In recent years, several studies have also suggested a positive correlation between an increase in the minimum wage and property crime (such as burglary, larceny, and auto theft) committed by young adults, who are disproportionately impacted by an increase in the minimum wage. But why would a minimum wage increase lead to an increase in property crime?

The hypothesis is that when minimum wages increase, low-income and low-skilled workers experience a reduction in hours worked or increased unemployment, which often means a loss of income. The authors conclude that this decrease in earnings, reduction in hours worked, and increase in unemployment contribute to increases in property crime rates.

The effects of raising the minimum wage are particularly felt by workers who are younger, have a lower income, and are less skilled. The Journal of Economics study finds:

. . . using data from the 1998–2016 Uniform Crime Reports, we find that a 10 percent increase in the minimum wage led to increases in property crime arrests for those between the ages of 16-to-24 of approximately 2 to 3 percent.

Intuitively, this makes sense—losing your job or losing hours at your job could increase economic desperation, leading people to commit property crimes such as theft. In addition, jobs help give people structure and keep them on the right track. The Journal of Public Economics study mentions that more labor market opportunities for younger workers reduce criminal behavior because it increases the opportunity cost of crime. If you have a job, you have more to lose if you get caught committing a crime.

What does this all mean for Missourians? Raising the minimum wage can not only lead to fewer hours and jobs, but also more crime. To actually benefit low-income and low-skilled workers, shouldn’t we instead pursue policies that foster an environment enabling businesses to create more jobs, such as tax cuts or eliminating unnecessary occupational licensing?

The post Does the Minimum Wage Impact Crime Rates? appeared first on Show-Me Institute.

• Tax cuts at the local level
• Transparency for stimulus funds
• How federal spending affects Missouri’s budget
• Missouri students falling behind
• Teacher salaries in Missouri

Click here to find the newsletter.

The post Show-Me Institute’s December 2022 Newsletter appeared first on Show-Me Institute.

In November, voters in Clay County (and also Laclede County) will have the opportunity be the first counties in Missouri to reduce their commercial property surtax rate.

See a map of commercial surtax rates across Missouri here.

The commercial surtax is a property tax levied at the county level on commercial property only. Unlike other property taxes, it does not adjust downward as assessment value increases, and it cannot be lowered by elected officials. Per the Missouri Constitution, it cannot be raised, and only voters can lower it. To date, voters in Missouri have never lowered a surcharge tax rate, but in November, voters in Clay County will have the opportunity to be the first to do so. The modest reduction Clay County is proposing to equalize itself with Jackson County, in my opinion, is very good public policy, but more on that later.

The tax rate varies by county based on the amount of money the tax it replaced—a commercial inventory-based tax—raised in each county in 1985. If your county had many businesses that generated products subject to the inventory tax, such as Clay County with the Claycomo Ford Plant, you probably have a high replacement tax rate. If you are a county that had a lot of businesses that did not generate much taxable inventory, such as counties in the Lake of the Ozarks region with its tourism economy, you likely have a low commercial surtax rate. But the real issue is that because of the difficulty in adjusting the rate, counties still have the rate based on the economic conditions of 1985.

The post WATCH: Clay County Voters to Decide on Tax Reduction 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.

An income tax cut is basically the gift of money. Taxpayers would get to keep more of their hard-earned money to spend or save in any way that they want. That means more opportunities for taxpayers and more money that can be spent at Missouri businesses. And it’s the gift that keeps on giving, because you’d get this “extra” money year after year.

This would not only be an individual gift, but also a gift to Missouri’s economy. Income taxes are destructive to growth and disincentivize working. For a number of reasons, Missouri’s economy would be better off if the state relied more on other forms of taxation for revenue.

In recent years, Missouri lawmakers have taken steps to lower the individual income tax. The “Wayfair” bill in 2021, for example, added a reduction of the top income tax rate by 0.1 percent in 2024 and two triggers to eventually lower the top rate to 4.8 percent. But it’s not time to take our foot off the gas. Other states (like North Carolina) are implementing tax cuts, and Missouri should follow suit to support taxpayers and stay competitive.

In the mass of pre-filed bills, I know of at least one that would reduce the income tax, but it’s difficult to predict what will happen in Jefferson City in 2022. If lawmakers really want to give taxpayers a gift (albeit a late gift, given the timing of the legislative session), they’ll consider further income tax cuts this session.

The post A Tax Cut is the Gift that Keeps on Giving appeared first on Show-Me Institute.

Sure enough, my mom started on the first knot, then the second and third, and once done, she started to knit. A pattern soon formed – a big, beautiful sweater with a daisy in the middle. At that point my grandmother turned to her and said “That sweater was in there the entire time—you just didn’t know where to look.”

Show-Me Institute writers regularly advocate eliminating or reducing the tangle of economic development credits that so often waste taxpayer money without providing the promised benefits. However, we also understand that such an endeavor can seem overwhelming, and that problems can easily become knotted together. To simplify such a convoluted mess, it can help to break the work into small chunks and work on it a bit at a time.

The Missouri Department of Economic Development’s 2015 Annual Report lists the amounts issued for every incentive issued in Missouri. Instead of looking at ways to eliminate such incentives or even cap the total amount issued, another option could be to tackle these incentives one at a time. Policymakers can start with the incentive with the smallest amount issued and work up, or they can tackle the largest ones, like the Historic Preservation Credit, and work their way down. The important thing is to focus on each issue separately before moving on to the next one.

In 2010, a state tax credit review commission considered ways to create greater efficiency and return on investment through tax credit programs. In its report, the commission listed 28 programs that do not create “a justifiable benefit in relation to their cost to taxpayers.” This recommendation could mark a good place to start unraveling. The state tax revenue recovered by eliminating ill-advised credits could allow for a proven economic growth plan: a broad and fair tax cut.

The post One Knot at a Time appeared first on Show-Me Institute.

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.

The post Seeded With Tax Cuts, Kansas Harvests the Benefits appeared first on Show-Me Institute.

Read the full essay: .

The post Taxes Matter and They’re Too High for Missouri appeared first on Show-Me Institute.

Last week, the legislature approved the Missouri Dairy Revitalization Act, which, among other things, would provide up to 70 percent reimbursement  to dairy farmers who pay their federal Margin Protection Program insurance premiums. The total estimated cost to Missouri taxpayers is between $2 million and $5 million a year. That’s a lot of moolah.

Now, I have nothing against dairy products or dairy farmers, but I am wary awarding state subsidies to agriculture, even if it’s for insurance premiums. Why can’t the private sector provide insurance for dairy farmers? Why is the state supplementing this federal program? Are the premiums too high? If so, shouldn’t that be a warning sign that there is something wrong with the federal program itself? I am genuinely curious, but if we end up getting cheesy answers from proponents of this legislation, then it shouldn’t be enacted. Legislators have better things to do than cowtowing to agricultural special interests. Unfortunately, this bill already has passed the legislature, and by overwhelming margins. Currently, it’s awaiting the governor’s signature, so there is a decent chance this bill will soon become law.

I want Missouri to have a thriving dairy industry, but surely there are butter ways to spend taxpayer money. I know this might sound tired, but a whey better option would be across-the-board tax cuts for businesses. If everybody, including dairy farmers, were allowed to keep more of their money, things like dairy insurance would be more affordable and the government wouldn’t be giving special handouts to favored industries.

The post Sending Out Subsidies Until the Cows Come Home appeared first on Show-Me Institute.

Now, the economic border war is not nearly as serious as actual combat between two opposing armies, but like Confederate General P.G.T. Beauregard, opponents of the tax cuts in Kansas are eager to declare a complete victory. The truth is that it appears Kansas just received some reinforcements, this time from the Bureau of Labor Statistics (BLS).

According to the BLS, Kansas private-sector job growth in 2014 surpassed that of Missouri (1.87 percent vs. 1.16 percent). Also, earnings in Kansas have grown nearly five times the rate that they have in Missouri (2.98 percent vs .59 percent). Does this mean we, as tax cut proponents, should declare victory? No. The next couple of months’ job or wage figures could change how the two states stack up. Overall, I think we just need more time to determine the tax cut’s effects. I definitely wouldn’t go as far as to say that these tax cuts are leading Kansas toward a disaster of biblical proportions.

As I’ve said many times, tax cuts are not everything. There are many factors that influence how an economy performs. However, with that being said, taxes do matter and income taxes in particular are harmful to economic performance. I hope these latest figures can give opponents a moment of pause before writing Kansas’ tax cut obituary.

The post Are Things Looking Up in Kansas? appeared first on Show-Me Institute.

The post Show-Me Now! Missouri businesses on the Dole appeared first on Show-Me Institute.

These incentives are bad policy in general, but to create these handouts well outside of the legislature’s normal budgeting protocol is inexcusable. The budget must balance, and this late-breaking special interest goody bag throws the state’s budget out the window. Missourians deserve better than to be treated like a cash spigot for the well-connected.

There’s also a larger picture that needs to be understood here. Some of the most vocal tax cutters are also big boosters of tax incentives, but by creating, expanding, and sustaining tax handouts like these, our state is making the enactment of future tax cuts much more difficult. We should all be paying for the cost of our government, but increasingly, well-connected special interests are being exempted from that burden. That’s wrongheaded policy. As a general rule, if taxes are going to fall for anyone, they should fall for everyone. It’s time to kick the tax incentive circus out of Jefferson City.

The legislature should come back next year and pass broad and responsible tax cuts for Missourians. The first step is rejecting this year’s incentives.

The post Ditch the Tax Incentives and Pursue General Tax Cuts Next Year appeared first on Show-Me Institute.

The post Show-Me Now! Give Tax Cuts A Chance appeared first on Show-Me Institute.

(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.

The post Give Tax Cuts A Chance appeared first on Show-Me Institute.

We conducted a poll of Missouri voters and asked them a number of questions regarding school funding and school choice. When we asked participants how much they think we spend on each student per year, we found that the vast majority of Missourians have no idea. Seventy-two percent of Missouri voters either underestimated or were not even willing to guess how much Missouri spends in total expenditures per pupil. Approximately one-fifth of Missourians estimated that we spend less than $4,000 per pupil in current expenditures. In reality, we spend $9,400.

How does not knowing the facts allow for scare tactics to work? It’s simple. When people have more information, they are less likely to believe outlandish claims.

During the poll, we tested the impact of having spending information. We found that when individuals were told how much we spend on students, they were much less likely to say that spending is “too low.” There is room for honest debate in politics, even when it comes to education funding; but this debate should be based on the facts.

You can find the full poll on the Show-Me Institute and Friedman Foundation websites.

The post Survey Says . . . Missourians Dramatically Underestimate Education Spending appeared first on Show-Me Institute.

First, the “fact sheet” uses the Governor’s Executive Budget recommendation in the analysis of the potential cost impact of SB 509. This is a mistake because the governor’s recommendations are just that, recommendations. The figure used is not the actual appropriation amount for the upcoming year. That has yet to be finalized.

Let’s just grant, for the sake of argument,  that SB 509 will reduce foundation formula funding to $3.13 billion next year. If you look at this year’s budget, you will notice that funding for the foundation formula is actually $3.08 billion. So even if the MSBA’s numbers are correct, the foundation formula will be getting more money next year.

However, this whole exercise is pointless because the first year that the tax cut would go into effect is 2017. Fiscal year 2015 ends in June 2015. This means there won’t even be a tax cut for two-and-a-half years. No revenue will be lost next year (or even the year after that) because of it.

I welcome healthy debate concerning major public policy issues, but people shouldn’t be scared with false facts, and that is what the “fact sheet” from the MSBA is: scare mongering filled with plainly false information.

The post Truth And Falsehoods appeared first on Show-Me Institute.

• The top tax rate is cut by .1 percent per year if state revenues increase by $150 million. Once fully phased in, the new top tax rate will be 5.5 percent.
• Tax brackets are to be adjusted for inflation.
• Business owners who pay their company’s taxes at the individual level will be able to deduct 5 percent of their business’s income. This deduction will increase by 5 percent every year until it reaches 25 percent.
• Creates an additional $500 personal exemption for people with incomes less than $20,000.

Nixon already denounced the legislation and will likely veto the bill. He has trotted out the same talking points he used when he vetoed last year’s tax cut. “Once again, members of the legislature have chosen to ignore evidence that Missouri is already a low-tax state — sixth lowest in the nation,” Nixon said. I guess the governor felt that Missouri’s taxes weren’t low enough for Boeing when he signed a $150 million incentive package for the company to move manufacturing jobs here. Also, Missouri is not a low-tax state, particularly when it comes to income taxes.

You probably also will hear progressive groups complain that passing this bill will blow a hole in our budget and seriously harm state revenues. That’s what the Missouri Budget Project is doing. However, the group doesn’t show its arithmetic in its report. This is par for the course for the Missouri Budget Project and the “report” isn’t very useful for actually discussing the bill’s merits.

I’m glad the legislature is trying to cut taxes. I prefer more significant cuts (such as fully eliminating the individual and corporate income taxes). However, I’ll take any forward progress in cutting taxes. Hopefully, this time, the cuts will get enacted.

The post Here We Go Again . . . appeared first on Show-Me Institute.

The 51-to-49 [%] ratification of the contract [by Washington’s machinist union] ends a nationwide search by Boeing for a new manufacturing home for the planned 777X, a 350- to 400-seat jetliner scheduled for delivery in 2020, and its carbon fiber composite wings. Twenty-two states had offered 54 sites for Boeing to evaluate, each hoping to win potentially thousands of high-value aerospace jobs.

With the approval of the union, the chief executive of Boeing’s commercial unit, Ray Conner, confirmed that the 777X and its wings would be built in Washington state.

“The future of Boeing in the Puget Sound region has never looked brighter,” Conner said. “This will put our workforce on the cutting edge of composite technology, while sustaining thousands of local jobs for years to come.”

The Missouri Legislature opened a very special session just for Boeing to lure production of the 777X to the Show-Me State, and the state and Saint Louis County together offered more than $3 billion in tax incentives to the aviation giant. Although the Left was largely silent on the matter, the Show-Me Institute repeatedly criticized the cronyism of the proposal — a proposal that followed hot on the heels of a failure to pass broad-based tax cuts only months before.

If the state has billions just lying around for economic development, then the case for cutting taxes in 2014 is even stronger than it was in 2013. And thanks to the special session, practically every policymaker in Jefferson City is now on the record as endorsing tax cuts for businesses to spur economic growth. If big tax cuts are good enough for Boeing, big tax cuts are good enough for the rest of Missouri’s job creators.

The post It’s Official: Boeing To Keep 777X Construction In Washington State appeared first on Show-Me Institute.

However, the fact that HB 253 did not become law does not mean tax reform is dead. The legislature can always pass another tax cut and hopefully the one they do enact is much more significant than HB 253. The Show-Me Institute has released a paper detailing how the state could eliminate the income tax and another on how to eliminate the corporate income tax without losing any revenue.

The simple fact is that whether Missouri enacts tax cuts or not, it is still competing with other states economically. Kansas knows this. That is why they cut income taxes last year, and despite the doom and gloom predictions from opponents, the state is starting to see positive results. In the Kansas City metro area, all the net new job growth has been on the Kansas side since the tax cut passed. That is why Kansas continues to cut taxes now.  The sooner Missouri officials understand that the state needs to remain economically competitive, the better off it will be.

The post Only Round One For Tax Cuts appeared first on Show-Me Institute.

Supporters of higher taxes have spilled a lot of ink suggesting that Missouri House Bill 253 will decimate the state’s budget, the bill’s revenue triggers notwithstanding. Taking their figures as gospel only for the sake of argument, I wonder, do tax hike supporters recognize that all that tax money is actually the taxpayers’ money first and foremost? By sustaining the governor’s veto, tax cut opponents are actually taking every dollar it “costs” the state or a political subdivision from the private economy to grow the size of government. Put another way: Does taking more money out of taxpayers’ hands and letting the state spend it — a state that, under the present status quo, ranks 48th in the country in GDP growth since 1997 — sound like a recipe for economic success to you? Sounds like business as usual, and here in Missouri, business has been too bad for too long.

The implication at the core of the veto supporters’ argument is that the state knows how to spend that money better than we do. I disagree. If you support smaller government, you support tax cuts. If you support bigger government, you make excuses.

The post That Sucking Sound Is Your Money Being Taken From Missouri’s Private Economy appeared first on Show-Me Institute.