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Help Build a Legacy of Liberty in Missouri

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A Free-Market Guide for Missouri Municipalities is a multi-part series by David Stokes, director of municipal policy at the Show-Me Institute, offering practical, free market–oriented reforms for improving local government across the state. Each installment focuses on a core area of municipal policy—combining real-world examples, historical  context, and academic research to help cities, towns, and villages better serve residents and taxpayers.

The second installment, A Free-Market Guide for Missouri Municipalities, Part Two: Taxation, examines the sources of municipal revenue in Missouri and evaluates the state’s heavy reliance on sales and income taxes. It makes the case for rebalancing local finance by placing greater emphasis on growth-oriented taxes like property taxes and more targeted sources such as user fees, while reducing reliance on volatile and distortionary taxes. Topics include land taxes, special taxing districts, user fees, local gas taxes, and the economic consequences of tax subsidies like TIF. The report offers practical recommendations to make local tax systems more stable, transparent, and conducive to long-term prosperity.

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Friedman, one of the foremost proponents of free-market principles, advocated for school choice as a means to improve education for all. His idea was simple: by giving parents the ability to choose, schools would be forced to compete for students, thus driving innovation and improvement across the board. The PPI report supports this theory, demonstrating that competition doesn’t just help the students in charter schools but raises the overall standard of education in a city.

The report highlights that when a critical mass of students attend charter schools, the pressure on traditional public schools to improve becomes undeniable. This pressure results in better outcomes for students of all socioeconomic backgrounds, particularly those from low-income families. It’s a compelling validation of the core free-market belief that competition drives quality.

Critics often argue that school choice drains resources from public schools, but the data in PPI’s report suggest otherwise. Instead of diminishing public schools, competition enhances them, as they are compelled to adapt, innovate, and meet higher standards.

As we continue to debate education reform in Missouri, this report serves as an important reminder: competition and choice, far from being threats to public education, are key drivers of improvement. By expanding options, we give all students a chance to succeed, fulfilling Milton Friedman’s long-standing belief in the power of choice.

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Would that be a fair game, or even fun? Of course not. But this version of Life is reality for many Americans. Where people grow up—their zip code or place on the game board—significantly affects their chances to succeed as adults.

Without a doubt Americans, rich and poor, are much better off now than they were a hundred years ago thanks to unprecedented economic growth made possible by the free enterprise of individuals and pro-market political institutions. Nevertheless, economic mobility, or the ability to move up the income ladder, varies for children depending on where they live, and these disparities have consequences—both for children growing up in low-income families and for the rest of the state.

A recent pair of essays from the Show-Me Institute digs deeper into the data on poverty and upward mobility in Missouri and asks what, if anything, can be done to break cycles of poverty. The solution is not simply to expand entitlement spending; America has been increasing welfare benefits for over 50 years, and it’s time to change our approach.

While child poverty is decreasing in Missouri—the percentage of children in poverty dropped from 22.6 percent in 2012 to 18.6 percent in 2017—child poverty rates in Missouri range from single digits, as in St. Charles County, to over 40 percent in St. Louis City. Moreover, data on economic mobility suggest that about one-third of children born into low-income homes in the areas surrounding Cape Girardeau, Poplar Bluff, Kansas City, and St. Louis will remain in poverty as adults.

Searching for solutions to this problem is important primarily so children in poverty have more opportunities for a better future; but Missourians should also be aware of the economic impact of lifelong poverty on the state and taxpayers. Based on economic mobility data for Missouri, roughly 77,800 people who were poor as children in the late 1980s will remain poor throughout their adult lives and will collect a conservatively estimated $15 billion in lifetime welfare benefits as a group.

Having a safety net is important, but could Missouri find a better way to invest these public dollars to help people move up and out of poverty? One promising possibility is the improvement of our education system through competition and innovation to better meet the needs of low-income students.

Data show significant gaps in test scores between low-income students and their peers on the National Assessment of Education Progress (NAEP) and the ACT college entrance exam in Missouri. While quality education cannot be measured by standardized test scores alone, these results do tell us that low-income students are less likely than their peers to have mastered the basic academic skills that will enable them to be successful in college or their chosen career.

Thankfully, Missourians can look to other states for examples of programs that help students from low-income families be successful, including specialized vocational high schools and emergency grants to help low-income college students stay enrolled. Whether by helping low-income kids to get a jump-start on a career of their choice or by better ensuring that they can get through college, Missouri should move toward an education system that meets the diverse needs and interests of these students though innovative schools and programs.

No single reform to education or any other policy area will end cyclical poverty. State leaders and policymakers do have the opportunity, however, to prioritize free-market solutions that enable people to provide for themselves and their families and help create surer pathways to prosperity.

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The legislature was right to reject the Medicaid expansion for a number of reasons—among them, the program's patient access and health outcome problems and its soaring cost to taxpayers. But one of the most important arguments against expanding welfare to the unimpoverished was captured by Ronald Reagan in testimony to Congress nearly 50 years ago. Reagan's admonition that "[w]e should measure welfare's success by how many people leave welfare, not by how many more are added" is probably the best-recognized line from that speech. But I'd like to quote another sentence that is at least as important:

It doesn't seem right to reduce a man's take-home pay with taxes and then send him a government dole which robs him of the feeling of accomplishment and dignity which comes from providing for his family by his own efforts.

It's a bad idea to create a new class of welfare recipients and graft them into a broken program like Medicaid, but it is an especially bad idea to substantively change the standard for who is supposed to be receiving welfare to begin with. Medicaid is broken, but even if it weren't, government shouldn't be freshly yoking millions of able-bodied Americans to the welfare state. 

Reform-minded free marketeers should look for ways to empower workers and widen their opportunities. Unfortunately, in too many ways, the "Affordable Care Act" does precisely the opposite. Congratulations to the legislature for holding firm against Obamacare.

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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.

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Although I could cite a host of Friedman literature on the subject of taxes, I’d like to just highlight one interview he did in 2003, at the age of 90, with John Hawkins. Asked whether “the Bush tax cuts” were the “right thing” to do, Friedman replied that he was “in favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it’s possible.“

The reason I am is because I believe the big problem is not taxes, the big problem is spending. The question is, “How do you hold down government spending?” Government spending now amounts to close to 40% of national income not counting indirect spending through regulation and the like. If you include that, you get up to roughly half. The real danger we face is that number will creep up and up and up. The only effective way I think to hold it down, is to hold down the amount of income the government has. The way to do that is to cut taxes. [Emphasis mine.]

Creep, indeed. Ten years later in Missouri, supporters of Gov. Jay Nixon’s tax cut veto have delivered a parade of horribles about what will happen if the legislature overrides the governor’s veto and Missourians get tax relief. They claim (among other things) that the state will have to leave bills unpaid and cut education, its bond rating will decline, dogs and cats will live together… in short, mass hysteria. No, public education funding won’t be eviscerated by giving the People back their money, and as to the bonds, of course it wasn’t a tax cut that imperiled Missouri’s rating earlier this year. It was … the prospect of new government spending, specifically in the Medicaid program. That’s an inconvenient fact which, in all the bluster about credit ratings, veto/Obamacare supporters hope you forget.

That’s because it’s all interconnected. Missouri’s tax cut opponents don’t want taxes cut because less tax revenue would prevent them from maintaining and growing the size of state government — whether they say it explicitly or not. It was spending, not tax cutting, that imperiled our bond rating this winter. And if I might repeat Friedman’s words here, “The only effective way I think to hold [the government’s size] down, is to hold down the amount of income the government has. The way to do that is to cut taxes.”

Friedman was right. If you support smaller government, you support tax cuts. And in my view, if you support bigger government but don’t want to say so, you make excuses instead. I think Missourians are tired of excuses.

The post Opposing Tax Cuts, Supporting Bigger Government, And The Wisdom Of Milton Friedman appeared first on Show-Me Institute.

Seriously, we have openings for full- or part-time internships. If you are interested in free-market economics and Missouri public policy, please consider applying.

Disclaimer: The part about the U.N. is a joke.

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I thought that we as a state were making steady progress toward that end. As I see it, there have been a number of real pluses:

• Over the past couple years, the Missouri legislature responded to a challenging fiscal environment with responsible spending cuts, as opposed to harmful tax increases;
• Missouri is home to a robust Tea Party movement; and
• Missouri fielded a bumper crop of candidates espousing strong free-market principles during the November 2010 mid-term elections.

But now I am wondering how much progress we have really made — given what seems to me the complete abandonment of principle by some self-described conservatives in the legislature. These so-called conservatives have thrown their support behind the proposed bill to grant $360 million in tax credits for the supposed purpose of creating a “China Midwest Hub” or “Aerotropolis” at Lambert-St. Louis International Airport.

This legislation — which may be considered at a special session of the legislature in September — would spawn the largest tax credit subsidy in Missouri history.

The proposed bill is also the epitome of bad public policy. Let me count some of the ways that it fails the test of serving the public good:

• It would take from the many (basically, all Missourians who pay income taxes, as individuals or businesses owners) and give to the few (mostly to owners or developers of warehouses and real estate in designated areas near the airport, some of whom have already received or are in line to receive substantial tax credits);
• The legislation is being rushed to a vote in the absence of anything resembling a serious cost-benefit analysis — and in the absence of any proof the Chinese government or ANY major air carrier is committed to a plan to turn Lambert into a major air cargo hub;
• It therefore represents a huge (and completely misplaced) leap of faith in the ability of our legislators to outsmart and outthink the marketplace in putting taxpayers’ money at risk.

In a positive development earlier this year, top business leaders in the Kansas City metropolitan area called on the governors of Missouri and Kansas to declare an armistice in a senseless “border war” over the use of economic development incentives to poach jobs from one side of the state line to the other. The two-way traffic of companies chasing tax credits has depleted tax revenues in both states without a net increase in wealth or employment. We should all give thanks for this outbreak of common sense.

Now, however, supporters of the Aerotropolis legislation would have us believe that it will create thousands of jobs in the Saint Louis metropolitan area and generate nearly $34 billion in economic activity over a 20-year period — paying back the original investment in taxpayers’ money more than 100 times over. Why, then, is the smart money (private capital) staying on the sidelines? Why hasn’t it acted on its own — given the supposedly fabulous returns cited by supporters?

The answer is clear: The underlying economics is not there. Heavily promoted “investment opportunities” predicated on tax credits or other subsidies are almost always accidents waiting to happen.

A dozen or so years ago, we were told that subsidizing a new runway at Lambert would bring new traffic, and it didn’t. We were also told the Mid-America Airport — deeply subsidized on the Illinois side — would bring huge traffic. Now there is just one subsidized cargo flight a week out of the entire airport.

Karl Marx (not normally someone I quote) said that history repeats itself, “first as tragedy, then as farce.” Let’s hope that history is not about to repeat itself with the misconceived and hugely expensive Aerotropolis legislation.

R. Crosby Kemper III is chairman of the Show-Me Institute, an independent think tank promoting free-market solutions for Missouri public policy.

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Several weeks ago, Ira Glass opened his nationwide hourlong “This American Life” program with a satiric interview about one of the defining elements of Nixon’s leadership: his whirlwind trips around Missouri to celebrate state-funded job creation schemes.

Glass described his visit to a plant that made fishing reels, “to announce not hundreds of jobs, or dozens of jobs, but eight jobs,” Glass marveled. “Eight! He did a press event for eight jobs!”

At this point, Nixon chimed in, saying, “That’s not the smallest we’ve been to, either. We actually did one in north Missouri where we created one job.”

“And you showed up?” Glass asked, laughing in disbelief.

Nixon affirmed that he had. A program that he initiated had given a low-interest loan to a woman in Bethany. This enabled her to move her T-shirt printing business from her basement to a storefront, and to hire a single employee.

“This is what it’s come to, America,” Glass hooted. “You can hire your very first employee, and the governor shows up with TV cameras.”

At the Show-Me Institute, we have pointed out the flawed thinking behind a wide variety of schemes intended to promote job creation and economic development — ranging from big-budget Hollywood movies to plans for building an “Aerotropolis” in and around Lambert-St. Louis International Airport.

A total of $4.5 million in tax credits were issued to the makers of the George Clooney film Up in the Air, as an enticement for filming a large part of the movie in the Saint Louis area. How much good did that do for job creation and the local economy? Almost none, it seems. According to the casting call, extras were compensated only $7.05 per hour before taxes, and they worked all of one day.

In the Missouri legislature, there is support from both parties for an enormous tax credit bill that would subsidize the construction of $300 million worth of new warehousing space in and around the Saint Louis airport, while doling out another $60 million in tax breaks for freight forwarders. Nixon backs the proposed legislation, which may be raised at a special session of the legislature later this year.

Proponents say the extra warehousing space is needed for processing cargo going to and from China. However, as we pointed out, there are acres and acres of unused warehousing space in and around the airport. So, why are our lawmakers in a hurry to build more warehouses? Especially when there is no commitment from China to support the project?

Politicians will often argue that even one job created through tax credits or subsidies is better than none. To think in this way, however, is to engage in single-entry bookkeeping — counting jobs gained but ignoring jobs lost because of higher taxes or the burden of increased public indebtedness. Add to that the misallocation of resources that always occurs when power-hungry or publicity-seeking politicians, rather than paying customers, decide what is to be produced and who should produce it.

Our state government is already straining to meet its current commitments. Every dollar that is given away in tax credits is a dollar that our state government must replace by increasing taxes or making cuts in current programs.

“Being governor of the state is not a theoretical job,” Nixon said at a recent press conference. “It is a very practical job.” Here, then, is some practical advice for our governor: Get out of the job-creation business. It’s doing more harm than good.

Andrew B. Wilson is a fellow with the Show-Me Institute, an independent think tank promoting free-market solutions for Missouri public policy.

The post How (Not) to Create Jobs: Some Advice for Gov. Jay Nixon appeared first on Show-Me Institute.

If the director of the airport did indeed help introduce the bill that has gone before the Missouri legislature, as she asserted, there are serious questions she needs to answer. Contrary to her implication, the Aerotropolis legislation’s original price tag was not $360 million, but $480 million, which included tax credits for the payment of $120 million in interest costs for the building of warehouses.

For somebody who seemed particularly interested in Webber’s rhetorical precision, Hamm-Niebruegge’s obscuration of the original cost of the bill as she introduced it is revealing. She should have been more forthright about the details of her bill.

To her credit, Hamm-Niebruegge admits that warehouses would be fully eligible for $300 million in tax credits, in support of a projected maximum of eight flights per week — a meager result for such a large amount of taxpayer money.

More importantly, though, Hamm-Niebruegge has failed to explain why the legislation specifies that Missouri would restrict the $300 million in Aerotropolis warehouse subsidies solely to new warehouses located on 100 contiguous acres, in urban redevelopment areas, within the boundaries of the airport, or in areas managed by a port authority. Those strange provisions demand an explanation. Hamm-Niebruegge says that she helped introduce the legislation (original price tag: $480 million); she had the opportunity to explain these preferential carve-outs here, but declined to take it.

We doubt that there is a practical explanation. The 100-acre stipulation and other requirements serve only to limit the individuals that could have access to the tax credits, and it is disheartening that the executive director of an airport would be concerned with making sure that only a few politically powerful individuals and businesses would be eligible for hundreds of millions in state tax money.

Hamm-Niebruegge says that the proposed bill’s provisions “require that investment or export activity take place before the application for tax credits.” This is incomplete. A close reading of the legislation reveals that owners of these newly built warehouses who use two modes of commerce — perhaps road and rail transportation — could qualify for the Aerotropolis tax credits. Owners of the comparable refrigerated warehouses would qualify in this way, as well. There is no requirement in the legislation that those warehouses store any amount of international cargo. Is the purpose of the Aerotropolis tax credit legislation to encourage international trade, or is its purpose to subsidize warehouse construction?

Hamm-Niebruegge optimistically writes that the $300 million in warehouse tax credits could result in millions of square feet of new warehouse space, yet she does not mention the approximately 18 million square feet in developed warehouse space already vacant in the Saint Louis area. Why does the state need to subsidize the construction of more warehouse space if, as market research from CB Richard Ellis has shown, a great deal of space is already available? Again, we are disheartened by the possibility that public officials are in such a rush to subsidize the owners of vacant land that they fail to consider the considerable existing supply of warehouse space.

Proponents of the Aerotropolis subsidies, including Hamm-Niebruegge, point to an eight-page study commissioned by the St. Louis Regional Chamber and Growth Association (RCGA) purporting to show that the $300 million in warehouse construction tax credits would result in economic activity worth billions. We were disappointed, but hardly surprised, that the RCGA study failed to consider the cost of taking $300 million from all Missourians in order to award it to a favored few. Aerotropolis proponents fail to understand that tax credits are not free money. 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 — through increased taxation.

Let us be clear: The Aerotropolis dream of attracting international trade to a region is by no means a poor one. In fact, increasing trade among countries is one of the best ways to improve economic welfare. However, we are concerned that the dream is being used as an excuse for public subsidy.

If the Aerotropolis dream is viable, as Hamm-Niebruegge states, where are the private investors clamoring to make a substantial positive return? The absence of such investor interest without heavy subsidy reveals that the “big idea” pushed by Hamm-Niebruegge, other public officials, and industry lobbyists is in trouble — with or without this extraordinarily problematic legislation that the director helped introduce.

Patrick Ishmael and Audrey Spalding are policy analysts at the Show-Me Institute, an independent think tank promoting free-market solutions for Missouri public policy.

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The Eagles couldn’t have written a more succinct fiscal description of the $300 million hotel that Kansas City officials want to build downtown, a project likely to be backed in some way by the city’s taxpayers. But Kansas Citians shouldn’t let themselves be captive to another “big idea” pet project promoted by its political class, and should press city officials to drop the plan.

Consider where the hotel would be built: between the recently expanded Bartle Hall Convention Center and the recently constructed Power & Light District (P&LD). City leaders, including Kansas City Convention and Visitors Association President Rick Hughes, hoped Bartle’s 2004 expansion would double the number of conventions the city hosted each year.

Yet conventions haven’t doubled.

The P&LD now has the city on the hook for $10 million in public subsidies each year until 2033, because the district’s present revenues aren’t sufficient to fund its existence.

Even Bill Lucas, president of the city’s hotel steering committee, can’t guarantee that the project wouldn’t be a financial sinkhole. “We’d about have to double our convention bookings” to make the hotel feasible, Lucas recently said.

Let’s recap: 1) The Bartle expansion was supposed to double the number of conventions the city booked, but didn’t. 2) The P&LD was supposed to revitalize downtown, but is now draining millions each year from the budget. 3) As Mayor Sly James put it in February, a hotel is now being proposed to “offset some of the problems” in the P&LD. 4) But, in order to save the P&LD, the hotel needs Bartle … to double its convention bookings.

And around we go.

The project doesn’t make sense on an economic level, either. The fact that private actors haven’t built this hotel suggests that there isn’t a market for one. Moreover, if subsidies from city officials distort Kansas City’s hotel market by giving preferential treatment to the project, existing hotels will see business siphoned away. That isn’t economic growth; that’s economic suffocation.

The project is simply a bad idea. If taxpayers want to avoid getting trapped in their own freshly built Hotel California, they should instead force their political class to book them at the Hotel Free Market. I hear it’s a lovely place. Much less expensive, too.

Patrick Ishmael is a policy analyst at the Show-Me Institute, an independent think tank promoting free-market solutions for Missouri public policy.

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At the 11th hour, legislators tacked on this misguided proposal to another bill that would limit tax credit expenditures. The end result is a 330-page bill that would accomplish little other than take benefits from some — in this case, the low-income elderly — and instead award benefits to private developers in Saint Louis.

In a recent state Senate committee hearing on the China Hub subsidies, Sen. Ron Richard opined, “I’ve got business people and friends of mine that live in Saint Louis that are begging for something new and creative. So we take a chance.” Unfortunately, when he advocated trying something new and creative, Richard did not suggest that the state create an environment that encourages all Missourians to be creative and entrepreneurial. His plan entails quite the opposite: gambling hundreds of millions of dollars, and leaving Missouri taxpayers on the hook.

The China Hub subsidies have three critical problems. First, the bill rests on the flawed notion that legislators are all-knowing, and that they have the ability to successfully pick and choose the industries, types of employment, and goods and services that should exist in Missouri. Second, the state government is already short on funds, and it cannot afford to give away hundreds of millions. Revenue lost to tax breaks for favored industries would need to be replaced by increased debt, reduced government spending, or — more likely — imposing a higher tax rate for all of Missouri’s less fortunate taxpayers.

Third, there has been no in-depth study of the costs and benefits of the proposal, nor do we know the level of commitment from foreign firms. The Saint Louis Regional Chamber & Growth Association recently released an eight-page brief about the China Hub subsidies, but it is by no means in-depth. It merely extends the unsupported assumptions that were built into the legislation.

Major questions remain to be answered. In particular: What’s the rush? We don’t know with certainty what the legislation will cost, or what business it may bring. Why should state government pick an economic winner, when it has such a poor track record for doing so? Also, how do we know that cargo warehouses have the ability to boost the Saint Louis area economy?

Legislators like Richard have a hunch, and they want taxpayers to bear the risk. As Harvard economist Edward Glaeser notes: “Too many officials in troubled cities wrongly imagine that they can lead their city back to its former glories with some massive construction project …”

Unfortunately for taxpayers, the strategy taken by state legislators is not a new one — nor is it effective. The China Hub subsidies rely on the same old policies that the legislature has tried before. Why will this time be any different? Within the last decade, we spent $1.1 billion on a new runway at Lambert, and it sits largely unused. Missouri lawmakers say that they want to rein in tax credits, but then turn around and award even more.

If lawmakers were serious about “taking a chance,” they would do something that is actually new and different, such as reducing the state income tax or eliminating tax credits altogether. This would create a more favorable playing field for all businesses — not just a select few. Is there anything creative and new about subsidizing the construction and operation of warehouses?

The best way for Missouri to grow the economy is to provide a business climate that encourages individuals to develop new ideas. If government officials genuinely want to try a new strategy, they should stop attempting to control the state economy from the top down. Creating another layer of bureaucracy — no matter how well-intentioned — will only impede this creativity and stifle growth.

Entrepreneurs in Missouri will seize upon the opportunities around them as soon as the government gets out of their way.

Christine Harbin and Audrey Spalding are policy analysts at the Show-Me Institute, an independent think tank promoting free-market solutions for Missouri public policy.

The post The ‘China Hub’: Another Flight of Fancy? appeared first on Show-Me Institute.

The problem is, the LRA seems to have done more to thwart development than to encourage it. During the past four decades, the LRA has accumulated a larger and larger inventory of vacant properties in Saint Louis, while rejecting many offers from private individuals and small businesses to purchase selected properties from the agency.

The agency’s most frequently stated reason for turning down so many offers has been that the property in question is “being held for future development” — as if some unknown savior will come along at a future date to undertake a massive development that will require scores of vacant parcels in a single swoop.

In acting in this way, the agency has ignored a basic rule of thumb: When you are in a hole, stop digging. The LRA’s holdings of vacant properties have climbed from 2,000 in the early 1970s to more than 9,000 today. It has turned the derelict status of much of the city’s housing stock into an unchanging and seemingly permanent condition. Remarkably, more than half of the parcels that are now owned by the LRA have been in the agency’s possession for well over a decade.

If you want to know the full story of how this happened, I urge you to visit showmeinstitute.org and read our study of the LRA, “Standstill: Is St. Louis Hindering Development by Waiting for Large-Scale Miracles?” It illustrates the fallacy that a public agency can work miracles by substituting its judgment for the far more detailed knowledge of the marketplace.

The LRA now works in relative obscurity, seldom attracting much attention. Still, though, it wields the same extraordinary powers originally granted to it by the Missouri legislature 40 years ago. We believe that a review of both the practices of the LRA and the authorizing statute are in order.

The LRA’s actions spring from the same impulse that has led to the abuse of eminent domain laws: a lack of regard for the rights and interests of small landowners, and the assumption that government officials know better than private citizens how best to use or dispose of their property. Action by the Legislature is needed to help address this problem, with a view toward reversing the LRA’s longstanding practice of hoarding land and toward establishing standards for disposal of property that will ensure its availability for private use.

To better serve the public interest, the LRA should stop trying to pick winners and losers in the market for vacant land. It should accelerate the sale of tax-delinquent properties to private individuals and businesses who are willing to purchase it.

By making it more difficult for people to buy land in the city, the government discourages city living. It is little wonder that the city is still hemorrhaging residents.

Brenda Talent is the executive director for the Show-Me Institute, an independent think tank promoting free-market solutions for Missouri public policy.

The post Saint Louis Agency May Be Hindering Development by Hoarding Vacant Land appeared first on Show-Me Institute.

For visitors unfamiliar with the Show-Me Institute, first add us to your blog reader. Second, the Show-Me Institute is a free-market think tank based in Missouri, focused on promoting limited-government ideas. I’d check the “About Us” page for a more comprehensive explanation of the institute’s objectives, but I’ll highlight this tidbit in particular:

The work of the institute is rooted in the American tradition of free markets and individual liberty. The institute’s scholars seek to move beyond the 20th-century mindset that every problem has a government solution. Instead, they develop policies that respect the rights of the individual, encourage creativity and hard work, and nurture independence and social cooperation.

Not much to add beyond that. Like I said, bookmark us and come back often. We’d love to hear about what’s important to you and what you think of our work.

Finally, I’d like to send a quick thank you to Hot Air, a place where much of my work and research has appeared during the last couple of years. It’s one thing to explore the patterns and intersections of politics and policy in a vacuum; it’s another to pursue those interests in full view of Hot Air’s gigantic audience, gaining not only feedback from those who read the site, but also feedback from the consummate professionals who run it. To Ed, Allahpundit, and everyone that made and makes the site “go,” thank you for the invitation and opportunity to contribute at Hot Air. To Hot Air’s readers, thanks for the feedback — and for not (always) separating my head from my neck each time you disagreed with me.

So, to old friends, welcome. To new friends, glad to make your acquaintance! And I’ll see you all again soon, back here in the same space.

The post Who Am I? What Is the Show-Me Institute? And a Thank You to Hot Air appeared first on Show-Me Institute.

During the debate surrounding the 2006 minimum wage law, the Show-Me Institute released a study by University of California, Irvine, economist David Neumark showing that minimum wage laws decrease employment among unskilled workers and prevent them from acquiring the skills they need to climb the socioeconomic ladder. When the minimum wage increases, businesses respond by hiring fewer low-wage employees. The employees who keep those jobs are more likely to be teenagers from relatively affluent families than minority workers from poorer households.

In essence, a higher minimum wage destroys jobs for the most vulnerable workers in the labor market and redistributes a portion (but not all) of the lost wages to workers who frequently live in families that make more than four times the poverty level. Neumark’s thorough review of the literature demonstrated that a 10-percent increase in the minimum wage (about 70 cents, at present) caused teenage employment to drop by 1 to 2 percent and increased poverty by three quarters of a percent. It is a peculiar type of anti-poverty program that throws poor people out of work.

A 1994 study by economists David Card and Alan Kreuger purported to show an increase in employment in New Jersey’s fast food industry after the passage of a higher minimum wage. However, Card and Kreuger relied on telephone surveys for their employment information. Subsequent studies using payroll documents from the restaurants themselves showed that employment fell after the minimum wage was increased, just as standard economic theory predicts.

Business owners generally do not employ people or give employees raises out of the goodness of their hearts — nor could they, without bankrupting their enterprises. If the government forces a business to pay workers more than the owner believes their labor is worth, those workers will soon be out of a job. Wages do not rise because of government mandates, they rise as workers acquire more skills and create more goods and services at lower costs. We can boost wages across the board with improvements like better education or greater investment in technology, but simply waving the wand of government and expecting low wages to rise magically is no solution at all.

John Payne is a research assistant at the Show-Me Institute, an independent think tank promoting free-market solutions for Missouri public policy.

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Year end is a time to reflect — and to think ahead. In the holiday spirit, the Show-Me Institute has compiled a list of five New Year’s resolutions for state officials, to promote better government for 2011 and beyond. Taken together, these policy changes have the potential to propel Missouri’s income and job growth into the front ranks.

First, lose weight. The Nov. 2 election showed that the overwhelming majority of Missourians (and Americans generally) want smaller, less intrusive government and reduced taxes. Missouri legislators should therefore unite to kill pork barrel spending projects and make major spending cuts.

Municipalities need to rein in runaway pension costs for city employees, including firefighters and police. They should also consider privatizing the provision of water, electrical power, and other services. The Show-Me Institute has produced a wealth of research demonstrating the benefits of privatization, which creates much-needed cash through the sale of public-owned assets and contributes to municipal revenues through the addition of new taxpaying entities in the private sector. Research shows that privately owned utilities consistently provide more efficient services than their public-sector counterparts.

Second, stop meddling in other people’s business. The Show-Me Institute has spotlighted the proliferation of needless licensing requirements that do nothing to promote public safety in businesses as different as home heating and air conditioning work (HVAC) and African hair-braiding. Such requirements are often promoted by established businesses as a means of inhibiting competition and choice.

Third, give families real school choice. Our research has consistently shown that education is improved when parents and students are given more choices and traditional public schools face greater competition from charter and virtual schools. Adjusted for inflation, we spend four times as much for education in urban areas today as in 1960, but educational achievement is no higher. Today, the Saint Louis and Kansas City school districts spend more than $15,000 per pupil — more than all but the most expensive private schools. Charter schools provide a real opportunity for poor students stuck in failing schools. They also enable teachers and administrators to innovate more freely, and force other public schools to improve their performance in order to compete successfully.

Fourth, halt the silly business of awarding specialized tax credits to favored enterprises. In one of my op-eds about the inanity of tax credits for favored industries, I pointed out that government policy should not prefer filmmaking over, say, hog farming, “simply because one is considered to be more glamorous.” Most of the local jobs created by Missouri film productions like Up In the Air were both low-wage and temporary — many lasting only a single day. Missouri should do away with its development tax credit programs, which have a record of failing to boost either income or employment — even if you do like George Clooney.

Last but not least, repeal the state income tax and replace it with a broader sales tax. The adoption of such a plan in 2011 would be the single most important step that Missouri could take to move Missouri to the front of the pack in terms of growth. The noted economist Arthur Laffer, who spoke at the Show-Me Institute in October, observed that during the past decade, the nine states without a personal income tax have “outperformed those states with the highest personal income tax rates by 26.5 percent, and have outperformed the U.S. average by 20 percent.” Even more impressive, those nine states “outperformed Missouri by a whopping 41.5 percent.” Eliminating the income tax would encourage people to work and save more, crucial factors for economic growth. A broader sales tax can also be balanced with mechanisms that would compensate those with lower incomes for any potentially regressive effects.

In the past, it has often seemed that major changes originate on the coasts and slowly make their way to the heartland. I think that flow has been reversed during the past year and a half. I believe that Missouri — and the heartland — will play a leading role in our nation’s economic recovery. We will do so through a renewed commitment to free enterprise.

Christine Harbin is a policy analyst for the Show-Me Institute, an independent think tank promoting free-market solutions for Missouri public policy.

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