I want to make it clear that I do not want to outlaw wine in Missouri. However, it troubles me that taxpayer money is subsidizing the wine industry. Specifically, the Missouri Department of Agriculture spends $1,828,859 (click on HB 6-Agriculture and scroll down to page 133) on something called the Missouri Wine and Grape Board.

According to the Department of Agriculture’s 2012 Budget Request Form (click on HB-6-Agriculture and scroll down to page 134), “The Wine and Grape Board stimulates growth of the grape and wine industry for the economic and social benefit of the citizens of Missouri.” Aspects of the board’s functions include using funds to “develop programs for growing, selling, and marketing of grapes and grape products grown in Missouri.” Indeed, the Missouri Wine and Grape Board does have marketing products, including brochures, videos, and radio advertisements. The Wine and Grape Board also funds the University of Missouri Institute for Continental Climate Viticulture & Enology in order to fund grape research programs.

So, in essence, the board serves somewhat like a chamber of commerce for the Missouri wine and grape industry. However, unlike a chamber of commerce, participation in this program is mandatory, with a charge of a 12-cent excise tax on every gallon of wine sold in the state. Also, in all my searches through the state budget, I have yet to encounter an official appropriation for a private chamber of commerce.

I have to ask, why can’t Stone Hill or Hermannhof promote themselves with their own money? Why can’t there be a private chamber of commerce that promotes the wine industry, or all the wineries of the state? I have no problem with private groups promoting wineries, but do I think the state should be promoting them? No.

Also, there is no evidence that this expenditure actually DOES have a positive impact on the state’s wine industry. In my search, I haven’t seen anything to suggest that the Missouri Wine and Grape Board has a discernible impact on the Missouri wine industry. Even the economic development report on the Missouri Wine and Grape Board website doesn’t really show the spending cause and effect; it just shows that in recent years, Missouri wineries are doing well. However, it doesn’t link the activities of the board to the wine industry’s success.

The key issue here is funding priorities. Why is the state funding this board, at least at its current level, when there are other places in the budget that may require that money? If the choice for appropriators is between potentially laying off teachers, firing firemen, or withholding funds from vital social services, shouldn’t every area of the state budget come under review for potential savings? Just my 2 cents.

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The state of Missouri, like most states in the Union, is faced with the difficult task of balancing the budget. The article gives some examples of reforms on the federal level, where the savings to taxpayers wouldn’t be “poultry.” However, I will focus on one particular reform mentioned in the article because it has relevance to state spending. The reform in question is to shuck subsidies for ethanol.

The state also has a long list of its own ethanol incentives and the budget impact of these ethanol incentives is not insubstantial. In fact, ethanol subsidies account for 37% (click on HB 6-Department of Agriculture, page 81) of the fiscal year 2011 Missouri Department of Agriculture budget. In the not-too-distant past (FY 2010), it has amounted to 58% (pages 43 and 55) of the Department of Agriculture budget. Considering the dollar amounts involved and the percentage of the Department of Agriculture’s budget that state ethanol subsidies take up, it would be prudent to ask whether the state is serving the taxpayers well by investing in ethanol subsidies.

The Show-Me Institute has researched the effects of ethanol on Missouri and I would encourage everybody to give the case study a gander. Considering the other negative consequences the Show-Me Institute mentioned in its case study, it would seem that ethanol subsidies should be a ripe target for the budget cutter’s scythe. Before making the really difficult decisions on where to cut the budget (like deciding between laying off teachers or closing down mental health centers), wouldn’t it be great if the state could go after the low-hanging fruit? Just some food for thought.

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Gov. Jay Nixon is travelling to Taiwan later this month, and a gaggle of subsidized special interests is tagging along. From a news release from the governor’s office:

Joining Gov. Nixon on the trade mission will be First Lady Georganne Nixon; David Kerr, director of the Missouri Department of Economic Development; Jon Hagler, director of the Missouri Department of Agriculture; and senior leaders from the Missouri Chamber of Commerce and Industry; Missouri Soybean Association; Missouri Corn Growers Association; Missouri Rice Council; Missouri Energy Development Association; Missouri Biotechnology Association; Boeing Corporation; Pfizer; Advantage Capital Partners; and other major industry associations and businesses.

All else being equal, increasing the exportation of subsidized Missouri goods will have the negative effect of forcing Missouri taxpayers to subsidize the consumption of their trading partners.

How does this work? Let’s say that the price of a particular good on a store shelf is $5. Let’s also say that that the production of that good received $2 in government subsidy. (The production of agricultural and technological products is subsidized at the federal, state, and local levels.) That means that the total price of the product to the domestic consumer is $7. When the foreign consumer purchases this same good, he pays the $5, but because he does not contribute tax monies to subsidize the production of the good, domestic taxpayers still pay the $2 in subsidy.

Missourians would be able to achieve higher overall levels of productivity and consumption if they focused on profitable non-subsidized economic activity and then engaged in voluntary trade with others. Eliminating agricultural subsidies would have positive consequences because taxpayers would be able to keep more of their earnings. This is because they would not be forced to continue to prop up agricultural industries so that they produce at a level that’s higher than optimal, nor would they be forced to subsidize the consumption of foreign consumers.

If public officials are serious about promoting economic growth in Missouri, they should avoid public policies that remove wealth from the regional economy.

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To help combat this problem/issue, the editorial suggests, we (of course) need a government solution. This is where I start to disagree:

Recognizing the value of animal health professionals, USDA Rural Development has contributed $500,000 to a partnership with the Missouri Department of Agriculture to create a business plan and pilot program for an educational institution to train veterinarians. The program will focus on skills specific to treating food animals.

Like many things, this problem does not need a government solution. In fact, strict licensing of veterinarians may be one of the reasons we have a shortage in the first place. Furthermore, the veterinarians (via their licensing board) are actively involved in maintaining that general supply shortgage, as evidenced by the ongoing lawsuits against horse-teeth floaters in Missouri. As Dave Roland wrote:

Missouri’s Veterinary Medical Board has sued to prevent horse owners from hiring anyone but licensed veterinarians from working on their animals’ teeth. Equine dentistry is a centuries-old profession that veterinarians traditionally avoided, and equine dentists have their own educational programs that offer far more training and experience with horses’ teeth than is offered in veterinary schools. Nevertheless, the law states that equine dentists must be punished with a $1,000 fine and a year in prison for every horse they treat.

Basic economics tells us that the solution to a shortage is: 1) higher prices or salaries; and, 2) reduced barriers to entry. If we make it easier to be a veterinarian (or vet tech, or horse teeth floater) and allow for the market demand to increase prices or salaries for vets who work on farm animals, this shortage will solve itself.

(Note: Don’t take this as a call to completely eliminate all licensing for veterinarians. There are many worse examples of unnecessarily licensed professions than vets. But there are changes that can be made — expanding the role of vet techs, for example — that would reduce the role of government and allow the market to solve this problem.)

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Some line items in the Department of Economic Development’s budget:

The stated purpose of this department is:

The Business and Community Services Division consists of the Missouri Economic Research and Information Center (MERIC), Marketing, Sales, Finance, and Compliance Teams. The division promotes Missouri as a great place to do business and helps create an environment that will stimulate jobs and new private investment. Other services include various programs aimed at investing in Missouri’s communities to allow for future sustainable growth and to increase opportunities for new local and state revenues.

The keys to Missouri’s recovery from the current economic recession are: 1) job creation and new capital investment through the retention and expansion of existing Missouri companies and the recruitment of new job opportunities; 2) the development of a skilled, motivated, and productive workforce; 3) support for the development of innovative and high tech next generation industries; and 4) leveraging state and federal funds for community development.

This department’s function is in line with suggestions floated in a St. Louis Post-Dispatch article series last week, titled “Can St. Louis compete? Time to act is now.” The first two points in the last article of the series were about attracting young, educated people to live in Saint Louis. It focused both on those who come here for school and those who have left to go to school elsewhere. The article suggested a publicity tour of sorts that would herald Saint Louis’ good characteristics to other cities, and might entice people to live here.

Attracting educated young people does not take a publicity campaign. Young people will come to Saint Louis — and stay here — if there are jobs. Jobs will come to Saint Louis if the area provides a good business environment, with low taxes and amenable employment structures. Show-Me Institute scholars have suggested policies that would make create a more business-friendly economic climate, like eliminating the earnings taxes in Saint Louis and Kansas City, or eliminating the income tax statewide. Respectively, eliminating those taxes would entail a 1- or 6-percent raise to employees — income that can then be spent on goods and services. Lowering tax rates in general (rather than targeting lower rates through the use of distortionary tax credits) would help attract businesses and jobs, and subsequently young educated people. (One additional benefit of lower tax rates is that it would not be necessary to fund million-dollar publicity programs.)

The publicity campaign has it backwards, attempting to bring young people to Saint Louis in order to attract more business. Bring the business and jobs to Saint Louis, and young people will want to stay.

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One category of spending that showed a huge increase was “professional services,” which jumped from $8,000 to $428,000. The main component of this increase is “attorney services,” which cost the office of the governor $401,281. I did a quick Google News search to see if there was any media coverage explaining this increase, but no luck. Attorney services are probably necessary in some capacity, so the question is: What specifically is responsible for this steep escalation in spending?

Another large portion of this budget increase is funding for travel, which grew from $53,000 to $281,000, the largest amount spent on travel since 2000:

According to an article in the Columbia Missourian from last June, state flight records show that Gov. Jay Nixon flew on about 50 days during his first four and half months in office. As the article notes, this adds up to about one flight every three days. I have to wonder whether this amount of travel is really necessary. What’s more, the article in the Columbia Missourian also notes that Nixon has frequently charged the cost of his airplane travel to other government agencies. The governor’s explanation, when asked about this back in June, is that during these particular trips, he spent time highlighting the issues that are handled by those various other departments. Maybe this is justified in certain circumstances, but on one particular occasion, 11 different state offices, including the Departments of Agriculture and Revenue, split a $1,295 bill so that the governor and the first lady could fly to the Missouri-Kansas basketball game on March 1 (their host was Kansas Gov. Kathleen Sebelius). Even if this is deemed to be a necessary expense, which seems unlikely given the current economic climate, why wouldn’t it fall under the governor’s office travel budget?

The almost sevenfold increase in the total budget for the governor’s office is inconsistent with his claims of fiscal responsibility in the State of the State address. And the current governor isn’t the only one who has overseen questionable budget increases; there was a dramatic spike in the 2006 travel budget of former Gov. Matt Blunt, as well. The lesson here is that Missourians should keep a watchful eye on government finances, and that it is important for all Missouri officials to examine their budgets carefully in order to eliminate unnecessary expenses.

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Senator Crowell writes:

Both the director of Missouri’s Department of Agriculture and the Missouri Farm Bureau disagree with the tax Commission’s decision, warning that a tax increase could be extremely damaging to Missouri’s farmers as they work in this struggling economy.

I certainly agree with that. Now is not the time to make food more expensive, and it may never be the right time to do that via tax policy. However, sometimes in the interest of setting proper valuations on which to base property taxes, some people will see their taxes rise while others see them fall. It is important to remind people that some agricultural property would see its assessments — and, thereby, taxes — fall as a result of this study.

I’ll emphasize that I support preventing this new assessment system from going into place, but let’s not pretend for a moment that farm taxes are high in Missouri. That acre of farmland producing valuable commodities that the farmer will sell would only have been valued at $1,270 per acre. That does not entail a tax of $1,270 per acre; as explained nicely here, the tax rates would only be based on that valuation. A tax rate of $7 per hundred dollars of assessed valuation (about average for St. Louis County; it is probably lower in rural Missouri) leads to a property tax of $10.67 per acre — not very much. At that rate, it would take more than 400 acres of the most productive farmland in Missouri to equal the property taxes we pay on our 1/4-acre lot for a starter home in suburban University City. So, keep the taxes as they are; just don’t tell me farmers face a heavy tax burden in Missouri.

If we should be lowering taxes on any one area in Missouri, it should be on commercial/manufacturing property.

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And, yes, you should be allowed to sell raw milk in Missouri, provided it is clearly marked as such.

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The Missouri Department of Agriculture is asking for grant applications from organizations or groups of individuals who have ideas for making the state’s specialty crop industry more competitive.

Okay, so the free market didn’t literally bite anyone on the nose, but I’m entitled to bloggers’ license.

The Department of Agriculture is looking for competition in the wrong place. The market for food is not completely competitive, because of numerous subsidies and regulations. If the department wanted to rectify this situation, it would need to get out of the way and let the market work, not hand out more money. When the government gives out grants, it picks winners and losers, which is what consumers do in a free market.

Like “sustainability,” “competition” is invoked as justification for favoring some producers over others. The grants won’t increase competition within the industry, but they will give some producers an advantage when they compete with others.

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