Missouri is considered one of the most “conservative” of the 50 states. Is that a good thing or a bad thing? It depends on how you define the word.

Over the past several decades, Missouri has been going downhill both economically and educationally—as one of the worst-performing states in GDP growth and educational achievement in K-12 public education. Why?

Too often, Show-Me State conservativism has been characterized by a lack of urgency and a satisfaction with the status quo.

As I would define it, conservatism does not begin and end with the preservation of existing institutions, and it most definitely is not about protecting the privileges of the rich by exploiting the poor or being indifferent to the problems of the needy. Where it begins is with the desire to protect and enlarge freedom for all members of society—enabling people to work and live lives of their own choosing so long as they do no harm to others in the pursuit of their own betterment.

Here, then, are five New Year’s Resolutions for leaders in local and state government:

#1: Improve Missouri’s competitiveness; turn the Show-Me State from an economic sluggard into a great place to live, work, and own or operate a business. That means lowering taxes—leaving more money in people’s pockets to spend or invest as they choose. It also means removing obstacles to commerce and opportunity posed by excessive licensing and regulatory requirements.

#2: End crony capitalism—stop providing subsidies and tax carve-outs for politically favored businesses that are not available to all other businesses. In 2019, Missouri reported 524 tax-increment financing (TIF) projects from 100 political subdivisions across the state. These projects are anticipated to have $10.1 billion in TIF-reimbursable project costs. Such subsidies drain money from public services and have a bad track record of failing to deliver promised job, investment, or economic growth. Reductions in tax incentives and spending can provide some of the budgetary space to lower or eliminate individual income and earnings taxes.

#3: Don’t treat small, owner-operated businesses as the designated fall-guys in government-ordered lockdowns—calling them “non-essential” businesses while allowing their big-box counterparts such as Wal-Mart and Target to continue to operate.

#4: Don’t be penny-wise and pound-foolish when it comes to taking care of essential infrastructure on a timely basis. Interstate 70, an economic and transportation lifeline, is falling apart. Numerous other major roads are badly in need of repair. Travel on Missouri’s roads has increased by 12 percent since 2008, but the state’s transportation budget has fallen by 15 percent. According to Missouri’s Department of Transportation, it now gets only enough revenue to cover a little more than half the state’s needed road and bridge repairs. One thing is certain: Postponing needed maintenance on long-lived assets such as roads and bridges is not a smart idea. It leads to escalating costs and catastrophic failure.

#5: Expand educational choice for students and families at all income levels throughout the Show-Me State. There is no worse example of blind allegiance to the status quo than Missouri’s K-12 public education system.

Supported by nominally conservative lawmakers, the state’s educational establishment—meaning school superintendents, teachers’ unions, and DESE (Missouri’s Department of Elementary and Secondary Education)—have blocked almost every initiative aimed at expanding school choice from vouchers and education savings accounts to expansion of charter schools. Despite a long record of poor results in the so-called “Nation’s Report Card,” members of the establishment continue to oppose all forms of competition and choice in public education.

And who is hurt the most by this self-serving obstinacy on the part of the providers of public education? It is of course the users: students and their parents and families, and most especially lower-income families trapped in non-performing schools who cannot afford to move to other school districts or to private schools.

As I see it, true conservatism is really about an allegiance to principles—and to enduring values such as freedom, hard work, and equality under the law—rather than an allegiance to the status quo.

The post Five New Year’s Resolutions for Missouri Lawmakers appeared first on Show-Me Institute.

Each year, the federal government allocates funds for the LIHTC program, and historically Missouri has matched each dollar. In 2017, Missouri’s governor halted the state’s portion of the program after multiple reports showed glaring problems. The pause in state credit issuance allows policymakers to look back and determine whether the state’s LIHTC program ever had a meaningful impact. 

According to project approval data from the MHDC, there was little change in federal LIHTC applications in 2018, the first full year without the state’s LIHTC program. Projects can vary in size so it’s important to look at the number of units being subsidized. Last year more than 2,200 units were funded solely by the federal LIHTC program, which exceeds the average over the previous four years (where Missouri was matching each federal dollar) by more than 400. This indicates that project developers still believe there is money to be made on low-income housing. In short, the program was zeroed out and nothing changed.

The LIHTC program essentially functions as a way to help finance construction. Eliminating Missouri’s contribution may have simply changed the way developers choose to make their profits. For example, the MHDC data show a large increase in approved LIHTC rehabilitation projects for 2018, but a small decline for new construction. There is also a sharp increase in the estimated average cost per unit of approved new construction projects. The point being, as long as a project remains profitable, developers will find a way to make it happen, no matter what they tell Missouri policymakers.

Despite the overblown claims of the negative consequences from eliminating Missouri’s LIHTC program, the state’s affordable housing landscape appears to be moving in the right direction. If policymakers want to save Missouri taxpayers millions of dollars and strike a blow against crony capitalism, it appears there is no greater opportunity than leaving LIHTC behind.

The post More Proof that Missouri’s LIHTC Doesn’t Work appeared first on Show-Me Institute.

As famed economist Milton Friedman (and others) have emphasized again and again, being “pro-business” is not the same as being “pro-market” or, in this case, pro-consumer. If consumers want a more personal touch with their car buying decisions, then there will be a market for the car dealership experience. And if they just want an electric car direct from the manufacturer, shouldn’t they have that option, too?

I won’t belabor the point too much since this is well-trod ground, but I do want to highlight this video featuring Friedman, and the Friedman quote below, to reiterate the problem here of playing favorites against consumer interests.

You talk about preserving the free market system. Who has been destroying it? The business community must take a large share of the responsibility. You must separate out being pro-free enterprise from being pro-business.

Missouri should take Friedman’s point to heart and let consumers decide for themselves what they want from their car-buying experiences.

The post Car Wars II: Revenge of the Cronies appeared first on Show-Me Institute.

One reform that might make a great deal of difference is in the state’s legislative definition of blight. For the purposes of tax-increment financing, the blight definition is so broad as to be meaningless. One library executive said that under the existing definition, the governor’s mansion could be blighted. There are opportunities for improvement, and we need not look far.

The easiest option is to look at previously considered reforms. In 2002, Missouri Senator Wayne Goode introduced a bill that would have gone a long way in curbing abuses in blight findings. Specifically, Goode’s bill would require that any area subject to a redevelopment plan could only qualify if:

1. The host municipality—or, for unincorporated areas, the host school district—has low fiscal capacity; or
2. The census block group or groups (as defined in the most recent decennial census) containing the proposed redevelopment area had high unemployment; or
3. The municipality, census block group or groups, as defined in the most recent decennial census, containing the proposed redevelopment area was characterized by moderate income.

Goode’s bill defined such terms as “low fiscal capacity,” “high unemployment,” and “moderate income” in ways that were aimed at making sure that development projects only took place in the communities requiring taxpayer assistance and that effectively placed limits on crony capitalism.

Earlier, in January 1999, the Washington University Law Review published a piece by Julie A. Goshorn titled “In a TIF: Why Missouri Needs Tax Increment Financing Reform.” At the end Goshorn advocated for a new definition of blight that, like Goode’s, incorporated requirements for unemployment and poverty. While Goshorn’s reform dealt specifically with the definition of blight—a move favored by this author—she allowed wiggle room by permitting a blight finding if a building in the area was merely unsanitary. Given the lengths that developers, economic development staffers, TIF commissions, and city leaders have gone to broaden the standards of blight, it is likely that they will continue doing so in the future. Based on Goshorn’s original suggestion, the following terms and definitions might be considered for use in statutes and regulations:

(1) “Blighted area,” is an area that satisfies both (a) and (b) below:

(a) Buildings in the area are:

1. Unsanitary, unsafe for living or working;

2. Substantially vacant; or

3. Subject to a crime rate significantly higher than that in other surrounding areas; and

(b) The area in general is characterized by:

1. Pervasive poverty, unemployment, and general distress, as evidenced by

a. At least seventy-five percent of the residents living in the area have incomes below eighty percent of the median income of all residents within the state of Missouri; and,

b. The level of unemployment of persons within the area exceeds one and one-half times the average rate of unemployment for the state of Missouri over the previous twelve months.

Legislators will undoubtedly wrangle over definitions and thresholds for income and unemployment. That debate is welcome. But legislators, whether conservative or liberal, urban or out-state, should recognize by now that the lax language in Missouri statutes regarding blight is draining municipalities of much-needed resources and providing little if any economic benefit.

The post Fixing a Blight on Missouri Statutes appeared first on Show-Me Institute.

Trump has said some traditionally infrastructure-y words when he talks about this. “We’re talking about a very large-scale infrastructure bill,” the president-elect said in a long-ranging interview with the New York Times published Wednesday. “… [a]nd we’re going to make sure it is spent on infrastructure and roads and highways.” A proposal to privatize infrastructure projects released by Trump’s economic advisors describes the “complex network of airports, bridges, highways, ports, tunnels, and waterways” that underpins private sector growth.

Bliss worries that Trump will be more inclined toward “major new property development,” rather than infrastructure. She even cites Paul Krugman’s column, where such spending is often boosted, in The New York Times where he writes,

And we already know enough about [Trump’s] infrastructure plan to suggest, strongly, that it’s basically fraudulent, that it would enrich a few well-connected people at taxpayers’ expense while doing very little to cure our investment shortfall. Progressives should not associate themselves with this exercise in crony capitalism.

The President Elect’s infrastructure plan may or may not amount to crony capitalism. As my colleague Patrick Ishmael recently wrote, the Carrier deal in Indiana invites the accusation. Yet this is exactly the sort of crony capitalism that progressives seem to love in Kansas City and St. Louis. Recall that we’ve redirected hundreds of millions of tax revenue into property developments for wealthy corporations such as Cordish, Burns & McDonnell, Cerner, and H&R Block.

Meanwhile, important infrastructure spending (read: roads, bridges, sewers, etc.) is squeezed, because the city cannot afford it. We’ve heard that the city wants to borrow $800 million for such spending—but we have as much detail about where that money will go as Trump has given on his plans. Hopefully, those funds won’t go toward  “fraudulent” infrastructure projects instead of those truly necessary for the public good.

Policy debate on infrastructure is welcome, as is skepticism toward government spending. But if you want to be critical of fraudulent public programs that appear only to enrich the well-connected, you don’t need to travel to Washington to find it—or even leave Kansas City.

The post Kansas City and “Fraudulent” Crony Capitalism appeared first on Show-Me Institute.

That view is wrongheaded on both counts, and I certainly hope the Carrier "deal" doesn't presage future deals the President Elect will be cutting over the next four years. The reason is straightforward. In return for not following through on its threat to move, Carrier will receive $700,000 per year from the state of Indiana, for at least 10 years. If that kind of cronyistic deal sounds familiar to you, it should; the Carrier agreement is like many of the "deals" to "save or create jobs" that have been made, and that we have criticized for years, here in Missouri. As one economist observed after the Carrier deal was announced, "[e]very savvy CEO will now threaten to ship jobs to Mexico, and demand a payment to stay." Yup.

Even with the financial gift from Indiana, it doesn't sound like every job will be staying at the plant anyway, or at another nearby facility that was also slated to be closed. In return for the money, Carrier said it will keep about 1,000 jobs in Indiana, but that about 1,300 Indiana jobs were going to be sent to Mexico anyway, despite the public giveaway.

We have to reiterate: It is not the role of the government to pick winners and losers in the tax code, whether the tax code in question is at the local, state or federal level. More to the point, allowing powerful companies to issue threats as a way to compel public financial support for their private operations is a road policymakers should not go down. Most employers could never dream of getting such generous concessions, and if the tax burden needs to be reduced to make one big company profitable, policymakers, whatever their level of government, should instead work to reduce the tax burden for all companies—large and small, politically connected or not.

Indiana should not export its corporate welfare to Washington DC. If it does, it will be to the detriment of the American public and taxpayer interests.

The post The Indiana Carrier Deal: State Cronyism Shouldn’t Be Nationalized appeared first on Show-Me Institute.

The Show-Me Institute stands arm-in-arm with those decrying the decades of neglect suffered by the East Side. In fact, we authored the chapter that exposed the fact that city economic development policy favors wealthy developers in the Urban League’s “2015 State of Black Kansas City.” Kansas City leaders have for years turned a blind eye to the economic decline suffered by our urban core. Worse still, city leaders have actively pursued development policies that diverted important resources away from schools and libraries in that same community.

Just as Kansas City’s shameful past of red-lining and block-busting a generation ago aided and abetted racial segregation, subsidies for today’s wealthy developers have diverted property taxes away from important city services on the East Side and toward the millionaires and billionaires at Burns & McDonnell, Cerner, and VanTrust.

Kansas City has so hollowed out its tax base through these diversions that the city must borrow money to provide basic services like tearing down dangerous buildings and repairing roads. While Kansas City suffers a two-year spike in homicides, our cash-strapped police force has fewer uniformed officers than it had in 2011.

Desperate for the basic services that the city government should be providing, communities on the East Side have resorted to community improvement districts (CIDs). The Independence Avenue CID charges a one-percent sales tax in order to provide security and beautification—things residents feel they cannot get from the police or the parks department. As a result, families living in the urban core are paying a higher tax rate on food just to feel safe while they shop.

Vernon Howard Jr., senior pastor of St. Mark Union Church, was correct when he told the Star, “City, county, state and federal jurisdictions have not, to date, focused upon the inner city with the kind of zeal, investment, intentionality and creativity as have been vested within mostly white and wealthier neighborhoods and communities.”

I empathize with East Side leaders, but their solution may only make matters worse. Adding another sales tax means poorer residents will be forced to pay more out of their pockets to get services they should already be getting for their earnings taxes, property taxes, (already high) sales taxes, COMBAT taxes, and all the rest.

If Kansas City is to thrive, it needs to dramatically overhaul its taxing and spending policies. We need to limit our profligate spending on touristy frou-frou and focus on providing services quickly, efficiently, and compassionately; we need to stop subsidizing wealthy corporations and luxury high-rises; and we must focus on developing the things that make Kansas City great—rather than merely mimicking Portland or Denver or Dallas. Because as jobs and population numbers attest, we are losing that game.

The post The Consequences of Bad Policy appeared first on Show-Me Institute.

Well, things are not working exactly has insurers had planned. Just ask United Healthcare.

United Healthcare is the largest U.S. insurer by enrollment, and the company is warning that it may withdraw from Obamacare in 2017. The insurer has already suspended advertising for its Obamacare coverage and stopped paying commissions to insurance brokers for signing people up. It literally doesn’t want consumers to buy its products.

On a United Healthcare call Thursday with Wall Street analysts, Josh Raskin of Barclays asked, “Simply, how long are you willing to lose money in exchanges?” and then followed up, “Are you willing to lose money again in 2017, Steve?” United Healthcare CEO Stephen Hemsley replied: “No, we cannot sustain these losses. We can’t really subsidize a marketplace that doesn’t appear at the moment to be sustaining itself,” adding that “we saw no indication of anything actually improving.”

Not only are enrollees in the insurance market sicker than expected, but thanks to budgetary language passed last year, the insurance companies' shortfalls are no longer the taxpayers' problem. Obamacare's "risk corridors" were designed to transfer some money from profitable insurers to less profitable insurers as a way to shield less successful insurers from the deep losses that could force them to leave the marketplace. Under the original plan, taxpayers would pick up the remainder of the shortfall—a bailout for insurers, negotiated by insurers, and financed by taxpayers. Today, the insurers will bear that risk alone, and appropriately so.

Of course, whether these taxpayer protections will endure in the years to come may depend on the pull of insurance industry cronies— not only in the private sector, but also those cronies who are currently part of the adminstration. The Washington Examiner's Timothy Carney vividly captures the current, and appalling, health care scene:

This is where the intimate network of the Obamacare insiders comes in. The Centers for Medicare and Medicaid Services (CMS) — which issued the pledge to fully bail out United Healthcare and its cohorts — is run by acting administrator Andy Slavitt. Slavitt is the former CEO of United Healthcare (while he held that position he contributed to Obama's 2008 election)….

Meanwhile, the insurance lobbyist leading the industry's push for more Obamacare bailout money is Marilyn Tavenner, Obama's previous chief of CMS, now head of America's Health Insurance Plans (AHIP). AHIP says risk corridors aren't the group's top focus, but Tavenner is speaking out on it.

In summary: Tavenner helped build the risk corridor program, and then went to the industry that would get the money. Slavitt left the insurer with the biggest losses, and now is the government official promising to bail out his former employer.

You can call it regulatory capture or you can call it a revolving door, but it is cronyism all the same. And it's of a kind that is especially troubling: the kind where cronies don't just try to regulate their own industry, but also try to loot the Treasury while they're in power. The question now is whether Congress will accommodate these cronies by explicitly removing last year's taxpayer protections or will stand by if Obamacare's bureaucracy tries to sidestep the law and hand out money to insurers anyway. We should find out one way or another in the next month or so; stay tuned.

The post Obamacare Cronyism: Where Does the Bureaucracy End and the Insurance Industry Begin? appeared first on Show-Me Institute.

I don't share his policy view on this matter, but I would like to see the same "naming and shaming" program applied to corporations who accept public subsidies from municipal government. And I am not alone. My colleague Patrick Ishmael recently wrote about new standards from the Government Accounting Standards Board (GASB), In short, the new standards increase the amount of information that local governments have to publicly report about the number and type of tax abatements.

One shortcoming of the new standards is that they do not require localities to list the various subsidies by company. This would be an additional measure of government transparency that localities could adopt on their own through city ordinances. It would tell us which companies are the welfare queens of crony capitalism.

The post Naming and Shaming Corporate Welfare Queens appeared first on Show-Me Institute.

Advocates argue convincingly that it is overburdened and underfunded at nearly all levels. A system that at one time was well regarded and innovative is staggering from high demand and too few resources.

The lack of options leaves families of mentally ill individuals in a fearful limbo. Police officers and jails end up dealing with people who should have access to doctors and hospitals.

Surprising no one, the city’s paper of record faulted inadequate funding:

But state funding for a network of outpatient community mental health centers—the first stop for many patients—has been cut in half since 2008. Patients often wait weeks for medications and a treatment plan.

We don’t take issue with the Star‘s conclusion. Tight budgets at every level mean that policymakers have to make difficult choices. What is unfortunate is the Star‘s request to be exempted from having to pay their own fair share of taxes—taxes that would go to support these programs. The Star is asking to extend for 15 years the tax abatement on its downtown printing press. As a result, the Community Mental Health Levy in Jackson County, Missouri, will be denied $245,000 over 15 years. That is a quarter-million tax dollars from the Star‘s single property.

This request comes after the Star had Jackson County reduce their assessment from $42 million in recent years to $22 million in 2015. The folks at the Star seem to have put a lot of effort into avoiding paying taxes on their downtown printing and distribution center. And it’s easy to see why; what the Star prefers not to pay toward mental health is small compared to what they would avoid paying toward Kansas City schools ($10 million), Kansas City ($2 million), and Jackson County ($1 million).

Certainly, corporations can and do make the case that county property assessments are too high. And many businesses in Kansas City benefit from corporate welfare and crony capitalism of some kind. But shouldn’t we expect better from our newspaper?

If the Star wants to call out local and state governments for cutting spending, giving tax breaks to the wealthy, or handing out sweetheart deals, shouldn’t they refrain from seeking the same for themselves? By advocating a kind of “taxes for thee, but not for me” position, the Star risks being accused of nothing less than rank hypocrisy,

The post Rank Hypocrisy from the Kansas City Star? appeared first on Show-Me Institute.

the lack of a serious mayoral campaign also illustrates an ongoing issue in Kansas City politics. Voters are uninterested in the mayor’s race because the mayor’s job is, essentially, uninteresting.

For all the changes to the city’s charter over the years, the mayor remains primarily a 13th vote on the council. He or she makes some appointments and gets his or her name in the news, but day-to-day operations remain in the hands of the city manager.

More importantly, though, the council itself is relatively powerless. It doesn’t have the power to tax. And much of the city’s spending is off-limits, leading to fierce disputes over relatively small amounts of money.

Helling concludes, “More fundamentally, though, Kansas City seems locked in a leaderless drift—not because it lacks leaders, but because its government is built that way.”

Indeed, the government here was built that way with protections such as term limits and the Hancock Amendment. “Leaderless drift” suggests that without a strong leader cities are doomed. Often the opposite is true; take Chicago, where for 22 years Mayor Richard M. Daley spent and spent and spent on fruitless economic development schemes. Taxpayers in Kansas City are already on the hook for the ill-considered whims of self-styled geniuses. Do they want a government where the people are not a check on new airports, streetcars, convention hotels, and the like?

Kansas City still manages to excel at crony capitalism for the benefit of big business and developers, but at a much smaller scale than its leaders would prefer. And that is a good thing.

The post In Praise of So-Called Leaderless Drift appeared first on Show-Me Institute.

In ancient Athens, the birthplace of democracy and human freedom, the richest citizens often paid for roads, bridges, theaters, and gymnasiums. They picked up the bill for athletic games and other public amusements. In times of peril, they built war ships and donated them to the city.

This voluntary giving of both time and money maximized freedom, reduced the need for government, and reinforced a powerful sense of Athenian exceptionalism. In his famous funeral oration in 431 BC, Pericles spoke of how the freedom and openness of their city did not weaken but only served to redouble the valor, resourcefulness, and generosity of the citizenry, enabling Athens to exceed all its neighbors in dedication to the common good, both in war and peace.

Charles W. Adams, author of the classic book For Good and Evil: The Impact of Taxes on the Course of Civilization, called this system of giving “the Greeks’ brilliant alternative” to government ownership and control. He described it as “private enterprise for public good.”

In our own time, sports-minded cities across the United States have stood this ancient ideal on its head. In trying to attract or to hold onto sports franchises, most U.S. cities have followed the model of public assistance for private gain, or what is also known as crony capitalism.

Political leaders in our cities and states have been all too willing to grovel at the feet of the wealthy owners of professional sports teams, saying, in effect: If you pick our stadium over competing venues, we will do everything in our power to use the public purse to swell your bottom line and multiply the value of your franchise.

Consider the astounding concessions that the city of Saint Louis made to get the then Los Angeles Rams to move to Saint Louis in 1995—and how the city has now landed in a situation in which it will have to agree to another roughly $400 million in taxpayer assistance to have any hope of holding onto the team.

Neil deMause, co-author of Field of Schemes: How the Great Stadium Swindle Turns Public Money into Private Profit, calls the original deal that the city of Saint Louis struck with the Rams “the worst lease ever”—meaning the most one-sided in enriching the team’s owners at the expense of taxpayers . . . while doing far more to please deep-pocketed corporate clients than to control ticket prices or provide better seating for ordinary fans.

The Rams paid no part of the $480 million in construction costs in building the Edward Jones Dome, and they have paid almost nothing in rent (just $250,000 a year). They received all luxury box and concession revenues, took 75 percent of advertising and name rights, and pocketed a $46 million relocation fee.

Still more, political and civic leaders signed on to a deal that gave the team the right to opt out of a 30-year lease after 20 years—if the stadium no longer ranked in the “top tier” of NFL stadiums. As a result, the Rams may move as soon as 2016, but Saint Louis City and County and the state of Missouri are still on the hook for $120 million in remaining bond payments falling due between 2016 and 2021.

According to Forbes, the St. Louis Rams football team is now worth about $930 million. Experts say that the value of the franchise will jump to between $2.5 billion and $3.5 billion if the team moves to Los Angeles. Any such increase in value would more than offset the cost of building a new stadium in Los Angeles. Rams owner Stan Kroenke—a billionaire developer and the husband of Ann Walton Kroenke, daughter of Wal-Mart co-founder Bud Walton—has acquired a prime site in the city’s Inglewood neighborhood.

The city of Saint Louis and the state of Missouri are considering a brand-new publicly owned riverfront stadium, with still more luxury suites, high-priced club seats, scoreboard, and other amenities, aimed at meeting the most exacting NFL specs. It would cost close to a billion dollars, with local and state taxpayers picking up about 40 percent of the bill through publicly financed debt, state tax credits, and other means that would deplete local and state treasuries and leave less money for police, roads, schools, and other public needs.

However, there seems to be little public or political support for the project. A recent poll commissioned by the Missouri Alliance for Freedom shows that 70 percent of Missouri voters are opposed to public funding for the stadium.

In waving good-bye to the Rams, many Saint Louisans (this writer included) are therefore inclined to say “thanks for the memories.” We had “the greatest show on turf” for three years—with the 1999 Super Bowl champion, a playoff contender in 2000, and losing only in the final seconds of another thrilling Super Bowl in 2001.

Thirteen out of 32 NFL teams have never won the ultimate prize, and four have never made a Super Bowl appearance.

But as for public funding of a new stadium built mainly for the benefit of a billionaire owner and wealthy patrons, enough is enough.

Andrew B. Wilson is resident fellow and senior writer at the Show-Me Institute.

The post Super Bowls and the Super Rich: A Tale of Two Cities appeared first on Show-Me Institute.

But is government’s use of taxpayer dollars more successful than people making their own decisions?

Economist Enrico Moretti was interviewed on NPR’s Here and Now about his book, The New Geography of Jobs. He was asked about how successfully innovative regions are created and replicated [segment begins at 8:27]:

“[Interviewer] This is the unsettling part of your book: How do cities replicate these innovative job clusters?

“[Moretti] It’s very tough, because if you look historically where the innovation clusters are located, almost none of them [were] created by some deliberate, explicit policy. It’s really hard to engineer an innovation cluster. We talk about Seattle, but if you look at a lot of the clusters, they were all born in very random, often serendipitous, ways. So it’s really hard for policy makers to engineer from scratch.”

There is no magic formula known to bureaucrats or politicians about which companies and industries will be successful in the future. But they use public resources time and again chasing that white rabbit of jobs and growth. And unfortunately, the impact of taxing many businesses to subsidize a few is more often than not a recipe for destroying jobs, or at least keeping them away.

A better investment, as Show-Me has argued for years, is for government’s action to be broad and neutral: keep taxes low for everyone, maintain infrastructure, deliver necessary city services, and ensure quality education. Maybe those aren’t as appealing as large edifices named after politicians, but they are more successful.

The post How to Attract Jobs, or at Least Not Repel Them appeared first on Show-Me Institute.

What old-timey look at the past would be complete without a monorail light trail streetcar? Kansas City politicians are determined to employ 19th-century fixed rail transit, thinking wrongly that it will solve our problems. We’ve written extensively about why rail is bad for Kansas City. You can read about it here.

The most jaw-droppingly insipid claim is that such policies will draw the creative class. Never mind that there is no research to back up this claim — Kansas City already is rapidly becoming a fact-free city. In fact, a vocal proponent of streetcars who claimed to speak for millennials just announced that he is leaving Kansas City for the East Coast to seek greater opportunities. This supports the writings of my Show-Me Institute colleague: the so-called creative class goes where the jobs are, not to streetcars or airports.

Meanwhile, city officials view actual future-looking technologies such as those that Lyft and Uber provide with hostility because officials are mired in 19th-century protectionist cronyism. How are Kansas City officials going to react to the inevitable arrival of driver-less Google cars? Demand that cars undergo a background check? Require that each one contain a detailed street map? This is not forward-thinking; in fact, it’s not thinking.

Speaking of Google, Kansas City Mayor Sly James and others love to extol Google Fiber, as if Kansas City, Mo., won that national bidding war to bring them here a few years ago. We didn’t. We lost to Kansas City, Kan. We were just lucky enough to be next door. Kansas City, Kan., won because they demonstrated small and efficient government, not heavy-handed regulation and federal money.

In looking to create density downtown, city officials are falling over themselves to offer up any sort of taxpayer subsidy, handout, or corporate welfare package to bring density — sometimes just to move jobs two blocks. Yet they are unable or unwilling to deliver basic services to the rest of the city. This is not forward-thinking, it is urban cannibalism.

If Kansas City officials are serious about building a brighter future, they need to shed the city’s knee-jerk tax-and-regulate policies and start doing the few things a city can do well: maintain the streets and parks, fight crime, provide quality education, and do so while keeping taxes low. Then the city won’t need to pick winners — because the winners will come to the city on their own.

The post Kansas City’s War On The Future appeared first on Show-Me Institute.

To its credit, Burns & McDonnell isn’t seeking every tax break under the sun. “Greg’s first instruction to us was to find out what we needed to get the rents to be equal [to the company’s current headquarters] and stop there,” [Burns & McDonnell Director of Government Affairs Mike] Talboy says.

Or, as KSHB Channel 41 quoted Burns and Mac:

We are not requesting all the incentives that were available to us. Our goal throughout this process was to achieve a package that will allow us to pay fair market value.

Talk about adding insult to injury, after asking for millions of dollars in public subsidies, Burns & Mac wants to be lauded for not taking even more. This is modern crony capitalism: demand hard-earned taxpayer dollars and then expect us to act like you’re Andrew Carnegie.

Let’s be clear. Burns and McDonnell is asking for an enormous amount of subsidies, a.k.a., other people’s money, to build its expansion. The company is seeking a substantial Tax Increment Financing (TIF) package, a real estate tax abatement, a construction sales tax abatement, and probably more that I am missing.

Yael Abouhalkah writes in defense of Burns and Mac (in an overall well-balanced article):

One more thing: Kansas City politicians have approved far more expensive public subsidies — guaranteed by the city and gobbling up 100 percent of TIF revenues. Burns & McDonnell’s project is not city-backed, and it’s a 50 percent TIF.

TIFs are not intended to have the backing of local governments. The ones that are are exceptions, and damaging exceptions at that. So, no credit to Burns and Mac on that one.

The 50 percent claim is more disturbing. One hundred percent of subsidies for TIF are reserved for property taxes. State law limits sales and earnings taxes in TIF to 50 percent. But if you combine earnings and property taxes in the TIF, the company would have to either ask for a TIF far larger in percentage terms than the city normally approves, or it would have to hit its approximately $40 million TIF goal much quicker than 23 years.

Is there a solution that gives the company and the politicians the best of all worlds? Of course there is. Break aside the property taxes as part of a real estate abatement separate from the TIF, only use earnings (and the much smaller utility) taxes in the TIF, and then tell everyone you are making a sacrifice. Even though your subsidies will now last for two years more than they otherwise would have.

From the Kansas City Star (Chapter 100 bonds are the real estate tax abatement vehicle):

The plan includes $41.9 million in tax increment financing assistance over 23 years and a Chapter 100 bond that will save the company $41.8 million in property taxes over 25 years.

Read more here: http://www.kansascity.com/2014/05/14/5024360/burns-mcdonnell-headquarters-expansion.html#storylink=cpy

Real estate abatements are not generally given alongside TIFs, so let’s toss aside any notion that Burns and Mac is doing the city a favor by asking only for the “50 percent” earnings tax subsidy. This is $84 million in tax dollars the company will not have to pay. That means higher taxes for everyone else to pay for the services people need and want. (I admit that I don’t always agree with the “wants.”)

All this from a company that is proud to pay the earnings tax and gladly supported the effort to keep it in place. I can only imagine how much they would have asked for if they didn’t love paying the earnings tax so much.

The Show-Me Institute and others are not going to take our high school civics lessons and go home as long as modern-day corporate courtiers are abusing government authority to subsidize themselves at the expense of the taxpayers. Burns and Mac certainly has a Ph.D. in backroom cronyism.

Read more here: http://www.kansascity.com/2014/04/30/4993322/low-points-high-points-of-the.html#storylink=cpy

The post Burns and Mac Does Not Ask For Moon: NASA Calls Them ‘Responsible Corporate Citizen’ appeared first on Show-Me Institute.

That said, it must be noted that although Tesla is being wronged by the proposed amendment, policymakers would do well not to proclaim the heavily-subsidized company to be some spirit animal of the free market. Indeed, many businesses are quick to proclaim their love of the market while simultaneously marshaling special protections and subsidies to themselves. Tesla fits that description to a T; hit up that last link for a list of examples.

The Tesla episode reminds me of an old video featuring famed economist Milton Friedman. Asked some decades ago about who can save the free market, Friedman framed his response this way:

You talk about preserving the free market system. Who has been destroying it? The business community must take a large share of the responsibility. … You must separate out being pro-free enterprise from being pro-business.

The short video, which I commend to all of our readers, is below:

There is a difference between being pro-business and being pro-market. Clearly the proposed legislation would be pro-dealers; it would not, however, be pro-Tesla or pro-consumer.

The post Tesla, Car Dealers and Milton Friedman: The Problem of Protectionism and Cronyism appeared first on Show-Me Institute.

If you follow the work of the Show-Me Institute, you are aware (assuming you agree with us) how badly our state needs Tax Increment Financing (TIF) reform. TIF is severely damaging our state. It weakens the tax base, empowers government planners, encourages crony capitalism, encourages eminent domain abuse,  favors certain types of businesses over others, damages governments that depend on property taxes and have limited say in the decision (i.e., school districts), and all this for something that, in the end, does not succeed in growing the economy. But other than all that, TIF is great.

There are some important pieces of TIF reform legislation in Jefferson City right now. One of the better pieces is Missouri Senate Bill 774. The bill has passed out of the Senate and is now before the House. The most important thing the bill would do is further restrict how TIF dollars are spent in cases where local municipalities in Saint Louis, Saint Charles, and Jefferson counties override a county TIF commission’s decision against a TIF proposal. According to current law, the three above counties have county TIF commissions that make the choice on TIF, but cities have the ability to easily override the county TIF commission’s rejection. Small cities overriding the county TIF commission happens frequently in Saint Louis and Saint Charles counties (not so much yet in Jefferson County). The counties have tried to exercise discipline on TIF use, but small cities keep overriding their choice (Ellisville [initially], Shrewsbury, Saint Charles, etc.) and harming the larger community. Those new limits that SB 774 would enact are needed and would greatly benefit those counties.

The other good thing in the bill is that it adds Boone County to the list of the prior three where these tighter TIF rules would apply. There are great groups fighting corporate welfare in Boone County, and adding Boone to this list of counties is terrific.

Missouri needs TIF reform for all the reasons listed above and several more. Here’s hoping that the legislature will make this extremely important policy change for our state.

The post ‘Tis Time For TIF Reform appeared first on Show-Me Institute.

It makes your head spin! Two months ago, Gov. Jay Nixon vetoed a bill that would have provided some tax relief for all Missourians. Today he is calling for a gigantic tax cut — amounting to an estimated $150 million a year or $1.5 billion over the course of a decade — for one company.

The governor is hoping that would be enough to entice the Boeing Company to locate its 777X commercial airplane assembly plant in north St. Louis County.

In vetoing House Bill 253 earlier this year, Nixon went around the state arguing that cutting state income taxes for individuals and corporations would harm education and mental health. Where is the same concern today in offering a lavish gift to a single, deep-pocketed company?

If Boeing is short of the cash needed to build the new airliner, you wouldn’t know it from its generosity in compensating its top executives. In 2012 Boeing CEO Jim McNerney received $21.1 million in compensation — or 469 times the median family income in Missouri. J. Michael Luttig, the top lawyer at Boeing and a former federal judge, had $9.6 million in compensation in 2012 — or 214 times the median family income in Missouri. No doubt the Boeing general counsel is highly skilled in minimizing taxes (Boeing reportedly paid no federal taxes from 2008 to 2010) and maximizing tax rebates and other forms of corporate welfare.

How much should a state (and Missouri is just one of about a dozen states waving fistfuls of cash in trying to get Boeing’s attention) be willing to pay a company like Boeing to open a plant and create jobs?

Nixon is urging Missouri lawmakers to adopt a special tax package that would pay Boeing up to $75,000 per job per year — based on annual subsidies of $150 million spread over a minimum requirement of 2,000 jobs. No doubt that will strike some observers as money well spent — given much higher subsidy costs in other areas, such as solar energy, where federal subsidies have exceeded $350,000 per job.

Nevertheless, there are good reasons for being strongly opposed to the Boeing package.

First, it is crony capitalism and a misuse of taxpayers’ money. It makes the same mistake that many cities and town have made in cutting deals for Walmart and other big-name retailers that are not available to smaller retailers in the same community. It unfairly and unwisely diverts scarce resources to businesses with the biggest and most powerful lobbying organizations.

Second, tax credits are not free money. Our state government is supposedly straining to meet its current commitments. Every dollar that is given away in tax credits is a dollar that the state government must replace with cuts in current programs, or — more likely — increased taxation.

And third, there is a better way to promote business and job growth. Instead of chasing after Boeing and other corporate behemoths with more hand-outs, Missouri lawmakers should do something truly innovative: They should lower taxes across the board for all Missourians. That way, growth can occur organically, and in ways that politicians and lawmakers cannot even begin to anticipate.

Andrew B. Wilson wrote this article in his position as a resident fellow and senior writer at the Show-Me Institute, a free-market think tank based in St. Louis.

The St. Louis Business Journal carried a version of this op-ed in the December 13, 2013, edition.

The post Missouri Should Say No to Boeing Subsidy appeared first on Show-Me Institute.

So there is no misunderstanding the dynamic at play here, the liberal groups promoting these stories are supported by special interests who, like their free-market counterparts, fund what they tend to believe in. In this case, what these liberal funders “believe in” generally works out to be cookie-cutter reports attacking state-based think tanks nationwide. To each her own. To be clear, that the progressive network has well-heeled supporters doesn’t bother me a bit. The Left has its patrons — check out this revealing chart from 2008 — and the free-market movement has its patrons. The Left has populist supporters; we have populist supporters.

What baffles me is why any reporter would think this “leaked” document about pension grant proposals is some sort of revelation about the Show-Me Institute, or even think tanks generally, because little if any of it is surprising even to a casual observer of the policy world. Probably the most chuckle-inducing example of the article’s shallowness is this section (emphasis mine):

Although Show-Me is open about its conservative viewpoint, the summary of the grant proposal provides a glimpse into how the non-profit charity organization works and is evidence of its ties to larger, national organizations such as the State Policy Network [SPN].

“Evidence of its ties”? The Show-Me Institute is and has been listed as a member of SPN on SPN’s own website for as long as I can remember. The way it’s being portrayed here, it’s as if the Show-Me Institute or SPN have tried to conceal the fact that we know each other and intermittently share resources. It’s like saying a letter from Kansas City Chiefs CEO Clark Hunt to NFL Commissioner Roger Goodell is “evidence of the team’s ties to the NFL.” Uh, yeah. And? Even the document that’s cited in the main article reveals that the Show-Me Institute hasn’t received even a wooden nickel from this particular grantor since at least 2009. So, what’s the story again?

And I hate to have to spell this out, but the Show-Me Institute is composed of free marketeers, not intellectual nihilists. The market-based diagnosis of the pension problem is pretty straightforward when you just look at the basic facts: defined benefit pension programs tend to hurt both the state and, in the long run, many pensioners, by cutting out market forces that would diversify risk to both the pension provider and the beneficiary. Just ask Detroit; just ask Detroit’s pensioners. That analysis doesn’t require a complete intellectual build-out from nothing, and even a cursory dive into the subject of defined benefit pensions produces an incredible amount of data from which an institution or researcher could start a well-founded and intellectually honest project.

Which is, of course, all beside the point of this story. This wasn’t so much about informing people as it was about promoting a very caustic brand of bad-faith politics — an attempt by the Left to cast aspersions on free marketeers rather than fight these important policy fights on the field of ideas.

It’s pitiable that this is the best the Left has to offer to Missourians. Heck, just look at Progress Missouri’s silence on the cronyism of the Boeing deal, which we’ve roundly criticized in print and on the airwaves over the last week. What’s their excuse for hiding rather than fighting this latest case of corporate welfare? What do they really stand for? What do they really believe in? We’d all like to know.

What does the Show-Me Institute believe in? Free markets. Who do we believe in? You. People are the market. We believe in, seek, and promote free-market solutions because we trust our fellow Missourians and Americans to make their lives and our lives better. They’re people-powered solutions. They’re solutions that work. That premise is what under-girds this organization, and I suspect our opponents find this bottom-up philosophy to be a startling threat to their top-down sensibilities — a sensibility that can’t even drag itself out of its hole to engage even an obvious and bipartisan instance of cronyism.

The post The Sorry State Of The Professional Left In Missouri appeared first on Show-Me Institute.

These are our resolutions for 2013:

1. Ask not what government can do for you; ask what you can do for yourself — without being a burden to others. Recognize, and encourage others to recognize, the grave danger that is posed by a supposedly “caring” government which is in the habit of making promises it cannot keep.
2. Do not go quietly into the dark night of buying into arguments about “fairness” and “social justice” as an excuse for the limitless expansion of government. You will be accused of being heartless, cruel, just plain stupid, or worse. But do not let others define you, or dismiss you — when they are the ones who press ahead in ignoring the lessons of history, common sense, and genuine humanity.
3. Always keep in mind that our history and form of government (unlike many other hopeful but fleeting “democracies”) were not built on the proposition of One Man, One Vote, One Time. The great debate in the U.S.A. about the size and scope of government did not end with the 2012 elections. But the proponents of big government are seeking cloture — attempting to discredit and marginalize those who continue to believe in liberty, limited government, and individual responsibility as the essential pillars of democratic self-rule and human progress.
4. Write out — and be prepared to defend — your own Declaration of Independence against the prevailing orthodoxies of the Hollywood/academic/media elite, who favor every kind of “free lunch” — whether it is universal, “free” health care or universal, “free” college education even if it means severely limiting individual choice, undermining quality, and raising the real costs of health care and higher education.
5. Do not shy away from the battle of ideas as it continues to evolve inside your own family, your circle of friends and acquaintances, your community, and the state of Missouri. Ideas have consequences, and it is time to consider the catastrophic consequences of thinking it is possible to expand government spending and mandates without destroying jobs and economic growth — and condemning young people to the bleakest of futures. You only have to look at the extraordinarily high rates of unemployment and under-employment among young people in much of Europe (the nations teetering on the brink of bankruptcy) to appreciate the magnitude of the threat.

There is solace in the wisdom of our Founding Fathers, who looked upon anti-federalist sentiment at the state and local levels as an important bulwark in an enduring democracy. They used the words “the states” and “the people” interchangeably. Thus, the 10th Amendment, the final element in the Bill of Rights drafted in 1789 as part of the U.S. Constitution, famously states: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”

We the people can begin to reassert the principles of liberty and limited government by stopping the growth of crony capitalism (and crony unionism) at the local and state levels which occurs when officials award tax credits, Tax Increment Financing (TIF), and other subsidies to politically favored businesses and constituencies.

Along with other states, we in Missouri can say “no” both to the expansion of Medicaid in our state and to the creation of a state-run health insurance exchange that would implement the hugely expensive, deeply flawed, and greatly unpopular Affordable Care Act (aka Obamacare).
The battle for liberty, freedom, and responsible self-government continues. Indeed, it is never-ending.

Andrew B. Wilson is a resident fellow and senior writer at the Show-Me Institute, which promotes market solutions for Missouri public policy.

The post Five New Year’s Resolutions for Enhancing Liberty – And Pulling Back from the ‘Fiscal Cliff’ appeared first on Show-Me Institute.