, KCSD’s tax rate would be governed by the same rules as all other taxing jurisdictions in Missouri. That’s all. As assessments increase, rates would roll back at least in part to offset the tax hikes. Voters in the district could, of course, raise the rate if they chose to.

We should care about property tax rates for everyone, not just wealthy suburbanites. The residents of KCSD don’t deserve these constant tax increases. This provision may have been useful a while ago when the desegregation case was ending, but it is no longer needed.

The post One Way to Actually Do Something about Kansas City Property Taxes appeared first on Show-Me Institute.

This November, Laclede County residents will vote on reducing an obscure tax that places the county at a competitive disadvantage compared to its neighboring communities.

In 1985 the State of Missouri changed the way local governments tax commercial and industrial property. It eliminated the tax on business merchandise and inventory and replaced it with a surtax on the value of commercial real estate. Every county that year calculated the new surtax (also known as the commercial surcharge) at a revenue-neutral replacement level for the lost business inventory taxes. The change, made by an amendment to the state’s constitution, was explicit that the replacement levy calculated by the counties could be lowered only by voters, not elected officials, and that the surtax would not adjust downward as assessed valuations increased. This provision puts the commercial surtax at odds with most other property taxes in Missouri, for which the tax rate is supposed to go down as assessed valuations go up.

When the rates were established in 1985, Missouri’s economy looked very different than it does today. Kansas City and the City of St. Louis played larger roles than they do today (especially St. Louis). But Laclede County, likely because of inventory taxes generated by its role as a regional manufacturing hub, bucked the trend toward low surtax rates in most counties. It set its surtax rate at $1.03 per $100 of assessed valuation. That is the 14th-highest rate among Missouri’s 115 counties, and much higher than those of its neighboring counties. By comparison, Texas County has a commercial surtax rate of $0.68, Wright’s is $0.66, Pulaski’s is $0.49, Webster’s is $0.37, Dallas’s is $0.31, and Camden’s surtax is a miniscule $0.03.

Assessed valuations have grown enormously since the tax was introduced. For example, the commercial assessments in Laclede County have gone up almost 400 percent between 1985 and 2021, from $23 million to $108 million, yet the surtax rate has never been reduced to offset that increase. The combination of a high tax rate and the difficulty of reducing it puts Laclede County at a competitive disadvantage compared to other counties in its area.

To address this problem, the Laclede County Commission decided in August to propose lowering Laclede County’s surtax rate from $1.03 to $0.51. If passed by voters, this notable reduction in the commercial surtax rate would both spur economic activity in Laclede County and reduce the perceived need for tax subsidies. In general, Laclede County and its municipalities have been hesitant to use tax subsidies to selectively benefit a small number of businesses. That is to be commended. If this surtax cut passes, the county and its cities can remain focused on setting good policies and low tax rates for everyone, not special deals for a few.

The Lebanon R-3 school district has come out in opposition to this tax reduction, projecting a loss of $275,000 from the tax cut out of total revenues of $58 million. That is just $60 per student in a district that spends over $12,500 per student and one that received over $4 million in federal stimulus funds for a now-past economic emergency. Beyond that, personal property taxes for the school district (e.g., car and boat taxes) are expected to come in significantly higher than ever before due to the dramatic increase in used car values. In short, Lebanon R-3, like many taxing districts around Missouri, has more money than it knows what to do with, yet the district is opposing a tax cut to help grow business and jobs in Laclede County.

As Laclede County continues to grow and commercial assessed valuations continue to increase, actual revenue reductions for local governments that receive the tax money will be small. That’s not voodoo economics; it simply reflects expected growth in population, business, and assessed valuation.

Laclede County leaders deserve credit for placing this surtax reduction proposal on the ballot this November so voters can have a say in making their community more economically competitive. If approved, this reasonable and beneficial tax cut will help grow Laclede County’s economy, and everyone benefits from that.

The post Laclede County Should Reduce Its Commercial Property Tax Surcharge appeared first on Show-Me Institute.

This November, Clay County residents will vote on reducing an obscure tax that places the county at a competitive disadvantage compared to its neighboring communities.

In 1985 the State of Missouri changed the way local governments tax commercial and industrial property. It eliminated the tax on business merchandise and inventory and replaced it with a surtax on the value of commercial real estate. Every county that year calculated the new surtax at a revenue-neutral replacement level for the lost business inventory taxes. Among the reasons for the change was a desire to base the tax on the value of real estate, which is more consistent than the ever-changing values of inventories. The change, made by an amendment to the state’s constitution, was explicit that the replacement levy calculated by the counties could be lowered only by voters, not elected officials, and that the surtax would not adjust downward as assessed valuations increased. This puts the commercial surtax at odds with most other property taxes in Missouri, for which the tax rate is supposed to go down as assessed valuations go up.

When the rates were established in 1985, most of the collar counties around Kansas City and St. Louis were much smaller than they are today, with fewer businesses. Consequently, these collar counties set their commercial surtaxes at a low rate. But Clay County, likely because of inventory taxes generated by its massive Claycomo Ford Plant, bucked that trend. It set its surtax rate at $1.59 per $100 of assessed valuation. That is the third-highest rate in the state, and the highest in Western Missouri. By comparison, Jackson County has a commercial surtax of $1.44, while Cass’s rate is much lower at $0.54 and Platte’s surtax is a mere $0.36.

Assessed valuations have grown enormously since the tax was introduced. For example, the commercial assessments in Clay County have gone up 287 percent between 1985 and 2021, from $302 million to $1.17 billion, yet the surtax rate has never been reduced to offset that increase. The combination of a high tax rate and the difficulty of reducing it puts Clay County at a competitive disadvantage compared to other counties in its area, especially its Northland neighbor and competitor, Platte County.

This is a problem for Clay County. These differences may not have been a big deal in 1985, when the tax alteration was a neutral one for Missouri businesses and more of them were located in our central business districts. But it is a problem now. After much discussion and debate, the Clay County Commission decided in July to propose lowering Clay County’s surtax to $1.44, equal to Jackson County’s rate. If passed by voters, this modest reduction in the commercial surtax rate would both spur economic activity in Clay County and reduce the perceived need for tax incentives. As Clay County continues to grow and assessed valuations continue to increase, revenue reductions for local governments that receive the tax money will be miniscule or nonexistent. Even with the tax cut, revenues from the tax will almost certainly grow past current levels in the near future. That’s not voodoo economics; it simply reflects expected growth in population, business, and assessed valuation.

Clay County leaders deserve credit for placing this surtax reduction proposal on the ballot this November so voters can have a say in making their community more economically competitive. If approved, this reasonable and beneficial tax cut will help grow Clay County’s economy, and everyone benefits from that.

The post Clay County Should Reduce Its Commercial Property Tax Surcharge appeared first on Show-Me Institute.

In November, voters in Clay County (and also Laclede County) will have the opportunity be the first counties in Missouri to reduce their commercial property surtax rate.

See a map of commercial surtax rates across Missouri here.

The commercial surtax is a property tax levied at the county level on commercial property only. Unlike other property taxes, it does not adjust downward as assessment value increases, and it cannot be lowered by elected officials. Per the Missouri Constitution, it cannot be raised, and only voters can lower it. To date, voters in Missouri have never lowered a surcharge tax rate, but in November, voters in Clay County will have the opportunity to be the first to do so. The modest reduction Clay County is proposing to equalize itself with Jackson County, in my opinion, is very good public policy, but more on that later.

The tax rate varies by county based on the amount of money the tax it replaced—a commercial inventory-based tax—raised in each county in 1985. If your county had many businesses that generated products subject to the inventory tax, such as Clay County with the Claycomo Ford Plant, you probably have a high replacement tax rate. If you are a county that had a lot of businesses that did not generate much taxable inventory, such as counties in the Lake of the Ozarks region with its tourism economy, you likely have a low commercial surtax rate. But the real issue is that because of the difficulty in adjusting the rate, counties still have the rate based on the economic conditions of 1985.

The post WATCH: Clay County Voters to Decide on Tax Reduction appeared first on Show-Me Institute.

The timing of this change is important. In 1985, Perry County set its rate at $1.06 per $100 of assessed commercial valuation. This is a much higher rate than other counties in the region. Perry County has long had a strong manufacturing base, and it is likely that those industrial companies generated substantial inventory taxes that necessitated—at the time—a high surcharge replacement tax rate. By comparison, Bollinger County’s rate is much lower, at $0.13, St. Francois’ rate is a mere $0.20, St. Genevieve is just above that at $0.21, Madison’s rate is $0.25, and Cape Girardeau tops out the rest of the area at $0.37. Perry County is almost triple the surcharge tax rate for its region.

Assessed valuations have grown enormously since the tax was introduced. For example, in 1986 (the first year after the current assessment system was implemented) the total assessed valuation of Perry County was $84 million and $11 million of that was commercial property. As of the most recent reassessment in 2021, the total assessed valuation of Perry County is $404 million, with $74 million being commercial (an increase in commercial valuation of more than 500 percent). The surcharge rate has never been reduced to offset that significant rise in commercial assessed valuation, as happens with other property taxes. The combination of a high tax rate and the difficulty involved with reducing it puts Perry County at a competitive disadvantage with the rest of the region in 2022.

This is a problem, but a problem without blame. These differences were probably not a big deal in 1985, when the tax alteration described earlier had a neutral effect for Missouri businesses. But it is a major problem now. Reducing rates as commercial assessments rise is simply an issue of fairness. It would not lead to a tax revenue decrease but would simply mean treating the commercial surcharge like other property taxes in Missouri.

Another issue with reducing the tax might be more complicated. Lowering the commercial surcharge rate could both spur economic activity and reduce the perceived need for tax incentives. Frankly, from a government revenue perspective, many of the dollars lost to the surcharge reduction could be replaced by a reduction in the tax incentives that have been given to select businesses. Perry County and Perryville have each engaged in harmful tax subsidies like tax-increment financing. Reducing the surcharge rate for all businesses while eliminating the use of tax subsidies for a few, select businesses would be a public policy win–win for Perry County.

The elected officials in Perry County should place surcharge tax reduction proposals on the ballot so that voters can have a say in making their region more economically competitive. The state legislature should then authorize a vote on changing the Missouri Constitution to allow the commercial surcharge to be reduced as assessments increase, like other property taxes. These two changes would help grow the economies of both Perry County and Missouri, and everyone benefits from that.

The post Perry County Should Reduce Its Commercial Property Tax Surcharge appeared first on Show-Me Institute.

The tax rate varies by county based on the amount of money the tax it replaced—a commercial inventory-based tax—raised in each county in 1985. If your county had many businesses that generated products subject to the inventory tax, such as Clay County with the Claycomo Ford Plant, you probably have a high replacement tax rate. If you are a county that had a lot of businesses that did not generate much taxable inventory, such as counties in the Lake of the Ozarks region with its tourism economy, you likely have a low commercial surtax rate. But the real issue is that because of the difficulty in adjusting the rate, counties still have the rate based on the economic conditions of 1985.

That is why we built this map. The map below shows the commercial surtax rate for every county in Missouri. The redder the county, the higher the rate. The rate varies from $1.70 per $100 of assessed commercial valuation in St. Louis County to $0.01 in Reynolds County. The unweighted average rate is $0.53; the median rate is $0.41. Please check out the map (there is also a download link at the bottom of the post) and see where your county fits.

The post Map of Commercial Property Tax Surcharges in Missouri appeared first on Show-Me Institute.

The bill . . . aims to “to empower parents to enforce” rights laid out in the bill, like knowing what curriculum is being taught and allowing parents to visit schools to check on their children. . . .

An amendment added to the bill [] would prohibit teachers or students from being forced to adopt ideas in violation of sections of the Civil Rights Act of 1964, such as concepts that individuals are inherently superior or inferior based on their race, ethnicity, color or national origin or “bear collective guilt” for the actions their ancestors may have committed in the past. . . .

Other provisions included in the bill require that public school employees’ salaries be included in the state’s accountability portal, allow for lawsuits if school boards fail to follow requirements that allow for public comment and directs the state education department to develop a database for schools to post their curriculum and professional development materials every six months.

The bill also requires that districts post their curricula on their websites, one of many ideas that overlaps with the Show-Me Institute’s Parents’ Bill of Rights published last year. If this bill is passed, it will go straight into law. This is in contrast to House Joint Resolution (HJR) 110, which would first go to voters, but would also have the benefit of entering the Missouri Constitution.

It’s been a slow process, but it is good to see some of the legislative logjam in Jefferson City that’s bedeviled lawmaking for over three months finally making its way down the river. I look forward to testifying on this legislation in the Senate and hope these reforms complete the legislative process and become law. Onward.

The post Parents’ Bill of Rights Law Passes the House appeared first on Show-Me Institute.

One notable thing about this MPBR legislation is that it’s being advanced as a “resolution” rather than just a “bill.” What makes a House Joint Resolution (HJR) different than a bill is that in contrast to a bill that would change state law and requires a governor’s signature, a joint resolution—if agreed to with the Senate —does not require a signature by the governor and is instead sent to the public. If approved by the public, the joint resolution’s language is then added to the state constitution. If approved by the House and Senate, a vote on the MPBR would happen either this summer or fall.

Although HJR 110 has advanced to debate in the House, when that debate will happen remains to be seen. It may get its vote in the next week, or it may get its vote in the next month; House leadership will determine the timeline from here. But given the friction in the Senate, I hope this resolution gets out of the House fairly quickly to provide some breathing room for a vote before the end of the session, should the Senate continue its slow grind. We’ll keep you posted.

The post Missouri Parents’ Bill of Rights Moves to the House Floor appeared first on Show-Me Institute.

Parents deserve to see what their kids are learning, and taxpayers deserve to know what they’re paying for. If that’s going to happen, however, at a minimum state law needs to be updated to empower these stakeholders to assert those rights.

It will take champions of reform in the Missouri legislature to carry such bills forward, but fortunately there are already several good proposals circulating at the Capitol, including an especially strong one that I testified on this morning. House Joint Resolution (HJR) 110, introduced by Rep. Phil Christofanelli, would put key language from the MPBR directly into the Missouri Constitution—including curriculum transparency, performance transparency, and a host of other items. As a Constitutional item, Missouri voters would also have their final say on the proposal at the ballot box later this year, and I’m optimistic it would succeed with the public. Accordingly, I felt it was important to testify to the House Elementary and Secondary Education committee (which heard the bill) to share my research.

If passed by the legislature and the public, the Constitutional amendment would be an enormous leap forward for both educational reform and transparency. I hope the entire Legislature and eventually the public will have an opportunity to weigh in on this important proposal.

The post Will a Missouri Parents’ Bill of Rights Be Added to the State Constitution? appeared first on Show-Me Institute.

He also suggests that Jackson County elect its assessor, which I also think is a good idea. St. Louis County made that change about a decade ago, and I think the change has been beneficial. This way, voters can always bring back the crooked assessor (as happened in California) if they want to. However, the only way to really address property tax increases in Kansas City is to change the state constitution. Currently, an exemption in Missouri’s constitution allows the Kansas City school district to maintain its tax rates even as tax assessments rise significantly. That is the biggest part of the problem in Jackson County.

It is not a coincidence that Sen. Cierpiot, who represents Jackson County, wants to address this issue. Over the past several assessment cycles, Jackson County has been a hotbed of property assessment and tax disputes, within both Kansas City and its suburbs. SMI analysts have written about this issue before. There are two main factors at work. One is that, for whatever reason, Jackson County does appear to have been historically under-assessed.

My belief is that the under-assessment was a response, in part, to the large school desegregation tax increases ordered by Judge Clark in the 1980s. It doesn’t matter how high someone raises your property tax rates if the property is substantially under-assessed. The Missouri State Tax Commission instructed Jackson County a few cycles ago to correct the under-assessment, and that is primarily what led to such a large increase in assessments in Kansas City in 2019.

The second part is also related to Kansas City school desegregation. Per the Missouri Constitution, the Kansas City school district is the only taxing entity in Missouri exempt from property tax rate rollbacks. So, when the assessments increase dramatically, as they have in Kansas City, taxpayers in Kansas City school district see no rollback in the rates. That results in a very large and immediate tax increase, and that situation has to be addressed. If elected officials from the Kansas City area really want to make a major change that will address a big part of the problem, they need to propose amending the state constitution to make the Kansas City school district roll their rates back when assessments increase.

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In 1980, Missouri voters approved an amendment to the state’s constitution adding Article X, Sections 16 through 24, which are collectively referred to as the Hancock Amendment. The sections are some of Missouri’s most important safeguards against higher taxes and growing government. But as with most constitutional topics, the Hancock Amendment and its implications are quite complex.

The concerns about this year’s gas tax bill center around Article X, Section 18(e) of Missouri’s constitution, which was approved in 1996. The subsection states that in addition to the other limitations imposed by the Hancock Amendment, Missouri’s general assembly cannot raise taxes or fees above a certain threshold in a given year without voter approval.

To avoid a public vote, the cumulative revenue impact of every bill passed by the legislature each year must be calculated and determined to be below the constitutionally defined limit. If the limit is exceeded, the bills that raise revenue must be submitted for a public vote starting with the largest increase, then every other increase in descending order, until the net effect of the remaining bills is lower than the year’s cap.

Here’s an example. Let’s say the cap in a given year is $100 million, and the legislature has enacted net tax increases of $125 million, and the most expensive bill raises taxes by $30 million. You would only need to vote on that one bill. If the bill is rejected by voters, then the legislature is below the cap. If voters approve the bill, the bill no longer counts toward the Hancock cap. If one single bill didn’t cover the entire gap by itself, that’s where voting on each bill in descending order comes into play.

When the amendment was initially adopted, the cap was $50 million in new revenue but has since been adjusted according to state personal income growth, and for 2021 it was $111.8 million.

For this year’s gas tax bill, the official fiscal estimates suggest that once fully implemented, it could raise between $123–$455 million. On its own, the bill would appear likely to exceed the Hancock Amendment cap, but that’s only one part of the story.

First, since compliance with the amendment’s limit is based on the net effect of all legislative changes in a year, we can’t know whether there’s a violation until Governor Parson finishes signing this year’s bills. It is also important to remember that if one bill raises enough revenue to violate the amendment, as long as there’s another bill that would simultaneously lower taxes or fees such that the net tax increase is below the threshold, the general assembly could still avoid violating the constitution.

Second, the gas tax bill is really the first of its kind. There haven’t been similar past efforts to raise taxes the way it does while avoiding a public vote. The gas tax bill has a refund mechanism, which is explained in the first post in this series. Given the potential complexity of a refund, this part of the bill appears to serve as a tactic to avoid triggering the Hancock Amendment rather than an effort to ensure Missourians pay less tax. Consequently, there are a variety of unanswered questions about how a potential Hancock Amendment violation would be handled. (See here for further breakdown of the questions at hand.)

One thing we do know is that Missouri voters are all too familiar with being asked to raise the state’s gas tax, and since the last approved increase in 1997have shot down every one of them, including a vote in 2018. While we wait to see what’s decided on the topic, it’s fair to wonder whether the legislature’s choice to avoid a public vote will prove to be a wise one.

The post Missouri’s Hancock Amendment and the Gas Tax appeared first on Show-Me Institute.

When Missourians voted on Medicaid expansion this past August, they were told the initiative would save the state billions of dollars. I wrote repeatedly at the time about how wrong those estimates would prove to be; expansion was then approved by a narrow margin.

With Medicaid expansion set to go into effect in a few months and Missouri’s Legislature now putting together next year’s budget, the true price tag for Medicaid expansion has finally come into focus. The state’s most recent estimates suggest that the first year will require more than $1.5 billion in new spending, which includes a significant portion of federal funding and a state share of approximately $100 million. Where will the legislature find these funds? Instead of searching for the money elsewhere in the budget, the House Budget Committee is questioning whether they need to fund expansion at all.

Of course, Missouri voters did approve the petition to expand Medicaid eligibility, but the issue is whether the constitutional amendment requires the legislature to come up with the funds. Our state’s constitution, like the U.S. Constitution, gives the legislature the “power of the purse”—the responsibility of authorizing all state spending. The constitution also provides that amendments cannot impose a new cost without outlining how that cost would be paid for. Unfortunately, the Medicaid expansion amendment, which will have an enormous cost, included no such funding mechanism.

The House Budget Committee’s stance is that without such a mechanism, the legislature is under no obligation to include funding for Medicaid expansion in next year’s budget. The committee’s move is just the first step of many if the legislature wants to avoid appropriating the funds necessary for expansion. But if the eventual budget does not include funding for expansion, the issue would probably be challenged in court.

While discussions on this topic are just beginning and will likely continue for the remainder of this legislative session, it’s important to recognize what’s happening here. There are legitimate constitutional questions being asked here, and despite what you may hear, this is about more than simply the politics of Medicaid expansion.

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