They say that the best time to plant a tree was 20 years ago, and the second-best time is now. That about sums up my opinion on the City of St. Louis’s one-percent earnings tax, the continuation of which is before St. Louis voters on the April ballot. The best time to start phasing out the earnings tax really was 20 years ago, and the second-best time is still now.

The 20 years in the saying is particularly appropriate in this case, as the Show-Me Institute released its first study on the earnings tax almost exactly 20 years ago. Professor Joseph Haslag, then at the University of Missouri, documented how the earnings tax reduces overall income and employment in the city by encouraging businesses and individuals to locate outside of the city. Additional studies conducted by Show-Me Institute analysts and others have found similar results regarding the harms of local income taxes generally.

Haslag didn’t just demonstrate the harm of the earnings tax; he also recommended a strategy to replace it in order to maintain necessary city services. Haslag suggested changing state laws to allow St. Louis to institute a land tax, which is simply a property tax on the value of the land only. Pittsburgh is one city that had beneficial results from implementing land taxation in the 1980s. Alas, while land taxes are popular with economists and fiscally beneficial, they are politically unpopular to say the least. Needless to say, land taxes have never been adopted in St. Louis (nor has state law been amended to allow them). But the harms of the earnings tax have continued to help drive St. Louis’s population and economy lower, and those fiscal harms were exacerbated during the pandemic.

An easier change (legally, if not politically) than a land tax would have been to start phasing out the earnings tax 20 years ago while increasing a combination of property and sales taxes over time to replace the lost revenues (while cutting spending where possible as well). Poor decision-making over the past two decades has made that already-difficult change almost impossible. Damaging special sales taxes such as community improvement district (CID) taxes are now ubiquitous throughout shopping areas in the city. Primarily used as a smokescreen for harmful corporate welfare, CIDs and other special sales taxes have driven sales tax rates sky high. While the sales taxes have gone up, commercial property values have plummeted. According to the St. Louis Business-Journal, downtown St. Louis office buildings have lost 19 percent of their assessed value since 2019, and even more if you go back further. The largest office building downtown, the AT&T building at 909 Chestnut, paid $5.5 million in property taxes in 2009. It paid just $200,000 in 2024. While that is the most extreme example, similar examples can be found throughout downtown.

The economic situation in the city was already bad, and the tornado that hit in May made it even worse. It was the type of disaster that could make people consider radical changes, and perhaps the land tax is the type of radical change the city needs. (For the record, the Show-Me Institute’s offices were destroyed in the tornado, and while we’re a nonprofit, our office building is subject to property taxes.)

As large parts of the Central West End and the Northside are still recovering from the tornado, St. Louis city government has commendably allowed homeowners with damaged homes to reduce their tax payments, but the long-term impacts on city tax revenues may be significant. The population of New Orleans still hasn’t recovered from Hurricane Katrina and, while the damage to St. Louis was not that severe, the risk is the same.

I suggest it is time to change state law to allow for a land tax, including on land owned by larger “nonprofits” like Barnes Hospital. The land tax could be imposed on the value of the land throughout St. Louis at a level that would gradually increase to make up for revenue lost as the earnings tax is phased out over a period of 10 years (or more). (Other changes would be necessary, including ending the tax subsidies the city gives out.) What makes land taxation so beneficial is that as homeowners and businesses rebuild their damaged property, they aren’t hit with higher taxes for the home or building. The tax is set to the land, which can’t be altered, rather than the building. So, return to the city, rebuild your home or business, make it even larger—do whatever you want—and you won’t be punished with higher taxes.

Pittsburgh in the 1970s was experiencing economic difficulties just as St. Louis is now. Land taxation helped spur investment in Pittsburgh, and it could have the same effect on St. Louis. The city has been hemorrhaging population, jobs, and wealth for decades. Honestly, at this point in its history, what does St. Louis have to lose?

The post It’s Time to Phase Out the Earnings Tax. Honestly, Nothing Else Has Worked . . . appeared first on Show-Me Institute.

“The entire region should be outraged by this because what happens in the central business district, the economic engine and heart of the St. Louis region affects us all. It affects our national reputation. It affects what businesses consider St. Louis when exploring options for their headquarters. Most importantly, it affects each of our families. Downtown St. Louis is the region’s Downtown. We all own it. We all deserve to feel safe visiting the many assets that can only be found in the heart of our city.”

Of course, violent crime is nothing new to Saint Louis, and downtown is far from the most dangerous neighborhood in the city. However, safety problems in the CBD tend to generate much more response than similar crimes in other areas do. Saint Louis leaders are eager to defend the “heart” of Saint Louis, and to call on the whole region to support the downtown.

But what exactly is Saint Louis’s CBD the heart of? Certainly not the region’s population. As we’ve written before, Saint Louis’s downtown actually has a lower population density than areas farther away from the core, like the Central West End. Furthermore, the region’s population is extremely dispersed, with large sections of the population living more than 20 miles from city hall. The Saint Louis metropolitan area is region with more than 2.8 million residents, only a few thousand of whom live downtown:

What of the CBD’s status as the business heart, or the economic engine, of Saint Louis? Today, less than 1% of the region’s annual payroll comes from businesses in the CBD. If we look at the zip codes that contain Saint Louis’s CBD, we find that areas in Saint Louis County, specifically Chesterfield and Creve Coeur, contain more businesses, contain more employees, and generate higher payroll than downtown. Looking at the maps below, we don’t see an economically dominant CBD surrounded by bedroom communities; instead we find dispersed areas of high employment. These areas include a broad central corridor that contains the CBD (but also Clayton and the Central West End) and a highly productive corridor in West County along I-270 that has more businesses and higher payrolls. The Saint Louis economy is so geographically dispersed that it might be difficult for a person not familiar with the region to locate downtown from economic data alone:

What of culture? The Saint Louis CBD has the Arch grounds. It also has the Scottrade Center, museums, libraries, theatres, and a sculpture garden. And of course, it has Busch Stadium, home to the Saint Louis Cardinals. For decades, the Saint Louis region as whole has poured tax money into amenities downtown, from the Dome formerly known as Edward Jones to the Arch grounds. Even as population and business activity left downtown, very few publicly funded civic projects were considered for any area but downtown (Forest Park being a notable exception). If public monuments, sports stadiums, and astro-turfed urbanism are all there is to culture, certainly downtown is unrivaled.

Whether or not Saint Louis’s downtown is truly its cultural heart, the region is undeniably diverse and dispersed. People live all over and work all over the map. To look at the region realistically (and plan for it effectively), we have to understand that St. Louis’s CBD is just one neighborhood among many, and we need to stop pretending that it has the economic and demographic dominance it did at the turn of the 20th century. Whether the problem is crime or economic growth, we’re unlikely to find a way forward when we can’t admit where we are.

The post Saint Louis’s Central Business District: The Heart of What? appeared first on Show-Me Institute.

TDDs are small taxing districts that collect property or sales taxes and spend that money on transportation-related projects. We’ve been largely critical of TDDs in the past, because:

. . . TDDs are ad-hoc specially created taxing districts with idiosyncratic boundaries. They are created through what is not a normal democratic procedure (see “qualified voters” and flexible district boundaries), with boards that are not elected in the normal sense.

Most TDDs opt to collect sales tax dollars instead of property taxes, allowing the micro-districts to export taxation. However, as TDDs proliferate, it becomes increasingly difficult for a resident to know how much they are getting taxed and where that money is going, even in their own city.

There are situations where using TDDs or other small taxing districts may be appropriate. For instance, we wrote favorably about the use of a Community Improvement District (very similar to a TDD) to build a causeway in the Lake of the Ozarks. In that instance, the district had: 1. A clearly defined and much needed improvement (a causeway); and 2. Virtual unanimity among those who would be taxed.

As things stand, the downtown TDD fails to meet these criteria. What critical transportation improvement requires the TDD? According the chief executive of Downtown STL, “We don’t have a definite proposal but we know what the needs are. . . .” Reportedly, projects could include pedestrian improvements, security cameras, and/or supporting a “development spine” to Midtown. In addition, Downtown STL has long pushed for a streetcar; setting up a TDD is a common first step toward that goal.

Because the TDD will charge sales taxes, unanimity among taxpayers is already out of the question. City/county residents from outside the TDD who come downtown for a Cardinals game or Ball Park Village (both of which city and state taxpayers subsidize) will have no vote on the matter. But even within the district, business owners are not all on board. Cardinals ownership is opposed, and hotel representatives point out that they already have a very high tax rate—17 percent—and visitors’ complaints are mostly about safety, not transportation.

When it comes to downtown Saint Louis, there are plenty of taxes in place to pay for necessary street improvements. There are also elected representatives who are empowered to manage those resources. Residents should think twice about giving an unelected group what amounts to a $4.5 million taxpayer budget without that group articulating a clear, non-controversial plan. 

The post Group Pushes for Higher Downtown Taxes appeared first on Show-Me Institute.

Read the full testimony:

The post The Use Of Tax Increment Financing In The City Of Saint Louis (Downtown) appeared first on Show-Me Institute.

Consider 4634 Cottage Ave., pictured below in August 2010. Until 1999, it was in private ownership following its construction in 1906. A sign reading “Private Property NO TRESPASSING” hangs ironically on one of the building’s boarded door openings, a vestige of the structure’s past life as an income-producing property.

Today, the multi-family dwelling is in a perpetual state of decay because of its status a property owned by the Land Reutilization Authority (LRA).

Private owners in a free market have vastly different incentives than do government agencies to ensure the health and vibrancy of assets under their control.

This month’s meeting of the LRA Commission will be held on Wednesday, Oct. 27, at 8:30 a.m. in the board room of St. Louis Development Corporation, on the 12th floor of 1015 Locust St. in downtown St. Louis.

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The Tax Credit Review Commission held its regional meeting in a veritable monument to the tax credit programs they review: the Old Post Office building in downtown Saint Louis. It’s borderline poetic. From an article by Brian Hook in the Missouri Watchdog:

The DESCO Group and DFC Group developed a plan, using tax credits, to restore the [Old Post Office] building in 2000. The Missouri Court of Appeals, Eastern District, moved into the building in 2006.

Steve Stogel, co-chair of the Tax Credit Review Commission, is president of DFC Group in St. Louis.

Additionally, some individuals cited in their testimonies a recent study from Saint Louis University that evaluates the historic preservation tax credit program. After I delivered my testimony, co-chair Chuck Gross even handed me a paper copy.

The SLU study has a peculiar list of financial supporters:

DFC Group
Downtown Council of Kansas City
Kansas City Port Authority
Missouri Growth Association
Missouri Municipal League
Partnership for Downtown St. Louis
Urban District Alliance of Springfield

Listed first is DFC Group, which is co-chair Stogel’s company. The other organizations are groups that receive direct, concentrated benefits from tax credit programs. The Missouri Growth Association, for instance, is a trade association of commercial property owners, managers and developers. Also well represented in this list are city bureaucrats, a group with incentives to grow the size of government.

Isn’t this the very definition of a conflict of interest? How can the Tax Credit Commission evaluate the effectiveness of these programs objectively and fairly if its leadership uses tax credits to earn a living? How can the commission have sound judgment if it bases its decisions on studies for which the leadership paid?

The post The Definition of a Conflict of Interest appeared first on Show-Me Institute.

Pictured above in August 2010 is the 1818 Washington Ave. Building in downtown St. Louis. Paired main entry doors punctuate the center of the building’s primary facade, while four ground-level storefront bays are at right. A pizza restaurant occupies this retail space, displaying a bright red-on-white background “Now Open” sign, in addition to handsome neon signs for Bud Light and Bud Light Lime.

Two blocks to the southwest, at 2001 Olive St., a one-story building features plywood boards over the entirety of its glazed area. Permanent signage for the pizza place remains atop this building, while a banner reading “We Will be Relocating to 1818 Washington Ave. July 1st, 2010,” with red lettering on a white background, hangs from a ground-level storefront bay at left.

In a truly competitive free market, the story would end here: A business moved from one building to another. So what?

As this business relocation occurred in St. Louis city, however, legislated market distortion and an administrative exercise in symbolic violence likely contributed to the outcome pictured above.

On the legislative front:

Ordinances 67319, 67462 and 67463 designated 1818 Washington Ave. as a redevelopment area, executed a redevelopment agreement between the developer and the city of St. Louis, and authorized “$2,380,000 Plus Issuance Costs” in Tax Increment Financing (TIF) notes for the construction of 1818 Washington and another nearby project.

On the administrative front:

In addition to TIF, the 1818 Washington project stands to utilize “Federal and State Historic Tax Credit programs.” Combined, they could yield up to 45 percent of the project’s costs in tax credits for the developer — 20 percent for the federal credit; 25 percent for the state credit. (The building is a contributing resource in the “Lucas Avenue Industrial Historic District (Boundary Increase),” after all.)

In a free market, favorable lease terms or a street address on the vaunted Washington Avenue could prove enticements enough for a business to relocate. In St. Louis city, we are instead left to ask what role public monies are playing in a business location decision, and whether associated municipally approved TIF legislation is actually legal.

Missouri TIF law states the following in §92.805(4), RSM0:

For redevelopment projects or redevelopment plans approved after December 23, 1997, if a retail establishment relocates within one year from one facility to another facility within the same county and the governing body of the municipality finds that the relocation is a direct beneficiary of tax increment financing, then for purposes of this definition, the economic activity taxes generated by the retail establishment shall equal the total additional revenues from economic activity taxes which are imposed by a municipality or other taxing district over the amount of economic activity taxes generated by the retail establishment in the calendar year prior to its relocation to the redevelopment area;

If the pizza restaurant succeeds at growing its revenues dramatically at its new location, the rehabilitated building’s developer will prosper as government loses funds that it would receive were the restaurant not in a TIF district. Had the rehabilitated building attracted a business truly new to St. Louis city, government would receive a greater share of the TIF project’s associated revenues.

Subsidizing projects that displace economic activities from one site to another is a losing proposition for cities and their residents. In St. Louis city, the elimination of TIF would allow our community to awake from its current nightmare of ever-increasing taxes and instead move us toward broadly shared prosperity, courtesy of the free market.

The post Now Open, but So What? appeared first on Show-Me Institute.

Brian R.: Urban decay and poverty is a problem that has been ignored in Missouri for far too long. As governor, what will you do to stimulate positive economic activity and lift people out of homelesness and poverty in North St. Louis and Kansas City? Additionally, how do you plan to address rural poverty?

Sarah Steelman: That is a very good question. I believe that any economy, including local economies, have to be allowed to grow themselves. One of the main problems in both Kansas City and St. Louis is the earnings tax. This 1% tax is levied nowhere else in Missouri. In St. Louis, you need look no further than the hole next to Busch Stadium to know that the status quo is not working. In addition, no major corporate headquarters has moved to downtown St. Louis in 50 years. The state should support economic growth in our cities.

She is just on fire this afternoon, isn’t she? The earnings tax is a terrible idea, and should be eliminated in both Kansas City and St. Louis. As Steelman notes, the earnings tax deters businesses, as well as people, from moving into affected areas. If tax revenue is needed, there are much less distortionary means to raise it, such as through a tax on sales or on the value of land.

The post More Steelman appeared first on Show-Me Institute.

[Director of Development Chase Martin] attributed the delay to negotiations with Clayton-based Centene Corp.
after the company announced in September it would relocate its
headquarters to the Ballpark Village site.

This being the same Centene that wowed downtown officials in September with the announcement that they would be moving their headquarters and employees into the city to anchor the new development. This also being the same Centene that, four months prior, lost a judgment at the Missouri Supreme Court that prevented them from seizing "blighted" land in downtown Clayton through the power of eminent domain.

Any chance those two were related?

Now, however, negotiations between Centene, the Cardinals, the city, and Cordish Co. (the developer) are threatening to delay the project even further, to the point where completion is not expected until the beginning of the 2014 season, and officials are worried that the project may not even be under way when Busch Stadium hosts the Major League Baseball All-Star Game in July, 2009.

On one hand, this story brings up the positive side of what can happen when property owners stand up for their rights. Centene, which almost certainly would have built its new headquarters in Clayton had it been given the approval, will act as a major cornerstone in the continued revival of downtown St. Louis.

On the other hand, the last thing that I want to hear over the loudspeakers when I’m standing on the street outside the left-field fence during the Home Run Derby is Joe Morgan telling Chris Berman, "Hey, look at that big vacant lot across the street. That coulda been something really nice, but these people wouldn’t let a company build a building for some reason and they had to move and now it’s just a big ol’ pit. SWING AND A FLY!!!"

Let’s hope that doesn’t happen.

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The county library has its headquarters and a branch near Kirkwood. They provide better service and parking, Allin said. The county library benefits from economies of scale — and its 14-cent tax rate is lower than the Kirkwood library’s, he said.

Liz Walker, my counterpart in Kirkwood, offers a number of retorts:

Liz Walker, chairwoman of the library’s trustees, on Thursday said the tax increase would preserve "a huge asset for all citizens of Kirkwood. It’s convenient, and it brings in people from all parts of the community."

I think that a having a public library in the heart of a downtown area really adds something to the area, such as in the University City Loop, Downtown St. Louis and Downtown Clayton.  I also think that the property tax increase proposal is going to be a victim of bad timing, coming a few months after voters approved another tax increase and a few days after voters will have received their property tax bills in the mail.  But speaking of timing, the voters and citizens of Kirkwood could always consider selling off their municipal utilitites, which would give the city and its taxing districts a number of options moving forward. (Thank you to the Missouri Political News Service for hosting my latest op-ed.)

The citizens of Kirkwood get to decide between some obvious choices: higher taxes and a quality library right in the heart of their downtown area, or lower taxes and a reduction in local libarary services, which may or may not be offset by the presence of two county libraries nearby. I am not going to presume to tell the voters of Kirkwood what they should do, but I look forward to following the debate and decision.

The post Kirkwood, Tax Rates, and a Well-Timed Op-Ed appeared first on Show-Me Institute.

The last three projects alone required 334.7 million dollars in local, state, and federal subsidies and tax breaks, but that’s not the point. The point is that everyone wants to move downtown!

But is that true? Would anyone be relocating to downtown without the generous corporate welfare handout from city hall, Jefferson City, and D.C? Has the city done anything to clean up the crime, or is St. Louis still considered to be the “most dangerous city in America”? And what about the public school system? Is student performance on the rise in St. Louis, or does it continue to decline? And does the city no longer levy umpteen additional taxes and fees on city dwellers that country residents are exempt from?

Of course, the answer is no. Policymakers believe they can revive a city by redistributing wealth to large corporations in order to spur development, while ignoring or relocating slums. But the truth is that cities flourish when citizens rally behind a source of community and culture — not because they have shiny edifices to look at.

Our own Joe Haslag, who is quoted in the article, sums it up well:

"The market does a pretty good job of getting your city out of the doldrums, as opposed to the quick fixes of subsidies and tax incentives," said Haslag, a research fellow with the Show-Me Institute, a fiscally conservative think tank based in Clayton. "But from a political standpoint, these things are pretty attractive tools, and you understand the incentive to use them."

I would love for downtown St. Louis to be a nice place to live. But the truth is that until city officials recognize the real reasons why the city has declined during the past 50 years, they will never be able to revive it. Unfortunately, though, city planners are generally of the mindset that “if you build it, they will come.”

The post “City of Dreams” appeared first on Show-Me Institute.

Both of the options being considered currently:

Under one plan, Illinois would shoulder the cost of building a companion bridge to the Martin Luther King Bridge. Under another, a private group would pay for and build a bridge and collect tolls ranging from $1 to $6.

are preferable to earlier proposals.  The toll road idea is excellent.  I believe the fears of Illinois politicians are overblown, as most of their voters will remain on the free bridges while many of the same trucks that so often tie up those bridges will choose the new toll road.  Time is money in trucking, and toll expenses are tax write-offs. 

The MLK  companion / addition is also a good idea.  As anyone who had crossed the MLK knows, it is a little tight in the turns.  Making the current bridge all eastbound and adding new westbound lanes on a connected bridge will significantly improve flow into north downtown and onto 70 westbound. 

The final option I like, not discussed in the article, is expanding MetroLink into Madison County.  St. Clair County residents in Illinois use MetroLink more than any other demographic group in the area.  Going north from Fairview Heights to add a line and stations in Collisville and Edwardsville would serve many commuters who work in Downtown St. Louis and greatly reduce traffic.   Any of these three proposals will cost Illinois a great deal of money and Missouri little to none.  So I can’t really understand why Missouri’s reps on the Council all voted against the companion bridge proposal when they are not being asked to pay for it. 

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