TO THE HONORABLE MEMBERS OF THE COMMITTEE

Thank you for the opportunity to testify. My name is Elias Tsapelas, and I’m the Director of State Budget and Fiscal Policy at the Show-Me Institute, a nonprofit, nonpartisan, Missouri-based think tank that advances sensible, well-researched, free-market solutions to state and local policy issues. The ideas presented here are my own and are offered in consideration of proposals that will affect tax credits in Missouri.

Senate Bill 1079 consolidates Missouri’s existing film and series production tax credit sub-caps into a single $16 million pool for both, leaving the state’s total commitment the same. The only substantive effect of the bill would be to give the Film Office more flexibility in how the same dollars are allocated. That flexibility does not address the fundamental problem with this program.

Current and Past Tax Credit Failures

Despite the Missouri film tax credit’s recent revival, our state has a long history with this troubling incentive. Until its sunset in 2013, Missouri’s previous iteration made promises similar to what supporters are touting today. Missouri’s own Tax Credit Review Commission recommended the credit be eliminated because it served too narrow an industry and failed to provide a positive return on investment.¹

Research confirms that pattern holds nationally. Film tax credits have not resulted in job growth, have not affected market share or industry output, and have produced only short-term wage gains for those already in the industry.² Credits in many states generated just cents on the dollar. As one Tax Foundation analyst notes, “non-favored activities and businesses remain on the hook to bear the full impact of the state’s tax code.”³

The Missouri Film Office has pointed to the number of projects approved and production spending in the state as evidence the program is working, but that is not the right measure for determining whether the program is a good investment for state taxpayers.⁴ The relevant question is how much the state receives back in tax revenue and broader economic activity—and by that measure, the research is consistent: film tax credits do not generate a positive return.

The Competitiveness Argument Doesn’t Hold

Supporters of SB 1079 argue that pooling the sub-caps will make Missouri more competitive for productions. Even setting aside the ROI question, that argument doesn’t hold.

Steven Conrad, the showrunner who created a new HBO series set in St. Louis and filmed it entirely in Atlanta, recently suggested that governments may not be well-served by chasing the film industry at all.⁵ His observation reflects a structural reality: Georgia has spent two decades building the studios, crews, soundstages, and production infrastructure that make large productions possible. Missouri has not. No reallocation of $16 million changes that.

Georgia’s own state auditor found that even Georgia’s fully developed, deeply established program returned just 10 cents to the state for every dollar of credit granted, producing a net revenue loss of $602 million in a single year.⁶ If one of the most mature film-incentive programs in the country cannot generate a positive return on investment, a program at a fraction of its scale operating in a state without comparable infrastructure has no prospect of doing so.

Targeted Credits Are Poor Economic Policy

Targeted economic development tax credits are just another way for lawmakers to pick winners and losers, a job that is better left to consumers in the market. When tax breaks are given to some, other taxpayers have to make up for the lost revenue. The impulse to do something to support an industry is understandable, but tax credits are a poor substitute for the conditions that make industries thrive organically. A dollar of film tax credits reduces state revenue by exactly the same amount as a dollar of direct appropriations—the difference is that credits bypass the appropriations process and receive less scrutiny.

Prioritize Tax Relief That Benefits All Missourians

Missouri is already a national leader in state spending in the name of economic development. Over the past few decades, Missouri has forgone billions in state tax revenue in favor of a host of narrow incentives that have consistently shown poor results. In FY2025 alone, Missouri redeemed more than $961 million in tax credits—nearly double the $521 million redeemed in 2010.⁷ The General Assembly is simultaneously weighing whether to eliminate the state income tax, a reform that would deliver broad economic benefits to every Missourian. The legislature should consider whether a growing tax credit portfolio is consistent with that goal. Expanding targeted credits that erode the income-tax base works against broad-based tax relief, and Missouri would be better served by pursuing the latter.

The film tax credit is a small program, but it exemplifies the approach to tax policy that makes comprehensive reform harder to achieve. Tax credit programs have not been successful in Missouri in the past, there is little evidence to suggest the film tax credit is succeeding now, and there is no reason to believe this program will perform differently under a restructured allocation. If increasing economic opportunity is the goal, the research is clear: Instead trying to manufacture more opportunities at the expense of taxpayers, lawmakers should provide broad-based tax relief to every Missourian.

NOTES

1. “Report of the Missouri Tax Credit Review Commission.” Missouri Tax Credit Review Commission. 2010; https://www.semissourian.com/files/tcrcfinalreport113010.pdf.
2. “Lights, camera and no action: How state film subsidies fail.” USC Press Release. August 18, 2016; https://pressroom.usc.edu/lights-camera-and-no-action-how-state-film-subsidies-fail.
3. Loughead, Katherine. “Illuminating the Hidden Costs of State Tax Incentives.” Tax Foundation. 2021; https://taxfoundation.org/state-tax-incentives-costs.
4. “Made-in-Missouri Film and TV Productions Spent $40.7 Million in 2025.” Missouri Department of Economic Development. February 2026; https://ded.mo.gov/press-room/made-missouri-film-and-tv-productions-spent-407-million-2025.
5. Neman, Daniel. “HBO’s DTF St. Louis has a dream cast, but it wasn’t shot here.” St. Louis Post-Dispatch. February 26, 2026; https://www.stltoday.com/life-entertainment/local/movies-tv/article_cfa2d34c-435a-40fd-9fa5-75933d716915.html.
6. “Impact of the Georgia Film Tax Credit.” Georgia Department of Audits and Accounts, Performance Audit Division. Report No. 18-03B. January 2020; https://www.audits.ga.gov/ReportSearch/download/23536.
7. “Fourth Quarter Tax Credit Report, Fiscal Year 2025.” Missouri Department of Revenue. 2025; https://dor.mo.gov/public-reports/documents/Fourth-Quarter-FY25-Tax-Credit-Report.pdf.

The post Senate Bill 1079: Film Tax Credits appeared first on Show-Me Institute.

TO THE HONORABLE MEMBERS OF THE COMMITTEE

Thank you for the opportunity to testify. My name is Elias Tsapelas, and I’m the Director of State Budget and Fiscal Policy at the Show-Me Institute, a nonprofit, nonpartisan, Missouri-based think tank that advances sensible, well-researched, free-market solutions to state and local policy issues. The ideas presented here are my own and are offered in consideration of proposals that will affect tax credits in Missouri.

House Bill 2142 consolidates Missouri’s existing film and series production tax credit sub-caps into a single $16 million pool for both, leaving the state’s total commitment the same. The only substantive effect of the bill would be to give the Film Office more flexibility in how the same dollars are allocated. That flexibility does not address the fundamental problem with this program.

Current and Past Tax Credit Failures

Despite the Missouri film tax credit’s recent revival, our state has a long history with this troubling incentive. Until its sunset in 2013, Missouri’s previous iteration made promises similar to what supporters are touting today. Missouri’s own Tax Credit Review Commission recommended the credit be eliminated because it served too narrow an industry and failed to provide a positive return on investment.¹

Research confirms that pattern holds nationally. Film tax credits have not resulted in job growth, have not affected market share or industry output, and have produced only short-term wage gains for those already in the industry.² Credits in many states generated just cents on the dollar. As one Tax Foundation analyst notes, “non-favored activities and businesses remain on the hook to bear the full impact of the state’s tax code.”³

The Missouri Film Office has pointed to the number of projects approved and production spending in the state as evidence the program is working, but that is not the right measure for determining whether the program is a good investment for state taxpayers.⁴ The relevant question is how much the state receives back in tax revenue and broader economic activity—and by that measure, the research is consistent: film tax credits do not generate a positive return.

The Competitiveness Argument Doesn’t Hold

Supporters of HB 2142 argue that pooling the sub-caps will make Missouri more competitive for productions. Even setting aside the ROI question, that argument doesn’t hold.

Steven Conrad, the showrunner who created a new HBO series set in St. Louis and filmed it entirely in Atlanta, recently suggested that governments may not be well-served by chasing the film industry at all.⁵ His observation reflects a structural reality: Georgia has spent two decades building the studios, crews, soundstages, and production infrastructure that make large productions possible. Missouri has not. No reallocation of $16 million changes that.

Georgia’s own state auditor found that even Georgia’s fully developed, deeply established program returned just 10 cents to the state for every dollar of credit granted, producing a net revenue loss of $602 million in a single year.⁶ If one of the most mature film-incentive programs in the country cannot generate a positive return on investment, a program at a fraction of its scale operating in a state without comparable infrastructure has no prospect of doing so.

Targeted Credits Are Poor Economic Policy

Targeted economic development tax credits are just another way for lawmakers to pick winners and losers, a job that is better left to consumers in the market. When tax breaks are given to some, other taxpayers have to make up for the lost revenue. The impulse to do something to support an industry is understandable, but tax credits are a poor substitute for the conditions that make industries thrive organically. A dollar of film tax credits reduces state revenue by exactly the same amount as a dollar of direct appropriations—the difference is that credits bypass the appropriations process and receive less scrutiny.

Prioritize Tax Relief That Benefits All Missourians

Missouri is already a national leader in state spending in the name of economic development. Over the past few decades, Missouri has forgone billions in state tax revenue in favor of a host of narrow incentives that have consistently shown poor results. In FY2025 alone, Missouri redeemed more than $961 million in tax credits—nearly double the $521 million redeemed in 2010.⁷ The General Assembly is simultaneously weighing whether to eliminate the state income tax, a reform that would deliver broad economic benefits to every Missourian. The legislature should consider whether a growing tax credit portfolio is consistent with that goal. Expanding targeted credits that erode the income-tax base works against broad-based tax relief, and Missouri would be better served by pursuing the latter.

The film tax credit is a small program, but it exemplifies the approach to tax policy that makes comprehensive reform harder to achieve. Tax credit programs have not been successful in Missouri in the past, there is little evidence to suggest the film tax credit is succeeding now, and there is no reason to believe this program will perform differently under a restructured allocation. If increasing economic opportunity is the goal, the research is clear: Instead trying to manufacture more opportunities at the expense of taxpayers, lawmakers should provide broad-based tax relief to every Missourian.

NOTES

1. “Report of the Missouri Tax Credit Review Commission.” Missouri Tax Credit Review Commission. 2010; https://www.semissourian.com/files/tcrcfinalreport113010.pdf.
2. “Lights, camera and no action: How state film subsidies fail.” USC Press Release. August 18, 2016; https://pressroom.usc.edu/lights-camera-and-no-action-how-state-film-subsidies-fail.
3. Loughead, Katherine. “Illuminating the Hidden Costs of State Tax Incentives.” Tax Foundation. 2021; https://taxfoundation.org/state-tax-incentives-costs.
4. “Made-in-Missouri Film and TV Productions Spent $40.7 Million in 2025.” Missouri Department of Economic Development. February 2026; https://ded.mo.gov/press-room/made-missouri-film-and-tv-productions-spent-407-million-2025.
5. Neman, Daniel. “HBO’s DTF St. Louis has a dream cast, but it wasn’t shot here.” St. Louis Post-Dispatch. February 26, 2026; https://www.stltoday.com/life-entertainment/local/movies-tv/article_cfa2d34c-435a-40fd-9fa5-75933d716915.html.
6. “Impact of the Georgia Film Tax Credit.” Georgia Department of Audits and Accounts, Performance Audit Division. Report No. 18-03B. January 2020; https://www.audits.ga.gov/ReportSearch/download/23536.
7. “Fourth Quarter Tax Credit Report, Fiscal Year 2025.” Missouri Department of Revenue. 2025; https://dor.mo.gov/public-reports/documents/Fourth-Quarter-FY25-Tax-Credit-Report.pdf.

The post House Bill 2142: Film Tax Credits appeared first on Show-Me Institute.

TO THE HONORABLE MEMBERS OF THE COMMITTEE

Thank you for the opportunity to testify. My name is Elias Tsapelas, and I’m the Director of State Budget and Fiscal Policy at the Show-Me Institute, a nonprofit, nonpartisan, Missouri-based think tank that advances sensible, well-researched, free-market solutions to state and local policy issues. The ideas presented here are my own and are offered in consideration of proposals that will affect tax credits in Missouri.

House Bill 2058 consolidates Missouri’s existing film and series production tax credit sub-caps into a single $16 million pool for both, leaving the state’s total commitment the same. The only substantive effect of the bill would be to give the Film Office more flexibility in how the same dollars are allocated. That flexibility does not address the fundamental problem with this program.

Current and Past Tax Credit Failures

Despite the Missouri film tax credit’s recent revival, our state has a long history with this troubling incentive. Until its sunset in 2013, Missouri’s previous iteration made promises similar to what supporters are touting today. Missouri’s own Tax Credit Review Commission recommended the credit be eliminated because it served too narrow an industry and failed to provide a positive return on investment.¹

Research confirms that pattern holds nationally. Film tax credits have not resulted in job growth, have not affected market share or industry output, and have produced only short-term wage gains for those already in the industry.² Credits in many states generated just cents on the dollar. As one Tax Foundation analyst notes, “non-favored activities and businesses remain on the hook to bear the full impact of the state’s tax code.”³

The Missouri Film Office has pointed to the number of projects approved and production spending in the state as evidence the program is working, but that is not the right measure for determining whether the program is a good investment for state taxpayers.⁴ The relevant question is how much the state receives back in tax revenue and broader economic activity—and by that measure, the research is consistent: film tax credits do not generate a positive return.

The Competitiveness Argument Doesn’t Hold

Supporters of HB 2058 argue that pooling the sub-caps will make Missouri more competitive for productions. Even setting aside the ROI question, that argument doesn’t hold.

Steven Conrad, the showrunner who created a new HBO series set in St. Louis and filmed it entirely in Atlanta, recently suggested that governments may not be well-served by chasing the film industry at all.⁵ His observation reflects a structural reality: Georgia has spent two decades building the studios, crews, soundstages, and production infrastructure that make large productions possible. Missouri has not. No reallocation of $16 million changes that.

Georgia’s own state auditor found that even Georgia’s fully developed, deeply established program returned just 10 cents to the state for every dollar of credit granted, producing a net revenue loss of $602 million in a single year.⁶ If one of the most mature film-incentive programs in the country cannot generate a positive return on investment, a program at a fraction of its scale operating in a state without comparable infrastructure has no prospect of doing so.

Targeted Credits Are Poor Economic Policy

Targeted economic development tax credits are just another way for lawmakers to pick winners and losers, a job that is better left to consumers in the market. When tax breaks are given to some, other taxpayers have to make up for the lost revenue. The impulse to do something to support an industry is understandable, but tax credits are a poor substitute for the conditions that make industries thrive organically. A dollar of film tax credits reduces state revenue by exactly the same amount as a dollar of direct appropriations—the difference is that credits bypass the appropriations process and receive less scrutiny.

Prioritize Tax Relief That Benefits All Missourians

Missouri is already a national leader in state spending in the name of economic development. Over the past few decades, Missouri has forgone billions in state tax revenue in favor of a host of narrow incentives that have consistently shown poor results. In FY2025 alone, Missouri redeemed more than $961 million in tax credits—nearly double the $521 million redeemed in 2010.⁷ The General Assembly is simultaneously weighing whether to eliminate the state income tax, a reform that would deliver broad economic benefits to every Missourian. The legislature should consider whether a growing tax credit portfolio is consistent with that goal. Expanding targeted credits that erode the income-tax base works against broad-based tax relief, and Missouri would be better served by pursuing the latter.

The film tax credit is a small program, but it exemplifies the approach to tax policy that makes comprehensive reform harder to achieve. Tax credit programs have not been successful in Missouri in the past, there is little evidence to suggest the film tax credit is succeeding now, and there is no reason to believe this program will perform differently under a restructured allocation. If increasing economic opportunity is the goal, the research is clear: Instead trying to manufacture more opportunities at the expense of taxpayers, lawmakers should provide broad-based tax relief to every Missourian.

NOTES

1. “Report of the Missouri Tax Credit Review Commission.” Missouri Tax Credit Review Commission. 2010; https://www.semissourian.com/files/tcrcfinalreport113010.pdf.
2. “Lights, camera and no action: How state film subsidies fail.” USC Press Release. August 18, 2016; https://pressroom.usc.edu/lights-camera-and-no-action-how-state-film-subsidies-fail.
3. Loughead, Katherine. “Illuminating the Hidden Costs of State Tax Incentives.” Tax Foundation. 2021; https://taxfoundation.org/state-tax-incentives-costs.
4. “Made-in-Missouri Film and TV Productions Spent $40.7 Million in 2025.” Missouri Department of Economic Development. February 2026; https://ded.mo.gov/press-room/made-missouri-film-and-tv-productions-spent-407-million-2025.
5. Neman, Daniel. “HBO’s DTF St. Louis has a dream cast, but it wasn’t shot here.” St. Louis Post-Dispatch. February 26, 2026; https://www.stltoday.com/life-entertainment/local/movies-tv/article_cfa2d34c-435a-40fd-9fa5-75933d716915.html.
6. “Impact of the Georgia Film Tax Credit.” Georgia Department of Audits and Accounts, Performance Audit Division. Report No. 18-03B. January 2020; https://www.audits.ga.gov/ReportSearch/download/23536.
7. “Fourth Quarter Tax Credit Report, Fiscal Year 2025.” Missouri Department of Revenue. 2025; https://dor.mo.gov/public-reports/documents/Fourth-Quarter-FY25-Tax-Credit-Report.pdf.

The post House Bill 2058: Film Tax Credits appeared first on Show-Me Institute.

For those who don’t remember, last year, Missouri’s general assembly made the unfortunate decision to revive the state’s film tax credit program. After the program sat dormant for a decade due to prior poor performance, and despite the wealth of evidence from across the country showing that the program is a bad investment, our elected officials were somehow convinced that the program would work better this time.

While it’s still too early to evaluate the performance of Missouri’s revived film credit, a recently completed audit in the state of Georgia can offer some insight into what Missouri should expect. Unsurprisingly, the results show that the return on investment (ROI) for Georgia taxpayers is less than $0.20. This means that for each tax dollar devoted toward the program, at least 80 cents are lost.

If you have been following this issue for a while, these findings aren’t surprising, as they are in line with much of the past research on the topic. Study after study shows film tax credits are a ridiculously bad investment of state taxpayer dollars. Prior to our state shuttering the program, the Missouri Department of Economic Development found the program’s ROI to be a paltry $0.15. Previous Peach State audits found the ROI to be even lower—around $0.10. Louisiana’s program wasn’t much better, with an ROI of $0.15. And Pennsylvania (Missouri’s entertainment industry tax credit is modeled on the Pennsylvania program) found its film subsidies produced an ROI of only $0.13.

Of course, these aren’t the only metrics where the tax credit program fails to perform. In state after state, the film tax credit falls short of the jobs and economic activity promised. According to a 2019 study that compared film tax credit data from across the country, the author found the incentives have no meaningful effect on employment or wages and suggested the “incentives are generally ineffective at creating industry clusters or inspiring economic development.” Nevertheless, the majority of states keep giving out these subsidies.

At this point, I’m not sure how many more audits or studies need to be published before policymakers will be convinced that a film tax credit program isn’t worth having. But if there’s one thing Missouri lawmakers ought to learn from Georgia (besides that our state’s program should be ended again), it’s that frequent audits of these costly tax incentives are a good thing. Further efforts to improve transparency on Missouri’s numerous tax credit programs should be encouraged.

The post Another Opportunity to Learn appeared first on Show-Me Institute.

As I’ve written before, the LIHTC program awards tax credits to housing developers to offset construction costs. In exchange, the developers are required to rent a fraction of their units to low-income tenants. Missouri’s program is a supplement to the federal LIHTC and has a long history of poor returns on investment. When Missouri’s version of LIHTC was revived last year after a three-year hiatus, LIHTC boosters promised reforms to address some of the program’s much-discussed shortcomings. This pilot program was one of those reforms.

The purpose of the pilot program is to increase the sales price of LIHTCs by allowing housing developers to claim them more quickly. One of the biggest problems with these credits is that they’re awarded to developers over ten years—but upon being rewarded, developers often immediately sell the credits to investors to raise the capital necessary to fund the project’s construction. When something is sold today that can’t be claimed for a decade, it has to be sold at a discount, in part because of the time value of money. In many cases, Missouri’s LIHTCs have sold for as little as forty cents on the dollar. This means is state taxpayers are basically guaranteed a bad return on investment, because the thing they’re paying $1 for is being immediately sold for less.

The new pilot program allowed 20 percent of the state’s approved projects to claim their credits more quickly over the first five years, and more slowly the final five. The total cost to state taxpayers remains the same, the value of the credits for investors is increased because of the time value of money. Initial reports suggest this change worked and increased the market value of each credit by roughly $0.10. However, if credits were previously selling for $0.40 and now are selling for $0.50, that still means taxpayers are still losing half of their investment immediately.

Going into next year, the number of projects eligible for this pilot will be bumped up to 50 percent. And with more projects receiving accelerated redemptions, that should mean more credits are sold for higher prices, which in turn could slightly improve the dismal return on investment for state taxpayers. Supporters of the pilot also say that higher sales prices will allow the MHDC to subsidize more projects, because each developer will request fewer credits. It remains to be seen whether these claims will hold true with additional years of data.

Make no mistake, I still think the LIHTC program is a bad deal for Missouri. It is truly remarkable that such a meager improvement in credit sale price is being celebrated as a big win for the troubled program, when taxpayers are still expected to lose so much of each credit sold.  Much more needs to be done before LIHTC even comes close to being considered a worthwhile investment for our state.

The post LIHTC Pilot Finds Permanence appeared first on Show-Me Institute.

Film tax credits are a bad idea for Missouri, as my colleagues and I have written previously. The Missouri Legislature itself condemned them in 2010, saying the credit serves, “too narrow of an industry and fails to provide a positive return on investment to the state.” A study of film tax credits in Tennessee found “over 40 percent of films that receive grants made less at the box office than they received in incentives.”

Now we have a report from the state auditor of Georgia—the place supporters of film tax credits here in Missouri hold up as a model—and it isn’t good. According to The Atlanta Journal-Constitution, the report states: “The economic benefits of Georgia’s popular and lucrative film tax credit have been greatly inflated, a new audit says, and past estimates have not considered what would have happened if the state had instead spent the money on things such as education or health care.”

The just-released report from the Georgia Department of Audits and Accounts is more specific:

The economic activity generated by the film tax credit does not generate sufficient additional revenue to offset the credit, even after considering tourism and studio construction. In 2016, the film tax credit resulted in a net revenue loss to the state estimated at $602 million. The state’s return on investment for the credit was 10 cents for each dollar, though local governments received an additional return of 11 cents in revenue.

No serious legislator interested in protecting tax funds or reducing waste and fraud ought to consider reinstating film tax credits in Missouri.

The post They’re Back! Film Tax Credits Haunt the Missouri Legislature appeared first on Show-Me Institute.

Back in 2010, Missouri’s own Tax Credit Review Commission wrote in their report that the film tax credit should be cut because it “serves too narrow of an industry and fails to provide a positive return on investment to the state.” As my colleagues wrote in 2015, “according to data gathered by the Bureau of Labor Statistics, jobs related to film production decreased during the time the film tax credit program was in place.” What has changed since then that justifies a change in policy? No one is saying.

Instead, the sponsor of the effort to offer yet another state tax credit sings paeans about the work ethic of Missourians, telling the Post-Dispatch:

If given the opportunity for a production company to select anywhere they would choose without having the tax credits being part of the equation, they would certainly choose Missouri more often than other states that don’t have the work ethic and the pride that we have as Missourians.

The characters portrayed in “Three Billboards” and the Netflix show “Ozark” aren’t the examples of work ethic for which any state would want to be known. Furthermore, wasting money on investments that fail to provide a positive return isn’t a good work ethic; it’s careless.

What’s worse, governments don’t even do a good job of picking films anyone will see. A study from the Beacon Center of Tennessee found that “using available box office data, over 40 percent of films that receive grants made less at the box office than they received in incentives.” If we want to promote a good work ethic, let’s stick with rewarding filmmakers who apply their craft well, rather than filmmakers who merely apply for handouts.

It would be laudable if supporters of this proposal argued that Missouri’s taxes are too high, and that there would be more private investment if we lowered them. Instead, they are effectively saying “taxes are too high, and we’d like to lower them for one particular industry that we favor.” That is wrong; government should not be picking winners and losers. It’s just bad policy.

The post Film Tax Credits Still a Bad Idea appeared first on Show-Me Institute.

Supporters for the value of pre-K point to a single preschool program, the HighScope Perry program in Ypsilanti, Michigan that ran from 1958 to 1962. The participants had been tracked over 40 years and the resulting data provide much of the basis for what supporters claim is the benefit of pre-K.

The Mid America Regional Council (MARC), which will administer the Kansas City pre-K program if approved by voters, claims in its 2018 “Status of Children and Families” report that (page 45):

Research shows that every dollar invested in early childhood education saves up to $13 in future social costs, leading to lower crime rates, fewer adults on public assistance, fewer teen pregnancies, and a stronger, more prepared workforce.

Mayor Sly James’s pre-K Implementation Plan for pre-K similarly claims (page 44):

. . . the public benefits accrued over time from children who attended HighScope Perry Preschool program in Ypsilanti, Michigan, at a rate of 13 to one.

These returns seem too good to be true. And they are. The 13-to-one return comes from a single study of the HighScope Perry plan published in 2005, which claimed:

For the general public, higher tax revenues, lower criminal justice system expenditures, and lower welfare payments easily outweigh program costs; they repay $12.90 for every $1 invested. However, program gains come mainly from reduced crime by males.

The HighScope Perry study was of 123 “low-income African-American children who were assessed to be at high risk of school failure.” Only 58 were randomly assigned “to a program group that received a high-quality preschool program at ages 3 and 4.” The high-quality program included:

• Two school years of preschool running October through May;
• A center-based program for 2.5 hours per day with “4 teachers for 20 to 25 children”;
• Home visiting for 1.5 hours per week; and
• Group meetings of parents.

Only 39 of the participants in this study were male (see footnote 3 here). In other words, Mayor James and MARC want voters to believe that a small-scale, intensive two-year education program conducted with 39 high-risk boys can be extrapolated to the more than 6,000 children in Kansas City.

Even other proponents of pre-K are more restrained in calculating possible returns. Economist and Nobel laureate James Heckman wrote in a 2017 research summary of that same HighScope Perry program (emphasis added):

Every dollar spent on high quality, birth-to-five programs for disadvantaged children delivers a 13% per annum return on investment. These economically significant returns account for the welfare costs of taxation to finance the program and survive a battery of sensitivity analyses.

As I pointed out in a recent American Public Square panel discussion about pre-K in Kansas City, the program Kansas City voters are being asked to support is nothing like the HighScope Perry program Heckman analyzed. The plan being put before voters does not have anywhere near the 5 or 6 to 1 ratio of child to teacher, will not include home visits, will not be two years, and will not spend as much per child as HighScope Perry did.

A recent blog post discussed the unimpressive findings on pre-K programs such as Head Start that more closely resemble what Kansas Citians are being offered. But using HighScope Perry’s results to pitch pre-K for all in Kansas City is nothing short of a bait and switch.

The post Kansas City’s Pre-K Bait and Switch appeared first on Show-Me Institute.

The Post-Dispatch mentioned that many other states have also ended their film tax credit programs due to low returns on the investment. But the Post did manage to find one advocate in Kansas City:

Steph Scupham, director of the Kansas City Film Office, said the benefits of landing a project outweigh the costs.

“I don’t know what’s wrong with people coming in, doing business, spending money and leaving,” she said, “especially when it also educates the people in our industry and gives our industry that is here more experience.”

Indeed, nothing is wrong with “people coming in, doing business, spending money and leaving.” What is wrong is taking precious tax dollars intended to support basic services like police and schools and giving them to private film companies. Not only is it wrong, it doesn’t work.

A recent study from the Beacon Center of Tennessee found that “using available box office data, over 40 percent of films that receive grants made less at the box office than they received in incentives.” That is a stunningly bad track record. Missouri’s own Tax Credit Review Commission wrote in their 2010 report that the film tax credit should be cut because it “serves too narrow of an industry and fails to provide a positive return on investment to the state.”

My colleague Patrick Ishmael wrote exactly one year ago that to the degree Georgia is underwriting a piece about the Ozarks, Missouri is coming out ahead. Thankfully, the Post-Dispatch makes clear there is no danger of reinstating such a film tax credit regime statewide. Kansas City ought to scrap its effort, too.

The post Film Tax Credits: Facts and Fiction appeared first on Show-Me Institute.

Let’s walk through this. The project will add about $20 million to the productive capital in Columbia. Between 2001 and 2016, each dollar of capital added, on average, 17 cents to the value of output—that is, goods and services—produced in Columbia. Based on this historical average, Columbia would produce an additional $3.5 million in output when the project is completed in a couple of years. One more piece of information: Columbia collects about one cent of revenue for every dollar of output produced. Consequently, city coffers would increase by about $35,000 in the first year that the expansion was operating. However, even allowing for this additional output to increase at Columbia’s average annual growth rate, which is 1.8 percent, there is not enough revenue for the city. After discounting future revenues to their present value and summing over the 23-year period, the value of the stream of city revenues comes to about $650 thousand. In other words, the city gives the developer $2 million to get back $650 thousand. Not a good return.

Proponents of the deal contend that without TIF, the expansion (and accompanying economic growth) won’t happen at all—that without an infusion of taxpayer money, development won’t be profitable enough to attract investment. However, data from cities like Chicago, Saint Louis, and Kansas City say otherwise. Comparing employment or income, the evidence indicates that economic outcomes are no better in areas that award TIF than in areas that do not.

The Broadway expansion proposal offers the appearance of certainty. At the very least, we have a good idea of what a new hotel tower will look like, so it’s easy to imagine that it will lead to an increase in economic activity. It can certainly seem riskier to turn down the proposal and wait to see what (if any) productive use the land next to the current hotel is put to. But there is no guarantee that the expanded hotel will be successful, either.

Fundamentally, economies grow when people put labor and machines and capital together in a way that yields more valuable stuff. Growth is the product of creative and innovative people who are trying to earn a profit. The law permits people to ask the city government for a subsidy to make a profit. But city officials must determine if granting the request is the best use of resources collected from citizens. Looking at the numbers, one is hard pressed to show that the Broadway expansion is the best use of city funds.

The post Broadway Economics appeared first on Show-Me Institute.

The story begins like so many tales of tax incentives. The building's developers had been expecting taxpayer help with the project, and indeed the project appears set to receive a 15-year tax abatement—a "95 percent tax abatement for 10 years and 50 percent tax abatement for five years." As reported, that subsidy will account for about 8% of the project, translating into a tax incentive of around $10 million. That's serious money.

That abatement, however, was actually less than what the developers asked for, which led to this remarkable revelation in the St. Louis Post-Dispatch's report on the building (emphasis mine):

Mac Properties initially sought 20 years of full tax abatement, officials said. Pushback by city officials prompted the developer to increase One Hundred’s height by seven floors to accommodate about 50 more apartments and spread out the project’s cost, Roddy said.

To repeat: the project is set to receive fewer incentives than planned, and to make the project work, the developer actually increased the size of the building. 

We have often talked about the risk that's put on taxpayers when marginal development projects are underwritten by the public, but the story of the One Hundred building shows another risk we haven't talked about at length: that taxpayers could also be subsidizing the return on investment of private actors to the point that those actors settle on smaller, less risky projects. If a developer can make the same amount of money filling 250 rooms with a subsidy as 300 rooms with a smaller subsidy, a developer would do so. The former is less risky and the return is going to be about the same.

In practice, then, taxpayers may actually be paying some developers to develop less. Maybe it's time not only to emphasize the inequity of putting development risk on the public, but also to start talking about the potential of these subsidies to actively damage the state's growth potential.

The post Are We Paying Some Developers to Develop Less? appeared first on Show-Me Institute.

Since news articles reporting on the hearing only highlighted the arguments of those in support of HB 803, I’ll reiterate what analysts at the Show-Me Institute have written so many times before: Film tax credits are bad public policy!

Supporters of the program argue that the film tax credits bring immense economic benefits to the state. However, the problem with this argument is that it doesn’t look at the costs of the program along with its benefits. While supporters spout claims that “Gone Girl brought in $7 million into the economy,” the reality is the program’s return on investment (tax dollars generated versus tax dollars spent) is merely cents on the dollar. In other words, the program does not pay for itself.

Furthermore, the argument that the film tax credit helps create permanent jobs is a fallacy. Film production jobs, by their very nature, are short-lived. To add insult to injury, the highest paying jobs often go to non-Missouri residents, since production jobs require specific and highly skilled professionals. However, perhaps the most shocking fact is that Missouri has had a film tax credit program since 1999, and yet, according to data gathered by the Bureau of Labor Statistics, jobs related to film production decreased during the time the film tax credit program was in place.

It is bewildering that lawmakers can ignore important economic indicators, and the advice of the state’s own Tax Credit Review Commission, just so Missouri can play hostess to Hollywood for a few weeks. I hope legislators and political spectators will take a look at our testimony and exercise some common sense.

The post Touted Benefits of the Film Tax Credit Program Are Misleading appeared first on Show-Me Institute.

Whether it is chips at the grocery store or miles per gallon, it’s always good to get more for less. This is especially true in education. That is why a new report by the School Choice Demonstration Project at the University of Arkansas is so important. A team of researchers, led by Patrick Wolf, Ph.D., calculated the return on investment of public charter schools. In other words, they looked to see if charter schools are providing more bang for the buck. It turns out they are.

Charter schools throughout the country, and especially in Missouri, spend less per student than traditional public schools. Charter schools, on average, also outperform their traditional counterparts. By combining these facts, the researchers calculated that the productivity advantage for charter schools in math and reading was 40 and 41 percent, respectively.

So, what do you call it when you get better outcomes for less money? I call it a big win for students, parents, and taxpayers.

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First, as Stogel subsequently started to discuss, this begs the question of what to measure and what to define. This is often very difficult. Is this dollar generated in the same year? Over 10 years? Is this a dollar of general revenue? of general and local revenue? A dollar of economic activity in the private sector?

Even if we were able to measure the consequences of a particular tax credit program accurately and consistently, there exist further questions. For instance, what is the significance of $1? Why is the goal not $2? Why is it not 50 cents? What is the suitable ROI that the state of Missouri is seeking in its economic development expenditures? How could the government know what the optimal level is?

If Missouri issued $1 in tax credits and got $1 back, then what’s the point? The state economy would be back to where it started from, minus administrative and transaction costs — not to mention deadweight loss.

Economic development policy relies on the existence of a “multiplier effect.” As the Show-Me Institute’s chief economist, Dr. Joseph Haslag, recently explained in an editorial in the Columbia Business Times, the ability of tax credits to incite resonating economic activity is dubious at best:

No magic multiplier effect is created because of the government tax credit. Rather, the evidence points to a substitution from all other industries to the ones receiving the tax credit. […]

The evidence […] suggests that no such spillovers or multipliers arise. For one thing, the city’s tax base has shrunk. To supply the same number of services, revenues must be made up by applying a larger-than-otherwise tax rate to the remaining tax base.

Furthermore, because government expenditures tend to crowd out private investment, much of this economic activity (e.g., hotel stays, restaurant meals) would have been generated by individuals in the private sector.

The post “If Missouri Will Issue a Dollar for a Tax Credit, It Should Get a Dollar Back” appeared first on Show-Me Institute.