First, there are revenue triggers in the bill that would prevent the full tax cut from taking affect if revenues did not grow. Governor Nixon warns that if the Marketplace Fairness Act is enacted and the top rates drop by one-half percent, then state revenues will suffer. If this did occur; however, then the rest of the individual and corporate tax cuts would be stopped and only the business tax deductions would continue.

Second, the state is looking to have a $300 million surplus at the end of the year, which means it currently has more than enough revenue to fund its current operations. Now whether we have a surplus next year depends on what the state plans to spend and the state of Missouri’s economy. However, right now, Missouri has a cushion to absorb a decline in revenue.

Third, the Governor’s analysis (at least in the veto message), does not consider the dynamic effects for lowering the tax rates. According to a paper by Mathias Trabandt and Harald Uhlig, increased economic efficiency can make up for some of the revenue lost due to a tax cut. I’m not saying this tax cut will pay for itself, but the economic research by Trabandt and Uhlig suggest that it is not unreasonable to suggest that the loss in revenue will not be as large as opponents fear.

It is also important to note that if the state kept to tight expenditure limits for future years, like increasing spending only by inflation and population growth, then it would be easier to live with diminished revenues. For example, the Show-Me Institute published a policy study by Stephen Moore and Richard Vedder on how Missouri could eliminate the income tax entirely by 2020 if it adhered to these expenditure limits.

Governor Nixon’s veto will hurt Missouri in the long run and I’m sure Kansas is grateful for his actions. However, the reasons behind Governor Nixon’s veto are flawed and if Missouri is to remain competitive, it needs measures like HB 253 to become law.

The post Missouri House Bill 253…Vetoed! (Part II) appeared first on Show-Me Institute.

All told, some 17,000,000 Americans with college degrees are doing jobs that the [Bureau of Labor Statistics] says require less than the skill levels associated with a bachelor’s degree.

The author includes the following chart:

Source: The Chronicle of Higher Education

This strikes me as consistent with the signaling model in education, à la Charles Murray and Bryan Caplan. In short, it says that it is difficult to distinguish between the skill sets of workers initially (i.e., by visual inspection), and having a college degree provides a way for a person to “signal” to potential employers that he or she is a higher quality candidate. Good grades can signal many traits about a person that an employer may find attractive — that he or she is conformist, obedient, smart, dedicated, motivated, hard-working, etc.

Central to the signaling model is the fact that, in most higher-education classes, a student learns no job skills. I have a bachelor’s degree in French, so I have personal experience with this. Although I enjoyed my French classes and found them very challenging and fulfilling, I did not learn any skills that I use professionally — with the possible exception of having the ability to read Frédéric Bastiat in his original French, of course.

Certainly, there are social benefits to education. An educated population is, in general, a very good thing. Even if they don’t use skills that they developed through higher education, it’s probable that these janitors and flight attendants are leading more fulfilled lives as a consequence of their education. Perhaps the time that they spend outside of work, in leisure, is more fulfilling than it would have otherwise been.

On the other hand, there are also negative consequences to having a high number of degree holders. If one person becomes more educated, then he or she has a good chance of making more money. However, when a majority of the population becomes more educated, they compete for the jobs requiring that knowledge. This is the phenomenon that we see in the article — that’s why 29.80 percent of flight attendants have a bachelor’s degree or more. An additional negative consequence is degree inflation. As a greater number of people seek education, it will become increasingly difficult to distinguish between the quality of individuals (i.e., it will mute the signal), and employers will demand even more education, contributing to degree inflation.

Government subsidization of education is one of the biggest reasons why these 17 million degree-holders are in positions that do not require a degree. Despite the aforementioned positive consequences of an educated society, subsidizing education should not be the objective of government. When the government makes something less expensive, individuals will consume more of it than they would otherwise — more than the socially optimal level. The housing market is an analogous example: The government subsidized homeownership, so many individuals over-consumed housing, including those who were poorly suited for homeownership. (The United States experienced a housing bubble; is an education bubble in our future?) Although a particular project may have some social benefits, when that project is subsidized with taxpayer monies, it should be weighed against the costs.

Please don’t mistake my statements as being anti-education; on the contrary, I am a supporter. This post is an argument against current funding mechanisms. The policy of subsidizing education is quite regressive. Public universities, including my own alma mater, are largely funded by tax revenues taken from the general population, not by consumers of education. It would be more efficient if everybody paid for the true cost of their consumption through private means (i.e., private loans, savings, scholarships), just like they do for other goods and services. The government could then devote the tax money that they would save on higher education to other programs instead — on primary and secondary education, perhaps — or return it to taxpayers, to spend in the private sector.

I encourage our readers to watch the video “So You Want To Get a Ph.D. in the Humanities,” which former Show-Me Institute intern Martha King recently posted on her Facebook wall. It’s simultaneously hilarious and depressing.

The post The Subsidization and Consequent Overconsumption of Education appeared first on Show-Me Institute.

According to an analysis by Richard Vedder, an economist at Ohio University, [LeBron] James’s net present value tax savings on his salary are between $6 million and $8 million by living in Miami versus his home town of Akron.

This demonstrates how taxes can incite people and businesses to change their behavior. When tax rates differ across geographies, individuals and businesses have an incentive to move to the area of lower burden. This is largely why states that do not tax income experience larger rates of growth than states that do.

Later in the article:

While LeBron’s departure got extraordinary media attention, it is hardly unique. In the early 1990s, Ohio was the home of 43 Fortune 500 companies. Twenty years later the number is 24. Census Bureau data show that from 2004-2008 Ohio saw a net outmigration of $6 billion of income and some 97,000 taxpayers. Even Ohio’s famously liberal Senator, the late Howard Metzenbaum, moved to Florida late in his life to reduce his estate taxes.

If Missouri were to reduce or eliminate its income tax, then it would encourage more individuals and businesses (and professional athletes!) to locate here.

I have no means to verify or disprove this, but perhaps James used the Show-Me Institute’s IDEAS application in his decision process. Individuals can use the site to compare competitive tax environments across states, and I encourage our blog readers to play with the site to see how they would fare if they relocated.

The post LeBron James Votes With His Feet (And Perhaps Uses Show-Me Institute’s IDEAS Application?) appeared first on Show-Me Institute.

The goal is not to influence candidates’ platforms but to encourage them to engage with young voters on topics that matter to them, said Rice, the campus coordinator for the program’s chapter at Meramec.

"Politicians talk about Social Security and talk about Medicare, but they’re not talking about college affordability because students aren’t forcing them to," she said.

"It’s our time to let everyone know what we think," she said.

In fact, college has never been more affordable. Besides subsidized student loans, there are grants, including some specific to Missouri. The most expensive private colleges are pledging to give huge scholarships to middle-class applicants. And many economists believe that the gains from college in terms of lifetime earnings, health, and happiness far outweigh the costs, although others (most notably Richard Vedder) disagree about some of the details.

So I think the students in the article are misguided in their fight for college affordability. If  you can borrow money to finance your education and then reap the rewards for the rest of your life, it’s not unaffordable. It’s just a large investment.

I’m also confused by the claim that these students don’t intend to influence politicians. What are they trying to do, then? Flirt with them?

The post Please Pay Our Tuition appeared first on Show-Me Institute.

It isn’t clear how many people move exclusively or mainly for tax reasons. But from April 2000 through June 2006, there was a net migration of 2.3 million people moving from states with income taxes to states with no income taxes, an average of more than 1,000 people moving per day, says Richard Vedder, an economics professor at Ohio University in Athens, Ohio, based on an analysis of census data.

If Missouri were to enact some combination of long-term spending restraint and sales-tax increases, we could eliminate the income tax in our state without major cuts to government services. Combine the absence of a state income tax with our very affordable housing markets (see p. 31), and Missouri could truly become a magnet for Americans looking to move.

But why would we want that? We wouldn’t even know where all these new people went to high school …

The post Gasp! People Actually Move to Low-Tax States! appeared first on Show-Me Institute.