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 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.

Dave Helling recently responded to my Show-Me Institute colleagues’ piece on what Missouri should learn from Kansas’s tax changes a decade ago. He questions whether Missouri’s current discussion is meaningfully different from what happened under former Kansas Gov. Sam Brownback.

I respect Dave and welcome the debate. Kansas belongs in this conversation. But if we are going to invoke it, we should be clear about what it demonstrates.

Kansas did not experience instability simply because it lowered tax rates. It ran into trouble because revenue fell precipitously and the state did not appropriately adjust its fiscal structure. Lawmakers enacted sharp tax reductions, created a large pass-through exemption, and left spending commitments largely intact. The result was a structural imbalance.

That is the lesson.

Dave suggests that state tax policy has only a marginal relationship to economic growth. It is true that no state controls the national business cycle. But it does not follow that tax structure is economically irrelevant.

Growth reflects millions of individual decisions—where to work, invest, expand, or relocate. Tax policy influences those decisions at the margin. And marginal decisions, aggregated across an economy, shape long-run performance.

If tax policy does not meaningfully affect behavior, it becomes difficult to explain why businesses restructured to qualify for Kansas’s pass-through exemption, why cities such as Kansas City offer tax abatements and other tax incentives to attract employers, or why area policymakers worry about the Border War. Incentives matter. They always have.

Both Kansas City and St. Louis are about to vote on retaining their 1% earnings taxes. Does anyone doubt the tax is one more incentive to live and work outside city limits?

None of this means that tax cuts guarantee prosperity. Lower rates increase the after-tax return to work and investment; they do not override broader economic conditions. But acknowledging limits is not the same as declaring irrelevance.

Kansas was not a clean test of “supply-side theory.” It did not eliminate its income tax. It reduced rates quickly, carved out a significant exemption, and failed to align revenue reductions with sustainable fiscal adjustments. When revenues declined more than expected, the state lacked sufficient buffers.

That was a structural failure, not proof that tax policy is immaterial.

Missouri’s debate, then, should center on structure and discipline. Any serious reform would require conservative revenue estimates, a modernized and stable tax base, adequate reserves, and spending aligned with realistic collections. Without those elements, skepticism is warranted. With them, instability is not inevitable.

There is also a tension in arguing that tax policy has little influence on economic outcomes while simultaneously warning that changing it risks serious harm. If tax structure truly operates only at the margins, its effects—positive or negative—cannot be dismissed when convenient and amplified when politically useful.

The more accurate position lies between extremes. Tax structure is neither a magic lever nor a null variable. It is one component of competitiveness, and like any component, it must be designed responsibly.

Kansas offers a caution about execution. But the Kansas story does not settle the broader question of how Missouri should structure its tax system going forward.

That question deserves a debate grounded in fiscal mechanics and economic incentives instead of caricatures.

The post The Lesson from Kansas—and the Question for Missouri appeared first on Show-Me Institute.

The post Beyond Reagan and Thatcher: The Future of Supply Side Economics appeared first on Show-Me Institute.

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Beginning in early 2022, the Fed initiated a rate hike campaign that, to date, has taken the federal funds rate (which influences other interest rates in the economy) from 0% to over 4%. We now have evidence that the Fed’s rate hikes are beginning to bite. Consumer price inflation peaked in the summer of 2022 at over 9% and has been on the decline ever since, most recently hitting 6.5%. This lag between rate hikes and inflation dropping is common. Moreover, because the monthly inflation increases were so high in the first half of 2022 and have been considerably lower over the past few months, the topline year-over-year inflation readings are set to fall rapidly over the next several months—possibly even falling below 4% by early summer. The figure below visualizes a plausible path of inflation over the next few months.

If this projection comes to pass, it would of course be very good news for families’ pocketbooks. Keep in mind, however, that inflation is declining despite the federal government continuing to spend too much money, and not because of any of the recently passed legislation. Absent the spending binge of 2021 and 2022, the United States would almost surely not have seen the decades-high inflation that has robbed families of precious purchasing power—an erosion shown in the figure below. Since the passage of the American Rescue Plan Act in early 2021, consumer prices have risen cumulatively by nearly 14%. During that same period, worker earnings have increased by less than 10%. This four-point gap marks a significant decline in purchasing power that is showing no immediate signs of reversing.

By contrast, if one looks at recent history—namely, the period between early 2017 and the beginning of the COVID-19 pandemic—earnings noticeably outpaced inflation, as shown in the figure below. In fact, inflation-adjusted median household income jumped by the most on record during that period, just as poverty rates hit historic lows. It is worth pointing out that economic gains of that size were not expected. Instead, the economy outperformed earlier projections from the Congressional Budget Office made prior to the pro-growth tax reforms passed in 2017 and the concerted effort across federal agencies to streamline and reduce the burden of regulations.

Looking forward, the good news is that inflation is likely to continue falling, and possibly at a faster pace over the next few months. Producer price inflation is also moderating, with the most recent core reading (which strips out volatile components related to food, energy, and trade services) coming in at “just” 4.6% year-over-year. However, it is important that we do not move the goalposts and lower the bar for victory. The objective clearly stated by the Federal Reserve—and to which Americans have become accustomed over the past few decades—is inflation that is 2% or less. For this reason, nobody should expect the Federal Reserve to immediately stop hiking rates—let alone begin to cut them—until inflation falls below the 2% threshold and stays there for a while. The Federal Reserve has signaled this much in its recent communications.

Of course, the timeline for finally taming high inflation could be significantly accelerated with a pro-growth, supply-side agenda that unleashed the productive capacity of the U.S. economy whereby businesses could meet demand without raising prices. If we conceptualize inflation as too much money chasing too few goods, one approach to reducing inflation is to take money out of the economy—exactly what the Fed is doing right now—while the other approach is to ramp up the amount of goods and services the economy produces. In light of divided government, substantial tax and regulatory reform is unlikely, but on the positive side, massive partisan tax hikes and spending bills are unlikely too. Inflation relief is (likely) on the way, but it is important to understand how we got here so we don’t end up making the same mistakes again.

The post Inflation and the Dangers of False Narratives appeared first on Show-Me Institute.

But while the jury is still out on whether society-wide lockdowns really work to stop pandemics, the jury is not out on the importance of supply-side health care reforms: supply-side health care reforms work, and they help patients.

Of course, we’ve made this point often, and one reform we have emphasized in particular is Certificate of Need (CON) repeal. In short, a CON law “gives government the power to manage competition in a given industry through the allowance, or disallowance, of new providers, facility expansions, or certain services as defined by the law.”

In Missouri, the health care facilities covered by the state’s CON law include nursing homes and hospitals, and competing hospitals and care centers are included in the process of deciding whether to allow new competitors into their health care markets. The economics here are simple: more competition means more choices, which puts downward pressure on prices. That’s good for customers and their pocketbooks, but naturally, incumbent hospitals and other care centers would rather have less competition.

But just because hospitals and other care centers might not want competition doesn’t mean the government should be empowered to prevent it. Imagine if grocery stores, or gas stations, or restaurants had a say in deciding whether consumers could have new options for groceries, gas and dining. It’d be bizarre, anti-market, and anti-consumer. Yet, this is how large swaths of Missouri’s health care market operate, and this system survives at least in part because most of the public doesn’t realize what’s happening.

Supply-side health care reforms like interstate license reciprocity have both immediate benefits for combatting a pandemic as well as long-term access benefits beyond the pandemic itself, and such a reform was very popular because the benefits were immediate and easily explainable. But it’s important for legislators to start considering long-term supply-side reforms, like CON repeal, that may have been a low priority during the pandemic because the benefits would be slower to materialize. Fortunately, several bills have been filed for 2023 that would repeal the state’s CON law; I hope they fare well in the coming year.

Something that sounds like “hospital construction reform” may be a low priority when people are being exposed to a lethal respiratory disease, but policymakers should prepare our health care system for the (hopefully) vast period of time between now and the next pandemic, when more typical health care needs will need to be met and the price for care will be an acute concern for payers. Competition in health care is a good thing for patients’ wallets, and Missouri should repeal its CON law to ensure the state’s health care market is as competitive as possible.

The post Certificate of Need Repeal Must Become a Legislative Priority appeared first on Show-Me Institute.

On September 20, 2022, Show-Me Institute and Show-Me Opportunity hosted a discussion with Arthur B. Laffer, Jeanne Sinquefield and Brian Domitrovic about their upcoming book Taxes Have Consequences: An Income Tax History of the United States.

The post WATCH: Taxes Have Consequences with Arthur B. Laffer, Jeanne Sinquefield and Brian Domitrovic appeared first on Show-Me Institute.

While taxes create a lot of adverse incentives, those in favor of tax cuts often predict that a tax cut will create incentives that have a positive effect on the economy. Companies and individuals certainly consider the tax climate when making major decisions (like where to locate or what to invest in). States and cities with lower tax rates may find that many of those decisions work out in their favor.

A recent Wall Street Journal opinion piece gives a few examples of how a cut to the federal corporate income tax changed behavior and seems to have increased corporate income tax revenue. The article notes that corporate income tax revenue is up 22 percent from the previous year for the first six months of 2022. Though there are other variables, the piece concludes, “Lowering the rates while broadening the base by eliminating loopholes created incentives for more efficient investment decisions that paid off for shareholders, workers, and the government.”

States and cities may see similar effects if they cut taxes—like the earnings tax in St. Louis City, as one example. The 1 percent income tax and 0.5 percent payroll tax in St. Louis City only apply to those who live or work within the city limits. This tax incentivizes businesses to locate outside the city, taking their money and their workers with them. It’s understandable why businesses react this way, but it doesn’t help a city that seems to be shrinking every day.

While a reduction or elimination of the earnings tax would be a blow to St. Louis City’s tax revenue, it’s likely that this tax cut would sway business decisions in the city’s favor. Businesses would be more willing to locate in the city now that they wouldn’t be effectively cutting their workers’ pay by 1 percent. After a while, revenue collected from new businesses and workers through other taxes could offset losses from the earnings tax.

Now, does a tax cut guarantee that a government will have more revenue? Of course not; there are many other factors that affect business decisions and tax revenue generation. But this is just some food for thought: lower taxes don’t necessarily mean less revenue.

The post Lower Taxes, More Revenue? appeared first on Show-Me Institute.

Colorado’s governor defended his call for an income tax rate of zero with basic economic theory. When you tax something, you make it more expensive and discourage buying or doing it. With sin taxes such as cigarette taxes, the tax is added to do just that—make the price of cigarettes higher and discourage cigarette smoking.

But is that really what we want to do with income taxes? Do we want to discourage people from earning income? Show-Me Institute researchers have asked these questions for years as they’ve written about Missouri’s income tax and the earnings taxes in St. Louis City and Kansas City. The individual income tax accounted for more than 26 percent of Missouri’s total revenues in 2020 (Colorado’s 4.63 percent individual income tax contributed almost 20 percent of the state’s revenues in 2020). Given the adverse incentives created by income taxes, it would be in Missouri’s best interest to rely less on this harmful tax.

Missouri legislators have taken steps to lower the state income tax, perhaps indicating a general acknowledgment of the negative effects of income taxes. For example, the online sales tax bill from earlier this year includes mechanisms to incrementally lower the top state income tax rate to 4.8 percent. This is a great step in the right direction, but we are still far from zero. As Polis said: “We can find another way to generate the revenue that doesn’t discourage productivity and growth . . . and we should.” I agree, and I hope that Missouri lawmakers share this sentiment and continue to lower income taxes in our state.

The post Colorado Governor vs. Income Taxes appeared first on Show-Me Institute.

In 2012, we wrote about letting health care professionals provide Missourians free care—and facilitating it by accepting their out-of-state licenses. We were strong backers of the Volunteer Health Services Act in 2013, were national advocates for its wide adoption in 2014, and were apoplectic in 2015 that New York would stop licensed out-of-state doctors from providing their citizens much needed care. (New York has a different opinion on the issue now.) In 2016, our concluding lines in “Demand Supply: Why Licensing Reform Matters to Improving American Health Care” were:

[S]tates do not have to wait for [an interstate compact] to emerge and should be willing to accept, unilaterally, the licenses of qualified medical professionals from other states. Indeed, just as several states have passed Volunteer Health Care Services Acts for the needy, states can pass similar legislation that would allow licensed physicians in good standing to provide care to their own residents—no additional licensing required.

And we continued our advocacy. Last year we cheered Arizona for being the first to achieve this watershed reform, and this year we have been on the leading edge promoting supply-side health care that, among other things, would ensure Missourians have maximal access to health care professionals to meet their needs during the coronavirus crisis.

Six weeks ago, Gov. Mike Parson to his credit issued a waiver that established wide reciprocity for health care professionals. And this week, driven by Rep. Derek Grier’s leadership, the legislature passed a permanent reciprocity law for health care professionals—and many, many more licensed professions.

Suffice it to say, I am ecstatic. Congratulations to all who have worked toward this moment, but especially, congratulations to the people of Missouri. At long last, the state is an unambiguous leader on license reform issues, and the benefits of that commitment will ripple through Missouri for years to come.

The post Missouri Delivers on License Reciprocity appeared first on Show-Me Institute.

You can watch the full discussion here: https://www.youtube.com/watch?v=4BorO19ELMc

You can listen to the podcast here: https://bit.ly/2L5qkql

The post Virtual Town Hall with Art Laffer appeared first on Show-Me Institute.

Healthcare supply is an especially important issue in China. Ground zero for the pandemic, China had already long been beset by shortages of healthcare professionals, largely thanks to the surprisingly low pay and status of the health care professions in that country. Despite this, China has (as far as we can tell) mitigated this problem by shifting the supply of health care professionals from other areas into the Wuhan region. (Emphasis mine)

Sometimes it takes a crisis to highlight what’s wrong with a medical system. In China, however, the coronavirus hasn’t uncovered any surprises. Instead, it’s thrown a spotlight on problems that have festered for decades, including the lack of a primary care system, and — most critically — a shortage of qualified medical personnel. Although reform efforts have been underway for years, the situation in Wuhan is a stark reminder of how far China must go to meet the minimal medical standards expected by its fast-growing middle class. . . .

For now, China can treat Wuhan’s shortage of doctors as a health crisis and mobilize qualified personnel from across China to work in the city. Indeed, 6,000 medical workers from across China have either arrived in the Wuhan area or will soon, and they will alleviate much of the pressure building up in hospital corridors. But they’ll stay only as long as the immediate crisis requires. When they leave, Wuhan — like most Chinese cities — will be left scrambling to find enough doctors to treat a long-term health-care crisis.

Meanwhile Italy, which has also been hard hit by the virus, has also been dealing with a shortage of doctors and facilities for many years. That shortage has only been accentuated by the severe pressure the coronavirus has placed on the Italian healthcare system in recent weeks:

“We have a health-care system in southern regions, especially south of Naples, where we actually have very few facilities,” said Prisco Piscitelli, an epidemiologist and vice president of the Italian Society of Environmental Medicine. Their ability to cope may be “even worse with the increased number of occupied beds in hospitals and intensive-care units.”

Hospital berths are only part of the answer. Italy is also suffering from a shortage of doctors. As many as 1,500 leave the country every year after finishing their specialization, according to doctors’ association Fnomceo.

Thankfully the worst of the coronavirus hasn’t hit the United States yet, and hopefully the disease will be brought under control before it reaches Spanish flu epidemic levels. Whatever the outcome, the experiences of China and Italy reemphasize the threat posed by uneven and inadequate healthcare supply, both in terms of medical professionals and medical facilities. The consequences of government intervention in the United States and in Missouri that exacerbates these shortages—whether by blocking interstate licensing reciprocity or erecting barriers to new healthcare facilities—will be borne by patients, even under non-crisis circumstances.

Reformers should continue to focus on bringing supply-side reforms into law because not only will such reforms help the public during periods of healthcare normalcy, but they will also help the public when a healthcare crisis is upon us.

The post In Crisis, Supply-Side Healthcare Reforms Are Even More Important appeared first on Show-Me Institute.

In 1986, the federal government enacted the LIHTC program with the second round of President Reagan’s tax cuts. The idea was simple: provide a supply-side incentive to make housing more affordable. LIHTC represented a new approach to government-funded housing policy. Instead of directly subsidizing the rents of low-income individuals, the program forgoes future federal tax revenues to incentivize developers to build more housing. And in exchange for the tax credits, the developers must agree to reserve a portion of the subsidized units for low-income tenants and to cap rents for low-income tenants for thirty years.

Each year, the Internal Revenue Service allocates federal LIHTCs across all 50 states based on population. It is then the responsibility of each state’s housing agency to distribute those credits for approved projects. Last year, Missouri was allocated $2.75 per full-time resident from the federal government, which translated to $17 million in tax credits available for new projects. But not every project is eligible for the same amount of tax relief. Within the federal program, there are actually two types of tax credits: one for new construction projects and another for rehabilitations. The credits for new construction are the most popular, and can cover up to 90% of all construction costs over 10 years. The rehabilitation tax credits are less lucrative and cover closer to 40% of construction costs over the same period.

Awarding tax credits for the cost of construction lowers the investment required by the project developers, but not in the way you’d expect. Developers rarely use the credits to build housing directly; instead, developers typically sell the tax credits to independent investors at a discount to finance the originally approved project. The project’s investors then use the credits as dollar-for-dollar reductions in their business or individual income tax liability over the following 10 years.

And the way Missouri has implemented its state LIHTC program has made things worse. In response to claims from developers that the federal program alone cannot make projects profitable, Missouri’s LIHTC program fully matches each federal credit dollar for dollar with a state credit.

Over a series of upcoming blog posts, I’ll discuss how the LIHTC program as described fundamentally fails to effectively or efficiently improve Missouri’s affordable housing landscape.

The post LIHTC 101: Program Basics appeared first on Show-Me Institute.

CON laws limit where many health care facilities can open in Missouri, effectively carving out monopolies and oligopolies for incumbent providers. Sometimes the negative consequences of CON aren't obvious to patients because new providers don't even bother entering a CON health care market, so customers never see what they aren't getting. But for patients here in the Kansas City area, the difference between a CON state like Missouri and a non-CON state like Kansas is becoming a lot clearer as new, smaller health care operations are exploding in Kansas—but not here in Missouri.

The post Microhospitals Booming-But Not in Missouri, Thanks to Certificate of Need appeared first on Show-Me Institute.

Cochrane’s growth-oriented policy program outlines the need for more efficient regulations and a simpler tax system that would encourage work instead of undermining it. He says the ideal tax system should be one that raises revenues without drastically distorting economic behaviors, and a pure tax on consumption is “close to that ideal.” The piece goes on to cover a myriad of policies where free-market reforms could boost growth and improve standards of living.

While I highly recommend reading the piece, the Show-Me Institute also had the pleasure of hosting the self-described “Grumpy Economist” last month at Saint Louis University, where he talked in more depth about how these reforms could affect Missouri and the nation. The full presentation is available online here. 

The post “But for those willing to recognize the simple lessons of history, slow growth is not hard to diagnose or to cure.” appeared first on Show-Me Institute.

Making health care more available and affordable requires attention not only to health insurance and care demand; it requires that we also take a hard look at provider supply, and try to find ways to expand the care opportunities available to patients that are currently obstructed, unnecessarily, by government.

Physician licensure reform is an important step toward that end. There are over 900,000 state-licensed physicians in the United States, and yet today only about 3% of those doctors can substantively see Missouri-based patients, thanks to the way our current physician licensure system works. The paper's argument is straightforward: if you are a medical doctor who is licensed and in good standing in your home state, Missouri should not be stopping you from practicing in our state and helping Missouri-based patients.

With the maldistribution of primary care physicians we see both nationally and at the state-level, there are many underserved communities in Missouri that would benefit from the opportunities of interstate licensure, especially in the telemedicine context. Importantly, rather than pursue a system like the Interstate Medical Licensure Compact promoted by many state medical boards, policymakers should look at the Nurse Licensure Compact as a guide to making care by a physician more available and affordable to Missouri patients.

The paper builds on our previous work with the direct primary care and Medicaid reform issues. 

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Liberals love to hate Sam Brownback, and for good reason. The Kansas governor threatens a central tenet of liberal orthodoxy: the belief that higher taxes are a price that must be paid for progress.

“If your objective is to grow the economy, would you rather put more money into government, or leave it in the hands of small business?” Mr. Brownback asks during a recent interview in his office at the state capitol. Three years ago Kansas enacted the biggest tax cut of any state, relative to the size of its economy, in recent history. Lawmakers reduced the top rate on the personal income tax to 4.9% from 6.45%. They also eliminated the income tax for small business owners who file as individuals, a broad group that includes sole proprietors, limited liability partnerships and S-corporations.

The governor declared that Kansas was “open for business” in such strong terms that he might as well have donned a sandwich board reading “Come to Kansas / Keep Everything You Earn.” He boasted: “Our new pro-growth tax policy will be like a shot of adrenaline into the heart of the Kansas economy.”

The comment was subsequently picked up by critics who wondered why the Kansas economy wasn’t suddenly leaping ahead at, say, 4%-5% growth annually. When Mr. Brownback ran for re-election last year, national reporters descended on the Sunflower State and quickly made Kansas the national symbol for the alleged depredations of “trickle-down economics.” A sampling of headlines includes: “How Tea Party tax cuts are turning Kansas into a smoking ruin,” L.A. Times, July 9; “Kansas’ Ruinous Tax Cuts,” the New York Times, July 13; and “The Great Kansas Tea Party Disaster,” Rolling Stone, Oct. 23.

Yet voters re-elected Mr. Brownback by a four-point margin. What the news coverage missed was that if Kansas hasn’t exactly catapulted into the front ranks in economic growth and employment, then it has at least moved a long way from the stagnation of recent decades. Consider:

• In March 2013, unemployment in Kansas stood at 5.5%. It has since dropped to 4.2%, tied for 14th lowest in the country.

• From 1998-2012, Kansas ranked 38th in private-sector job growth, according Bureau of Labor Statistics data crunched by the Kansas Policy Institute. In 2013—the first year after the tax reform—the state climbed to 27th place, and in 2014 it moved to 21st, placing it in the top half of states.

• In the second half of 2014, hourly wages in Kansas grew 3.5%, according to BLS data, far faster than the national average of 1.9%.

Then there is the Kansas City metropolitan area, a living laboratory that straddles the border with Missouri. On Mr. Brownback’s side of the divide, the top personal income-tax rate is now 4.9%, beginning at $15,000 for single filers; in Missouri the top 6% rate starts at $9,000.

“I just think Kansas City is a great study,” the governor says. “This is an unusual place, where you’ve got a city virtually equally divided between two states.” The results? Over the past two calendar years, private-sector jobs increased by 5.6% on the Kansas side and only 2.2% on the Missouri. In the same period hourly wages grew $1.22 on the Kansas side, compared with $0.61 on the Missouri side.

To Mr. Brownback, those kinds of statistics show the success of his tax cuts. He says a reporter recently asked whether he could “definitively say this wouldn’t have happened” without the reforms. “We don’t have the studies that say that,” he replies, “but we’re in terrain that we have not seen before—and it’s good terrain.”

Such results make intuitive sense. Patti Bossert, who owns two employment agencies in Topeka, estimates the tax cuts saved her firms $40,000 last year. Seeing a windfall on its way, she spent $375,000 to buy and remodel an old building for a new company headquarters. “Our business has been phenomenal,” she says. “Wages are going up, and the big problem now is that there are many more available job openings than there are qualified people to fill them.”

Critics contend that Mr. Brownback’s tax cuts have blown a hole in the state budget—$344 million in the 2015 fiscal year and $600 million in the next. The governor is filling those gaps by moving money from highway projects and delaying some public pension contributions. He has also proposed raising cigarette and alcohol taxes and pausing some of the tax cuts still scheduled to take effect. But he insists that the state will maintain a balanced budget and at the same time “continue our march to zero income taxes.”

Even so, Ms. Bossert worries that budgetary issues could cause the legislature to roll back the tax cuts. “Kansas can’t afford to break the promise it made to small business in 2012,” she says. “We have to stay the course to reap the real long-term benefits of this reform.”

If Mr. Brownback has anything to do with it, Kansas will stand firm. The governor expresses mild regret that his use of “colorful language”—the shot of adrenaline line—became a distraction. But he’s still eager to take on liberal assumptions across a host of issues, including the best way to eliminate poverty.

“I love the debate on wage growth because the left wants to push mandatory minimum-wage growth,” he tells me. “They want to do it by statute, and we will do it by growth.”

Mr. Wilson is a resident fellow and senior writer at the St. Louis-based Show-Me Institute.

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(As an aside, it was Mr. Krugman, writing in The New York Times in 2011 who stated that “the V.H.A. [Veterans’ Hospital Administration] is a huge success story, which offers important lessons for future health reform.”)

Mr. Krugman’s predictable protestations notwithstanding, there actually is a significant body of empirical evidence finding that, on average, states and countries with lower tax rates tend to grow faster. (See articles in this SMI study.) While economists, like any other group of scientists, debate their findings, there is real-world evidence to believe that reducing taxes can improve the economic lives of a state’s citizens.

Every principles of economics student, even those using Mr. Krugman’s textbook, learns that if you wish to reduce an activity, tax it. Since income taxes are derived from working, basic economic theory predicts that higher income taxes will reduce people’s incentive to work more hours. At the extreme, tax me 100 percent of my income and I’ll just stay home, thank you. So, lowering tax rates in income should reduce this disincentive to work.

Mr. Krugman does not seem to think that lowering taxes matters. The story that Walgreens is contemplating moving its headquarters to Switzerland to lower its tax burden belies that notion. Even if you find this proposed move disturbing, you cannot ignore the simple fact that Walgreen’s likely would not consider relocating if taxes were equal in the two countries. Tax rates really do matter in making economic decisions.

There is no denying the fact that since the Kansas legislature enacted the tax cut in 2012 (it became effective in 2013), the state’s economy has yet to achieve the economic take-off that some promised. Job growth is slower than the national average and, due partly to income shifting in response to the fiscal cliff, the drop in tax revenues in 2014 compared to 2013 has been larger than predicted.

Changes in the tax code cannot be expected to reverse years of weak economic performance overnight. Kansas, like many other states, is still recovering from the effects of the Great Recession. Like most medicines, changes in tax codes should not be expected to deliver immediate cures.

Before Mr. Krugman is anointed as the Cassandra of tax cuts, let’s give the experiment time to take hold. Time will tell, but basic intuition and existing evidence predicts that Kansas’ economic future is brighter today than it would have been without the tax cuts.

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