Taxes are going down, right? That’s a good thing, right? My answers are “yes,” and a hesitant “maybe?”

I like low taxes, but I like low taxes evenly spread out for everyone. How we tax is almost as important as how much we tax. Whether they are income, property, or sales taxes, and whether they are at the national, state, or local government level, too often lately we are cutting taxes for some people in some instances for some things. These highly targeted cuts might work out overall, but often they are done because they make good politics, not good public policy. Taxes should be broadly based for several reasons, including fairness, certainty, and administrative ease. This is the opposite of what is happening.

Congress seems likely to pass changes to federal income tax rules that would exempt income from tips and overtime from taxation. This is absurd. The airport skycap who works a 50-hour week should be admired for his hard work, but his tax treatment should not be any different from that of the woman processing tickets behind the airline counter for 40 hours per week. This proposal treats things that are, essentially the same—regular, tipped, and overtime wages—as entirely different things for taxes. That’s a dangerous road to travel.

Staying in the same realm, one of the most hotly contested items in the ongoing federal tax debate is whether to raise the state and local tax (SALT) deduction. Currently, the SALT cap is $10,000 per household. This means that you can deduct state income taxes, local property taxes, etc., up to $10,000 from your federal income taxes. Currently, congressmen from higher-tax states are fighting to significantly increase the SALT deduction cap. The latest number is $40,000. That means that high-tax states would be able to continue increasing taxes knowing that their taxpayers would in part be subsidized by other federal taxpayers. California (or any high-tax state) would get to keep the tax money, and Missouri taxpayers would get to subsidize California taxes. This is preposterous.

The same things are happening locally in Missouri. A few years ago, legislation was passed allowing counties to freeze the property taxes of senior citizens. Scores of counties in Missouri have since done so. As a result, the wealthiest sector of the population gets its property taxes frozen upon turning 62. Younger families working and raising kids will see their taxes continue to rise, and those taxes will almost certainly rise more than they otherwise would have without the senior tax freeze. This is insane.

Another example includes Missouri’s sales tax rules. The legislature passed a law removing sales taxes from diapers and feminine hygiene products. We can all sympathize with the aim here. But adding more products to the sales tax exemption list will increase pressure to raise sales tax rates (or institute entirely new sales taxes) on the other products that are still taxed. Your diapers will have cost less due to reduced taxes, but your infant’s clothes will cost a little more with the new sales taxes on them.

Each of these targeted tax changes will have unseen, harmful effects. High-tax states will continue to get away with tax increases if the SALT deduction is raised. More workers will see their pay come via high-pressure “tips” instead of typical wages. Seniors will avoid beneficial downsizing simply for tax purposes. As fewer goods are subject to regular sales taxes, new special taxing district sales taxes will be added onto everything else. These targeted taxes will likely succeed for purposes of short-term politics, but they are going to fail by any longer-term fiscal measure.

Is there anything going right with tax policy? Sure. Keeping the federal tax rates from rising by passing those parts of the “big, beautiful bill” will benefit everyone, although the entire plan needs further spending cuts. In Missouri, the state income tax rate has been steadily coming down for everyone over the past decade as revenue targets are hit. Finally, the sales tax base has been broadened by taxing online sales and legal marijuana in the past few years. All of those moves are consistent with good tax policy.

If you are a wealthy California homeowner over 62 who still works for tips on overtime while buying diapers online for your Missouri grandkids, you may benefit from all of these changes. But if you are like most people you will benefit from maybe one while being hurt by the others. Of course, the one you benefit from will be clear and obvious, while the multiple ways you are harmed will be small and harder to detect. You will think you’re a winner in this game of tax politics. But in reality, you won’t be, and neither will the government’s fiscal condition.

The post The Wrong Direction on Tax Policy appeared first on Show-Me Institute.

Several years ago, my colleagues and I were debating what the worst possible tax policy change could be. We settled on “exempting lottery winnings from income taxes.” While it may not be quite that bad, the ongoing effort to exempt senior citizens from property tax increases around the state are a similarly misguided attempt at tax reform that will have harmful effects on the counties where it becomes law. This includes Greene County, which passed the plan in 2023, and may include Stone (the county question) and Webster (Proposition 1) counties, each of which has the proposal on the November ballot.

State legislation passed in 2023 and amended in 2024 authorized any county to freeze the real property taxes of the primary homes for senior citizens who meet certain qualifications. Their property taxes would stay at the same amount they were when they become eligible for the plan, which for most people would be when they turn 62. The purpose of the bill is to help senior citizens stay in their homes as they age, but there are several major problems with this proposal.

This proposal is harmful simply because it reduces the property tax base. A major tenet of good tax policy is that the base should be as broad as possible so that the necessary rate can be as low as possible. Unless local governments cut services in response to the enactment of a tax freeze for seniors, it will almost certainly lead to higher tax rates on those property owners not eligible for the freeze. A senior tax freeze is every bit as much of a tax increase on non–senior citizens as it is tax relief for some senior citizens.

People who live in homes of similar value with similar public services should pay similar property taxes. The young couple who has lived in their Marshfield home for a year should not pay higher property taxes than their neighbor just because their neighbor has lived there for two decades.

Passage of this bill would also lead to the problematic situation in which people vote on property tax increases that they themselves will not personally pay. In Stone County, the Village of Indian Point has a sizable property tax increase also on the November ballot. Indian Point seniors can vote for the proposition knowing that they may not have to pay the increased taxes if the tax freeze also passes. That’s not good government. The single best aspect of property taxation is that it imposes the costs of local services on the people who use those services, unlike sales or local income taxes that are exported in part to visitors, commuters, and others. Instituting a system in which people vote on property taxes they won’t pay breaks that beneficial connection.

For a cautionary tale about the dangers of property tax subsidies and alterations, consider California’s infamous Proposition 13, which was passed in 1978. Prop 13 limited the increases in property assessments and taxes for homeowners. The measure has certainly had its intended effect of keeping property taxes low for longtime California homeowners. However, it has also reduced mobility, dramatically increased alternative taxes, limited homeownership opportunities, and caused substantial tax disparities between similar properties. This is not what the people of Southwest Missouri need.

According to data from the Federal Reserve, people aged 65 to 74 have the highest net worth of any age group. So why, if we were to pick any age group for tax exemption, would we pick the wealthiest among us? (People over 75 have less wealth than those 65–74 or 55–64, but they have a higher net worth than any age grouping under 55.) We shouldn’t be handing out property tax exemptions to anyone, whether those exemptions take the form of corporate subsidies, developer abatements, or senior citizen tax freezes.

While passage of these propositions in Stone and Webster counties would benefit some senior citizens, it would alter the property tax and assessment system in a myriad of harmful and biased ways. Property taxes work best when the assessments are accurate, the base is wide, and the rates are low. Senior property tax freezes do not move Stone County or Webster County in that direction.

The post Senior Citizen Property Tax Freezes in Stone and Webster Counties Are Not Sound Public Policy appeared first on Show-Me Institute.

Last year, Jackson County passed the senior property tax freeze. I have testified against these plans across the state. In many of these comments, I have pointed out that it is extremely troubling to create a system where people (i.e. seniors) will vote on property tax increases they won’t have to pay. As I said in one of my testimonies:

Similarly, this bill will lead to the troubling issue of people voting on property tax increases that they themselves are not subject to. The single best aspect of property taxation is that it focuses the costs of local services on the people who pay for those services. . . . Instituting a system where people vote on property taxes they won’t pay breaks that beneficial connection. It dramatically alters the voter calculation if seniors are voting on property tax increases they are immune to.

Now, Jackson County has placed a property tax increase on the November ballot. So, as I stated, senior citizens in Jackson County will be able to vote on a property tax increase they won’t have to pay. But it gets even better. It isn’t just any property tax increase—it’s a property tax increase to create a new fund for senior services in Jackson County. You can’t make this up. The county has proposed a new tax to fund benefits for senior citizens that senior citizens get to vote for but won’t have to pay for. What rational senior citizen won’t vote for this tax? All the potential benefits, none of the potential costs. It’s simply ludicrous.

I said before that:

“This bill is every bit as much of a tax increase on non-senior citizens as it is tax relief for some senior citizens,” Stokes said.

I had no idea of just how right I was going to be, unfortunately.

The post Senior Citizens Get to Have Their Cake and Eat It Too in Jackson County appeared first on Show-Me Institute.

On August 6, along with voting in party primaries, Missouri voters are being asked to vote on a constitutional amendment to exempt all childcare facilities outside of homes from property taxes. While we all want more affordable childcare, this proposal is a terrible idea. Any small benefit to families with young children will be more than offset by higher property taxes on everyone else.

Many childcare companies are for-profit businesses. Nonprofit childcare facilities, like those in churches, are already tax exempt. I see no reason why for-profit childcare companies deserve a tax exemption, but for-profit auto repair shops don’t. Yes, childcare is important. So is having a functioning car to safely get to work. The argument that something should be tax exempt because, as the ballot language states, it “supports the well-being of children, families . . . and society,” is essentially meaningless. Nearly anything could be made tax exempt by that logic.

Furthermore, this proposal does nothing to restrain government spending. Any reductions in the property tax base will result in higher property taxes on other entities that don’t have the special exemption, such as your home, your farm, and other businesses. The overall effect may be small, but it will be real.

The property tax base should be set as wide as possible so that the tax rates can be as low as possible for all taxpayers. Shrinking that tax base does real harm, no matter how sympathetic the cause may be. Missouri voters should keep that in mind when they choose in August.

The post Exempting Childcare Facilities from Taxes Is a Bad Idea appeared first on Show-Me Institute.

Several years ago, my colleagues and I were debating what the worst possible tax policy change could be. (I work at a think tank, so conversations like this are normal.) We settled on “exempting lottery winnings from income taxes.” While it may not be quite as bad, the ongoing proposals before Missouri counties to freeze the property taxes for senior citizens are similarly misguided attempts at tax reform. Boone County is the first county to put this question before voters, who will vote on Proposition One on April 2. Hopefully, Boone County voters will see through the sympathetic arguments for the plan and realize that this is very poor public policy.

Last year, state legislation authorized any county to freeze the real property taxes of the primary homes for senior citizens who qualify. Their property taxes will stay at the same amount they are when they become eligible for the plan, which for most people would be when they turn 62. The purpose of the proposal is to help senior citizens stay in their homes as they age, but there are several major problems with this idea.

This proposal is harmful simply because it reduces the property tax base. Unless local governments in Boone County cut services in response to the enactment of this tax freeze for seniors, it will almost certainly lead to higher tax rates on those property owners not eligible for the freeze. Proposition One will be every bit as much of a tax increase on non–senior citizens as it is tax relief for some senior citizens. People who live in homes of similar value with similar public services should pay similar property taxes. The recent college graduates in Columbia who have lived in their home for a year should not pay higher property taxes than their neighbor just because the neighbor has lived there for two decades.

Concerns over reducing the tax base are especially applicable in Boone County, with its substantial amount of university-owned property that is already off the tax rolls.

Passage of this proposal would also lead to the problematic situation in which people vote on property tax increases that they themselves do not pay. The single best aspect of property taxation is that it imposes the costs of local services on the people who use those services, unlike sales or hotel taxes that are exported in part to visitors, shoppers, and others. Instituting a system in which people vote on property taxes they won’t pay breaks that beneficial connection.

For a cautionary tale about the dangers of property tax subsidies, consider California’s famous Proposition 13, which was passed in 1978. Prop. 13 limited the increases in property assessments and taxes for homeowners. The measure has certainly had its intended effect of keeping property taxes low for longtime California homeowners. However, it has also reduced mobility, dramatically increased alternative taxes, limited homeownership opportunities, and caused substantial tax disparities between similar properties. This is not what Boone County needs.

According to data from the Federal Reserve, people ages 65 to 74 have the highest net worth of any age group. So why, if we were to pick any age group for tax exemption, would we pick the wealthiest among us? (People over 75 have less wealth than those 65–74 or 55–64, but they have a higher net worth than any age grouping under 55.) We shouldn’t be handing out property-tax exemptions to anyone, whether those exemptions take the form of corporate subsidies, developer abatements, or senior-citizen tax freezes.

Passage of Proposition One would certainly benefit some of Boone County’s senior citizens, but it would alter the county’s property tax and assessment system in a myriad of harmful and biased ways. Property taxes work best when the assessments are accurate, the base is wide, and the rates are low. Proposition One does not move Boone County in that direction.

The post The Upcoming Senior Property Tax Freeze Vote in Boone County appeared first on Show-Me Institute.

Counties are creating their own special rules for the tax freezes, and the fact is they simply have no authority to do that. They may be able to do whatever they want with the property tax revenues for the counties themselves (or the independent City of St. Louis), but these changes affect other entities such as school districts and municipalities.

Not all of the changes counties have included in their bills are necessarily bad (in that they may have made a bad idea slightly less bad) but a county can’t change the authority the state gave it to collect and distribute tax money for other taxing districts, like schools.

Jackson County passed an ordinance limiting the tax freeze to those with homes valued at less than $550,000. Camden County passed a senior tax freeze, and county officials stated that  improvements to the home that resulted in more than a 50% increase in assessment will trigger a reassessment and, presumably, a tax increase. It speaks to how poorly Senate Bill (SB) 190 (the bill in the Missouri Legislature authorizing the senior tax freeze) was drafted that it does not address what happens if senior citizens make substantial improvements to their home after they receive the tax freeze. Common sense would lead one to believe that the valuation and taxes are changed in that case, but maybe not?

The City of St. Louis has proposed a bill (but it has not passed yet) that makes significant changes to the eligibility rule, including raising the age to receive the tax freeze to 65. Those changes aren’t even bad ones (mostly), but they are not allowed by the state law. This article states that Greene County passed an ordinance limiting the tax freeze to those actually receiving social security, not just those eligible for it, but I don’t see that in the ordinance so I am not sure that is correct.

As an aside, now that St. Louis County had commendably rejected the freeze but Camden County (Lake of the Ozarks area) has passed it, I am intrigued by the question of how many St. Louis County residents with second homes at the lake will change their primary address to Camden County. (You can only get the tax freeze on your primary residence, not multiple homes.) Remember, residence is mostly a matter of intent. If you “intend” for your residence at the lake to be your primary house—and you at least do the bare minimum and register to vote there—it is just about as easy as that.

These various bills from counties are going to invite legal challenges, and I, for one, look forward to that happening.

The post The Taxman Confuseth appeared first on Show-Me Institute.

The state legislation, Senate Bill 190 (SB 190), authorizes any county to freeze the real property taxes of the primary homes for senior citizens who qualify under the eligibility rules. Their property taxes will stay at the same amount they are when they become eligible for the plan, which for most people would be when they turn 62. The purpose of the bill is to help senior citizens stay in their homes as they age, but there are several major problems with this proposal.

This proposal is harmful simply because it reduces the property tax base. Unless local governments cut services in response to the enactment of this tax freeze for seniors, it will almost certainly lead to higher tax rates on those property owners not eligible for the freeze. This bill is every bit as much of a tax increase on non–senior citizens as it is tax relief for some senior citizens. People who live in homes of similar value with similar public services should pay similar property taxes. The young couple who has lived in their home for a year should not pay higher property taxes than their neighbor just because their neighbor has lived there for two decades.

Passage of this bill would also lead to the problematic situation in which people vote on property tax increases that they themselves do not pay. The single best aspect of property taxation is that it imposes the costs of local services on the people who use those services, unlike sales or earnings taxes that are exported in part to visitors, commuters, and others. Instituting a system in which people vote on property taxes they won’t pay breaks that beneficial connection.

Furthermore, there are important questions about the enabling state legislation. In order to receive a property tax freeze, it says you have to be “eligible” for social security. Does that include social security spousal benefits for people who are themselves not senior citizens yet? Are teachers not eligible for this program? Some Missouri public school teachers are not in the social security program. Are they not included? These are just two flaws in the state legislation that are repeated in the county bill.

For a cautionary tale about the dangers of property tax subsidies, consider California’s famous Proposition 13, which was passed in 1978. Prop 13 limited the increases in property assessments and taxes for homeowners. The measure has certainly had its intended effect of keeping property taxes low for longtime California homeowners. However, it has also reduced mobility, dramatically increased alternative taxes, limited homeownership opportunities, and caused substantial tax disparities between similar properties. This is not what we need in Missouri.

A major tenet of good tax policy is that the tax base should be broadly based. St. Louis County, for example, is considering a property tax increase for major public building construction and renovations, yet at the same time it is poised to become the first county to move forward with a local ordinance to exempt senior citizens from property tax increases (if the governor signs the authorizing legislation). In other words, it’s debating a property tax increase while also considering exempting a large swath of residential property from those same future property tax increases. In economic terms, this is lunacy.

According to data from the Federal Reserve, people ages 65 to 74 have the highest net worth of any age group. So why, if we were to pick any age group for tax exemption, would we pick the wealthiest among us? (People over 75 have less wealth than those 65–74 or 55–64, but they have a higher net worth than any age grouping under 55.) We shouldn’t be handing out property-tax exemptions to any individual, whether those exemptions take the form of corporate subsidies, developer abatements, or senior citizen tax assessment freezes.

While SB 190 would benefit some Missouri senior citizens, it would alter our property tax and assessment system in a myriad of harmful and biased ways. Property taxes work best when the assessments are accurate, the base is wide, and the rates are low. SB 190 does not move us in that direction.

The post What to Do about Property Taxes in Missouri appeared first on Show-Me Institute.

Instead of raising the fuel tax by 2 cents per gallon each year for five years, the bill would raise the fuel tax 2.5 cents per gallon each year for five years. If it were to become law, Missouri’s fuel tax would be raised from 17 cents per gallon now to 29.5 cents per gallon in 2025. The bill’s sponsors estimate that, once the increases are fully phased in, these measures would raise an additional $462 million per year starting in 2026.

The tax increase would eventually cover a little more than half of the annual $745 million MoDOT claims it needs for high-priority road and bridge needs. Increased transportation funding is needed, Show-Me analysts and other organizations have pointed out.

There’s another new wrinkle added to the bill: residents can claim an exemption and refund for the additional tax amounts they paid as a result of the fuel tax increase. This exemption would only apply to vehicles that weigh less than 26,000 pounds, effectively ruling out commercial trucking companies from receiving the refund. The recordkeeping and reporting requirements for the exemption and refund are onerous particularly if you have more than one vehicle. Under the current draft of the legislation, the claim for a refund shall at a minimum include:  (1) Vehicle identification number of the motor vehicle into which the motor fuel was delivered; (2) Date of sale; (3) Name and address of purchaser; (4) Name and address of seller; (5) Number of gallons purchased; and (6) Number of gallons purchased and charged Missouri fuel tax, as a separate item.

It’s hard to know how many Missourians would take advantage of this refund mechanism, but available evidence suggests that most won’t. The fuel tax refund is modeled after South Carolina’s fuel tax rebate, and only $3.4 million in rebates were issued out of over $500 million raised.

Perhaps the most interesting change is that the bill would establish an Electric Vehicle Task Force to study how to ensure drivers of electric vehicles (EVs) adequately pay for the damage they cause to roads. As more people use EVs and don’t fuel their cars with gasoline, this will become a salient question for future legislation. The task force would also study how the charging of EVs will impact the state electric system, the role of utilities and the Public Service Commission in overseeing charging stations, and ensuring that electric customers without EVs don’t end up subsidizing those who do.

The bill still faces another vote in the Senate, so things could change once again. Hopefully, we see a final bill that addresses transportation funding issues in Missouri in a fair and equitable way.

The post Gas Tax Bill Undergoes Several Changes appeared first on Show-Me Institute.

On the other hand, the state’s track record on good tax policy is not nearly as strong, which is why a proposal to exempt Olympic winnings from state taxation is both unsurprising and disappointing. 

I should reiterate once again that Missouri needs to move away from growth-destroying income taxes, but special tax carveouts like the ones currently being debated for Olympic athletes make it ever more difficult to provide much-needed relief to all Missourians. Creating a tax incentive for excellence in one profession disadvantages high achieving Missourians in other fields who are not afforded similar deference by the state.

On what basis is it wrong to tax Olympians for their achievements and yet right to tax others for theirs? If it is wrong to tax Olympians’ income, what does that say about a tax system that relies heavily on income taxes?

I reject the idea that any tax incentive that reduces an individual’s tax burden is a net benefit to taxpayers or is even preferable as a matter of policy, in much the same way that I don’t see “pro-business” legislation as necessarily “pro-market.” Exempting Olympians’ winnings from taxes is certainly pro-Olympian, but it isn’t “pro-taxpayer,” nor is it good policy.

All the while, I understand the sentiment. We all want to be supportive of our high achievers, especially those achieving in a public way on the international stage. But legislators should focus on reforming taxes for everyone—athletes included, but not specially preferred.

The post Gold Medal for Sentiment, But a Wipeout on Policy appeared first on Show-Me Institute.

But the Great Caffeine Shortage of 2016 (and 2015, and before) never really materialized in most of our offices. That's not because the government or some government-analog always provides the capital for coffee. Some of us make coffee ourselves and bring it to the job site in a thermos; others buy coffee on the way to work, or take a break mid-morning to get a pumpkin spice latte. (now available!) In fact, the coffee I drink at my office here on Troost is, more often than not, from my own coffee machine, which I brought to the break room and share with my coworkers.

I could demand that the Show-Me Institute provide me with "free" coffee and force everyone else to pay for it, and certainly there are office necessities and amenities that the Institute does underwrite. The point is, I wanted a certain kind of coffee, and I felt strongly enough that I didn't bother lobbying my employer for "shared sacrifice," but instead took care of that want myself—to the benefit of more than just myself. Not everything is best given from on high, including coffee. And somehow, some way, most of us have easy access to the stuff.

Of course Dave's office analogy for government has other limitations, too. First among them is that taxpayers don't work for the government. Taxpayers also cannot "switch" governments if we find ours unresponsive to our coffee demands—at least not to the extent, manner, and speed with which we can switch actual employers. Moreover, we can vote ourselves other peoples' money in government; I can't, by majority vote, requisition Patrick Tuohey's fancy-pants wallet and force him to pay for, say, a new coffee machine for the other 99% of us. 

You get my point.

Government has appropriate roles, and funding expenditures to carry out those roles is already fraught with all sorts of moral questions, because it requires taking money from people, even if it's against their will. But just because government can force other people to buy you a coffeemaker doesn't mean it should, and it is no virtue to publicly regret your good fortune as a means to force others to pay for your own priorities.

If you care about it, be an example to others and put your money where your mug is. And if you don't really care about it? Don't tell everyone else they owe you a latte.

The post On Government-Mandated Coffee Machines appeared first on Show-Me Institute.

One might ask, if the city’s payroll tax is illegal, why hasn’t it been challenged before? After all, the tax has been in place since the late 1980s, ever since the city reformed its business license fees. The explanation here may come in the answer to another question: Who pays the payroll tax? The city of Saint Louis’s private-sector payroll was more than $11 billion in 2014. If all businesses paid the payroll tax evenly, the city should have received more than $56 million. In fact, the city earned only about $37 million. Most of that gap comes from the fact that nonprofits (along with government) do not pay the payroll tax. While that sounds charitable, it’s important to remember that Saint Louis City’s top employers are large, wealthy nonprofits like St. Louis University and BJC Healthcare. Small nonprofits like the Show-Me Institute have an impact as well.

But it doesn’t end there. Companies are regularly given payroll tax exemptions as part of incentive packages to keep them in the city. Anthem and Polsinelli are two such companies and are listed in the previously mentioned lawsuit. Do companies with legal departments large and savvy enough to know that the payroll tax has constitutional issues receive exemptions? Or is it simply clout that allows large companies to avoid the tax? Whatever the case, of the top ten employers in Saint Louis City in 2013, only one might have been paying the full payroll tax:

With the payroll tax, we have a policy that not only raises legal questions, but is also implemented unevenly. Does the full rate only apply to for-profit, private businesses without the clout to get a tax break or the wherewithal to make a fuss? If so, the city might want to reevaluate its tax policy, whether it is legal or not.

The post Does Saint Louis Have an Illegal Tax? appeared first on Show-Me Institute.

For starters, Square’s new office is located at CIC@4240 in the Cortex Innovation Community, which is already a TIF district, meaning that the company will add little if anything to the city’s hollowed-out real property tax base: 

Worse yet, as the Post-Dispatch reported, the city plans to grant Square $3 million in industrial development bonds, which the company will use to buy equipment. This city action means Square will have access to cheaper credit than it otherwise would, and may not have to pay sales taxes on equipment. But it also means that the city becomes the lessor (and Square the lessee) of expensive industrial equipment, allowing the company to dodge property taxes on its equipment as well.

                The effect of these incentives is that Square’s impact on the city budget will be mostly in the form of the earnings tax, the same earnings tax that city officials have claimed they are trying to move away from. This latest tax break is just another in a long line of giveaways that make beneficial reform nearly impossible.

 The city claims it needed these incentives, and all of these incentives, to compete for Square. But how does the city expect to experience broader growth by granting favored companies special dispensations from an uncompetitive and inconsistent taxing system? Is it any wonder that after decades of this policy, the Saint Louis City is still among the slowest-growing large cities in the United States? 

The post Square Coming to Saint Louis City, but Not to Its Property Tax Rolls appeared first on Show-Me Institute.

In the first four blog posts in this series, we have seen how Saint Louis City’s property tax base is significantly curtailed because much of the city’s land is owned by governments and nonprofits, which pay little or no real property tax. Many other properties also receive special real property tax breaks, like TIF and Chapter 353 abatements, further reducing the number of parcels paying the city’s full property tax rate of $7.5850 per $100 assessed value (plus a $1.64 commercial surcharge). In total, an incredible 40% of the city’s property by value either is tax exempt or receives special tax breaks. The situation is worse downtown, where virtually any recent development has received tax breaks.

This situation has put Saint Louis City in a bind. Most cities rely almost entirely on property taxes and sales taxes to run government. But in Saint Louis, the city is forced to rely on an earnings tax to make up for the weak property tax base. Many economists and even Mayor Slay agree that earnings taxes are damaging to city growth and put Saint Louis at a competitive disadvantage. The mayor promised to look for ways to reduce the city’s reliance on the earnings tax in 2011. However, since that time Saint Louis’s reliance on the earnings tax has grown.

Another effect has been the creation of an unlevel economic playing field, especially for small businesses and depressed neighborhoods. Effective property tax rates vary from neighborhood to neighborhood, from block to block, and from building to building. If a business or development is big (or is setting up where civic leaders would like it to), it is almost certainly going to get a real property tax break. If a resident or a business doesn’t meet either of these criteria, it pays the full property tax rate. The homeowner in Southwest Garden pays full property tax rates, but the condo dweller downtown doesn’t. The laundromat in the Central West End pays full property taxes, but the Chase Park Plaza doesn’t. Fairness aside, the civic leaders are using the tax code to entice certain businesses or favor certain neighborhoods, in the hopes that these municipal champions will create trickle-down development. This prevents the city from charging broadly lower tax rates, which could generate more broad growth from the bottom up.

In the end, a good portion of the city’s property tax base problems are beyond its control. Parks, courthouses, schools, and cemeteries are tax exempt by state law or practicality. But much of the problem is the result of city policy. The city’s land bank, the LRA, has long dragged its feet over selling properties to willing buyers. Other city organs inappropriately own land on which private developments stand, like Busch Stadium. And when the city hands out tax breaks to any large developer that makes the request, even when their development plan is speculative at best, the hole gets deeper. With another vote on the earnings tax coming soon, now would be good time for the city government to stop hollowing out the tax base and reverse the damage already done.

The post Saint Louis City Property Tax, Part 5: Problems Ahead appeared first on Show-Me Institute.

While the share of the city’s property that either gets tax subsidies, qualifies as a non-profit, or is owned by the government is large individually, looking at these issues together shows the scale of the problems confronting Saint Louis’s tax base. In fact, about half of the city’s property by area is either tax exempt or receives tax breaks. Property tax exceptions are basically the rule. The map below demonstrates this:

As we discussed in previous posts, these areas include some of Saint Louis’s most economically important and profitable institutions, such as BJC Healthcare, Washington University in Saint Louis, Busch Stadium, the Eighth Circuit Court, and IKEA. In total, around 40% of the city’s property by value either is tax exempt or receives special tax breaks.

Who is left paying the full property tax rate? For the most part, residential areas on the city’s South (and especially Southwest) side have fewer exempt properties and tax breaks. In terms of value, utilities, casinos, manufacturing and distribution companies, as well as a handful of large businesses downtown appear to pay full property tax rates. However, as the map below shows, when it comes to parcels paying full real property tax levels, the city is hollowed out:

The next post on this issue will discuss some the negative results of this reduced real property tax base, as well as strategies for improving the base. 

The post Saint Louis Property Taxes, Part 4: All Together Now appeared first on Show-Me Institute.

                However, government bodies are not the only institutions that pay little or no real property tax in the city. Nonprofit groups such as hospitals, schools, and religious institutions are exempt from property taxation by state law. In Saint Louis City, nonprofit groups own almost 15% of the city’s total property and account for more than 7% of the city’s total land valuation, as the map below shows:

The largest parcels owned by nonprofits are cemeteries. However, some of the most valuable nonprofit properties are in the center of the city, where Washington University, BJC Healthcare, and Saint Louis University have campuses. These hospitals and schools (or eds and meds) are some of the largest employers in Saint Louis and have combined property assessments of over $150 million (3.3% of the city’s total). Aside from well-known hospitals and schools, Saint Louis City is also dotted with thousands of nonprofit (and partially government) organizations that are exempt from property taxes. These include arts foundations, museums, clinics, business associations, and even Amtrak. Altogether, property-owning nonprofits, both large and small, remove a sizable and valuable portion of the city’s property tax base.

Look for my next post on this issue, which will explore the effects of tax breaks on Saint Louis City’s real property tax base. 

Note: The Show-Me Institute is also a nonprofit based in Saint Louis City. However, the Institute does not own real property, and therefore it does not receive real property tax exemptions. 

The post Saint Louis Property Taxes, Part 2: The Nonprofits appeared first on Show-Me Institute.

                The problem with the city’s property tax collections is not the rate (around $7.5850 per $100 assessed value), but the fact that most of Saint Louis City is not actually paying the posted property tax rate. As this and future blog posts will detail, most of the city’s land area and much of the city’s properties either enjoy special property tax breaks or are exempt from property tax altogether.

                One type of entity that pays little or no property tax is government. This includes city, county, state, and federal government, but does not end there. In Saint Louis City, many properties are owned by other quasi-governmental bodies, including: the Bi-State Development Agency, the Metropolitan St. Louis Sewer District, Great River Greenways, the Land Reutilization Authority (LRA), the Saint Louis Convention and Visitors Commission (CVC), the Saint Louis Housing Authority, the St Louis Municipal Finance Corporation, and others. Altogether, government-owned properties make up almost 30% of all properties (by area) in the city, as the map below illustrates:

Large city parks are one reason governments own so much of Saint Louis City. But even if we take parks out of the equation, governments still own more than 23% of the city by land area and 12% of land by value. For instance, the city’s land bank, the LRA, owns more than 11,000 parcels of land, including the land on which Busch Stadium stands. Busch Stadium’s public connection is not an outlier. Many large entertainment venues in the city, including the Scott Trade Center and the Edward Jones Dome, are on public land. Different government organizations own housing complexes, office buildings, theatres, parking lots, and wharfs. Setting aside the question of whether or not all of this government ownership is justified, little if any property tax money can come from these parcels.

Check back for our next post on this issue, which will explore the prevalence of tax-exempt properties in Saint Louis City.  

The post Saint Louis Property Taxes, Part 1: This Land is Their Land appeared first on Show-Me Institute.

It appears that, unlike most TIF projects, the developers want 100 percent of incremental economic activity taxes, including sales taxes and the earnings tax. Page 11 of the MOU states,

The City will . . . redirect through its annual budget the City’s portion of the Project TIF for a period of 23 years and Super TIF for a period of 30 years generated from the Project’s tax revenue sources . . .

In  other words, they want the half that they get from the TIFs directly, and then they want the city to give them the rest through the appropriations process. Here is the tax revenue the developers want to keep:

• Tax Increment Financing (TIF): as mentioned above, all economic activity taxes collected by and for the county, school district, library district, and the zoo will be redirected back to the project for 23 years.
• A Super TIF that collects for 30 years the tax not captured in the TIF above, including the convention and visitors tax, and redirects it to the developers.
• A 100 percent exemption on sales taxes on construction materials and real/personal property taxes.
• The creation of a 1 percent Community Improvement District (CID) tax that will then be redirected back to the developers.

Here are some extra freebies the developers want:

• A cash contribution of $35 million.
• The city’s portion of the land, valued at $13 million.
• Fees generated by zoning, permits, inspections, etc., capped at $800,000.
• A management fee to the hotel for catering amounting to $62,363,816 over 15 years. Should the event fees be insufficient to cover this, the city will pay, “from any legally available city funds,” just like we do with the Power & Light District.

Here are some possible problems for the city, based on past issues:

• The “City will maintain the existing Convention Center to its current standards. . . .” Isn’t this exactly what the city failed to do with Kemper Arena?
• The MOU says that the city won’t be responsible for cost overruns, “except to the extent intentionally caused by the City without Good cause.” I’m guessing there will be an attorney whose full-time job it is to find ways to sue the city over this, just like Cordish sued Jackson County over its assessment.

Not mentioned in the MOU is any exemption from the streetcar Transportation Development District (TDD). Apparently, funding the downtown streetcar is more important than funding the city, county, schools, libraries, and zoo. What does that say about the City Council’s view of the rest of Kansas City?

The post The Convention Hotel’s Tax Breaks and Gimmes appeared first on Show-Me Institute.

When the legislative session started, talk about sales tax exemption changes generally focused on a problem the legislature actually needed to address — whether personal training services should constitute “entertainment” for sales tax purposes. Unfortunately, that evolved into a package of legislation (encompassing several bills) that also included sales tax exemptions for manufactured homes, data centers, electricity transmission, and more. The governor is predicting that the cost to the state for the bills could be upwards of $400 million, with hundreds of millions more in costs at the local level.

Whether that top-line total is exactly correct, it is clear that many of these sales tax carve-outs look a great deal like special interest income tax credits when it comes to the narrowness of the benefits and the political considerations that went into extending them. Indeed, legislators have been trying to direct tax credits to data centers in the state for years now. That the legislature decided to throw money at the industry through a different section of the tax laws comes, unfortunately, as little surprise.

The legislature is right to cut taxes for Missourians, but cutting big special deals for favored industries, whether through tax credits or exemptions, should be a non-starter. More to the point, the governor should veto the data center legislation even though doing so would mean better tax policies — which were bound to the fate of the questionable exemptions — will have to be reintroduced next session. If he does, next year, the legislature should take what the state would have foregone with the business exemptions and apply much of it instead to broad tax cuts for businesses. If the state can do without the millions in revenue assigned to many of these special exemptions, it can continue to do without that revenue — but this time through broad tax cuts. That would be a better policy.

The post Governor Should Veto Data Center Tax Exemption Legislation appeared first on Show-Me Institute.

David Stokes’s previous appearances with McGraw Milhaven:

• on the recent privatization of the gift shop at the St. Louis Botanical Garden (2/17/14)
• on his new case study which documents examples of privatization from across the state (2/10/14)
• on new credit card parking meters in St. Louis and the ongoing legislative session in Missouri (2/3/14)
• on government subsidies in St. Louis (1/27/14)
• on a government subsidy that Kirkwood turned down (1/13/14)
• on the horse-drawn carriage industry (1/6/14)
• on the St. Louis land bank–the Land Reutilization Authority (LRA) (12/23/13)
• on the Affordable Care Act (12/16/13)
• on a proposal to give $150 million in corporate welfare for Boeing (12/2/13)
• on a proposed South County connector a toll road (11/25/13)
• on property tax exemptions for non- and for-profit nursing homes (11/18/13)
• on the failed vote to unincorporate Uplands Park (11/11/13)
• on the vote to unincorporate Uplands Park and a ballot measure to increase taxes in the Pattonville School District (10/21/13)
• on the privatization of mail delivery (10/7/13)
• on St. Ann’s permanent speed trap (9/30/13)
• on the Zoo-Museum Taxing District (9/23/13)
• on the proposed tax subsidy to move Laclede Gas two blocks (9/16/13)
• on the defeat of a tax subsidy for Walmart in Ellisville (9/9/13)
• on tax subdies (TIFs) to Bass Pro (9/3/13)
• on the closing of Augusta Bottom Rd and municipal liability (8/26/13)
• recounts his role in exposing the taxi-cab scam (8/19/13)
• on the defeat of a tax increment financing (TIF) proposal in Crestwood (7/29/13)
• on how St. Louis county schools will incorporate transfer students from failing districts (7/15/13)
• on students in failing schools have the opportunity to switch schools (7/8/13)
• on St. Louis city’s fee and licensing of street performers (7/1/13)
• on patronage jobs in the St. Louis Treasurer’s office (6/24/13)
• on user fees for photographers at St. Louis county parks (6/17/13)
• on reforming city manager rules (6/10/13)
• on zoning and its alternatives (6/3/2013)
• on speeding tickets, parking meters, and why we should get rid of the penny (5/28/2013)
• on the recently completed legislative session (5/20/2013)
• on property assessments (5/6/2013)
• on Missouri’s alcohol distribution laws (4/29/2013)
• on sales taxes (4/22/2013)
• (3/25/2013)
• (2/11/2013)
• on the funding of Missouri roads (2/4/2013)
• (1/28/2013)

The post Show-Me with McGraw Monday Mornings 550 KTRS appeared first on Show-Me Institute.

Some of the hardest debates come from retirement communities and daycare centers. Many organizations operate these businesses on a for-profit basis, but hold some spots for charity. They attempt to claim tax exemption from that small percent of charity cases. There can be a significant difference in the types of services these businesses provide. Many truly cater to the needy (Head Start, etc.) and likely deserve tax exemption. Others cater to the well-off and absolutely do not deserve it. Daycare centers have mostly been unsuccessful in obtaining tax-exempt status. However, the senior-care industry has much more money at stake and has been more successful.

A new senior community in Kirkwood is attempting to qualify for tax exemption. The amount of money at stake is almost $1 million per year. The Saint Louis County assessor is fighting back, and good for him. Tax exemptions should be given out very carefully, because other taxpayers have to make up the difference when properties are removed from the tax rolls. This is one of the reasons the city of Saint Louis is dependent on the earnings tax. There are so many tax-exempt organizations within the city that the property tax base is too small to depend on it. Think Barnes Hospital, SLU, etc. The city then makes the problem worse by generously giving out TIF and operating the LRA poorly, but I understand their line of thinking.

I do not think a private organization operating a for-profit senior center deserves tax exemption. I hope Saint Louis County Assessor Jake Zimmerman is successful in his efforts to fight it. I think he is dead-on correct in his opposition.

The final decision is up to the Saint Louis County Council, though. Ultimately, they will probably base their decision on whether the business is unionized or not.

The post Property Tax Exemptions Are Too Easy To Get In Missouri appeared first on Show-Me Institute.