When Missouri and Kansas agreed to a border war truce in 2019, the agreement was widely celebrated as the end of an expensive and counterproductive competition.

After spending hundreds of millions of taxpayer dollars moving jobs back and forth across State Line Road, both states agreed to stop subsidizing the relocation of existing employers within the Kansas City region.

The agreement, which consisted of legislation on the Missouri side (which sunset last year) and an executive order from the Kansas side, was a good idea. But I argued at the time that Kansas Governor Laura Kelly’s executive order contained a glaring weakness. Specifically, I questioned how Kansas would define “net new jobs” and whether companies could continue receiving incentives by combining a relocation with a modest expansion.

Seven years later, Governor Kelly has provided the answer.

Defending Kansas’s $125 million incentive package for Lockton’s new headquarters in Leawood, Kelly argued the deal does not violate the border war truce because “We will not incentivize the move of current jobs. If a company is going to move and expand, we’ll talk.”

That is almost precisely the scenario I described in 2019: “Could a growing Missouri firm already planning to make a few new hires take that plan to Kansas and seek incentives—using those ‘net new jobs’ as leverage?”

The company is expected to move roughly 1,500 existing jobs from Missouri to Kansas while adding approximately 500 new positions. Under Governor Kelly’s interpretation, those additional jobs are enough to distinguish the project from the type of incentive-fueled relocation the truce was intended to prevent.

But the transaction looks familiar. Thousands of jobs move across the state line. Taxpayers provide substantial subsidies. Public officials attend a groundbreaking and celebrate job creation.

The fundamental question is whether those additional jobs would have been created anyway. It is a difficult question to answer from the outside, yet the system incentivizes businesses to claim the growth is due to the incentive.

A real economic border war truce is worth crafting. But unfortunately, the 2019 truce isn’t that.

The post The Border War Truce’s Predictable (and Predicted) Problem appeared first on Show-Me Institute.

Data center headlines have been filling newspapers each and every week. Among the myriad proposed developments across the state, one project in Ferguson stood out.

Ferguson officials recently rejected a tax subsidy proposal that would have granted substantial incentives for a data center project at the former Emerson campus. Specifically, the package included up to 15 years of tax abatements on real estate, personal property, and sales taxes.

Rejecting this tax subsidy for the development was the right decision. I want to stress that the Ferguson City Council did not reject the data center; it rejected the requested tax subsidy only.

For years, Show-Me Institute writers have been noting the problems with economic development subsidies. Governments should not be picking winners and losers, and data centers are no different.

However, many ignore these arguments and think that using incentives to attract a project could bring substantial jobs, invite tourism, and boost public morale. While maybe (strong emphasis on maybe) some could argue this about other projects, these arguments don’t apply to data centers.

The Emerson Campus formerly employed more than a thousand workers manufacturing automation products and providing engineering services. Modern data centers simply do not require that scale of employment.

At the same time, the concerns over electricity, water, and sound from data centers are well-known.

However, despite this, data centers can still provide a major benefit: significant tax revenue. They can provide so much revenue that local residents could see property tax cuts.

That is precisely why offering large tax abatements for these projects is especially misguided. Along with the cyber and electronic services we all use, tax revenue is the core benefit a data center can bring to a community. If local governments dramatically reduce those revenues through incentives, they are asking residents to absorb a lot of costs with little benefit.

A data center project at the Emerson campus could still be successful and economically beneficial without requiring massive local tax incentives. But too often, Missouri communities negotiate as though they have little to offer unless subsidies are attached.

They should think bigger than that. I wrote a recent op-ed on this very topic.

As debates around data centers continue across Missouri, policymakers should carefully weigh both the benefits and drawbacks these projects bring. Local governments should not rush to give away the primary benefit data centers can provide: tax revenue. Ferguson made the right decision.

The post Ferguson Denies Incentives for Data Center Project appeared first on Show-Me Institute.

For some reason, film tax credits remain popular in Jefferson City. They are much less popular with economists.

Missouri lawmakers are once again debating whether to extend the state’s film tax credit program. Earlier this month, I testified against legislation that would continue the subsidy. For those who don’t remember, this is a debate the state has already had.

Missouri operated a film tax credit program before ending it more than a decade ago. In 2010, the state’s Tax Credit Review Commission examined the program and concluded it served too narrow an industry to justify its cost to taxpayers. Lawmakers shut it down soon after. The idea never fully disappeared, though, and in 2023 the subsidy returned, this time with the promise of better results. The current program allows up to $16 million per year in credits for film and television productions.

So far, there is little evidence that anything has changed. Supporters point to production spending as proof that the program works. The Missouri Film Office reports that productions spent more than $40 million in the state in 2025 while receiving roughly $15.7 million in credits. But production spending is not the same as fiscal return. Much of that activity consists of temporary wages, lodging, equipment rentals, and other short-term expenses tied to a shoot. When filming ends, much of that spending leaves with it. What matters for taxpayers is how much tax revenue actually makes its way back to the state.

On that measure, film subsidies perform poorly almost everywhere they have been tried. Research summarized by the Tax Foundation estimates governments recapture between eight and twenty-eight cents in new tax revenue for every dollar of credit issued. Even Georgia, often cited as the model for film incentives, struggles to demonstrate that the program pays for itself. A 2020 performance audit by the Georgia Department of Audits and Accounts found that tax revenue generated by film production activity fell well short of the credits the state awarded.

There is also a basic budget reality lawmakers should keep in mind. Film tax credits are sometimes treated as something different than spending because the state only grants them after a production films in Missouri. But the fiscal effect is the same. Each credit issued is a commitment to collect less revenue in the future.

Meanwhile, the productions most closely associated with Missouri often film somewhere else entirely. A new HBO series set in St. Louis, DTF St. Louis, was filmed in Georgia. The Netflix series Ozark, which was set at Missouri’s Lake of the Ozarks, was also largely filmed in Georgia.

Though it should go without saying, Missouri’s lawmakers should be focused on using state tax dollars as effectively as possible. And there’s no disputing that film tax credits have repeatedly failed that test. Extending the credit today would mean ignoring the state’s past experience and choosing to repeat it.

The post Missouri’s Film Tax Credits Still Don’t Add Up appeared first on Show-Me Institute.

A version of the following commentary appeared in the Columbia Missourian.

As technology companies try to meet the skyrocketing demand for AI-specialized computing capacity, they are dotting the country with data centers to the dismay of some and the delight of others. As is all too often the case in Missouri, many of these companies are being offered taxpayer-supported subsidies or tax exemptions.

For example, Independence, Missouri, is giving Nebius more than $6 billion in tax breaks over the next 20 years for a “hyper-scale” data center, and Montgomery County has offered Amazon hundreds of millions in tax abatements to build a data center near New Florence. But why would subsidies be needed when it seems like data-center developers have money to burn and are desperate for suitable building locations?

Recent actions of data-center developers suggest that it is not the cost of building and operating those facilities that is the barrier; the main problems appear to be finding pathways to secure reliable energy generation and getting their centers online smoothly and quickly (speed-to-operation).

These two obstacles are so serious that the major technology companies (Amazon, Google, Meta, Microsoft, etc.) recently met with President Trump and signed the “Ratepayer Protection Pledge” to supply and pay for their own power for their AI data centers.

Why would these companies agree to take on this expense? Because their constraint is not cash. For these firms, time is money. The costs of delays in permitting and interconnection outweigh the value of a local tax incentive.

The negative effects of economic development subsidies and tax breaks are well known. When local officials offer these incentives, they diminish positive benefits that could come from a new data-center development: increased property-tax revenue to fill in the gaps for local services or be used to lower the overall tax rate of the community.

With all of this in mind, rather than just doing what most other states do (handing out checks or tax exemptions) Missouri should work on policies that actually deliver what these companies need most: pathways to secure and reliable energy generation, regulatory certainty, and speed-to-operation.

For local communities, this means they should not offer taxpayer dollars. Even with big tech agreeing to pay for their own power, many municipalities will still try to lure projects with incentives. No doubt the companies will take whatever money is offered to them, but subsidies are unlikely to significantly drive their decisions about where to locate.

Instead, local communities should offer a stable, predictable permitting environment and a suitable location to build. That would help address the greater desire for certainty and speed-to-operation.

And at the state level we should think even bigger. Policies like consumer-regulated electricity (CRE) could help make Missouri a true hub for data center development—without using unnecessary subsidies.

CRE would enable private electricity providers to serve large, energy-intensive customers independent of the existing, permission-heavy grid structure by allowing them to build their own power plants. Rather than spreading the costs for this infrastructure, CRE would create a “parallel path to energy abundance” —one financed by the large customers who demand the power.

CRE would allow these data centers to work with a private partner to meet their own energy needs, with less red tape, more certainty, more control, and more freedom to innovate. These benefits are likely to be more appealing than subsidies.

Unfortunately, offering subsidies seems to be a reflexive reaction in Missouri when there is an opportunity to attract a new business. But especially in this case, Missouri would be better off focusing on what the data center sector really needs. Efficient regulatory and permitting policies (like CRE), a predictable and stable environment in which to construct, and abundant energy would be far better suited to attracting and improving data center development than taxpayer dollars.

The post Why Hand Out Subsidies to Data-Center Developers? appeared first on Show-Me Institute.

When Congress created Opportunity Zones in 2017, the goal was simple: use tax incentives to steer private investment into distressed communities. Investors could defer or eliminate capital-gains taxes if they reinvested those gains in designated census tracts.

The hope was that these incentives would spur development and expand opportunity in struggling neighborhoods. But new research suggests the program may suffer from the same problems as Tax-Increment Financing (TIF).

In a recent paper from the National Bureau of Economics, “Understanding the Employment Effects of Opportunity Zones,” the authors examine employment outcomes through 2023. They find that jobs located within Opportunity Zones did increase modestly. But most of those gains appear to come from nearby communities rather than representing new economic activity. Sound familiar?

The authors estimate that job growth inside Opportunity Zones is largely offset by job losses in adjacent low-income tracts. Their overall conclusion is that the program mainly results in a “spatial reallocation of jobs and households” rather than broad economic gains.

The distribution of those jobs also matters. Most of the new positions in Opportunity Zones are filled by workers who live outside the zones—often in more affluent neighborhoods. Meanwhile, the economic circumstances of existing residents show little improvement. Employment among residents rises slightly, but median earnings and poverty rates do not change significantly.

These results should sound familiar to longtime readers of the Show-Me Institute. I’ve argued that programs like TIF often fail to generate new economic growth. Instead, they tend to shift development across neighborhoods or municipalities. Projects still get built, but just in a different place.

The evidence on Opportunity Zones suggests something similar may be happening at the federal level.

Investment incentives can influence where development occurs. But that does not necessarily mean they create new economic opportunities for the people policymakers mean to help.

TIF is TIF is TIF, even at the federal level.

The post Are Opportunity Zones Just Federal-Level TIF? appeared first on Show-Me Institute.

TO THE HONORABLE MEMBERS OF THE COMMITTEE

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

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

Current and Past Tax Credit Failures

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

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

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

The Competitiveness Argument Doesn’t Hold

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

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

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

Targeted Credits Are Poor Economic Policy

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

Prioritize Tax Relief That Benefits All Missourians

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

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

NOTES

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

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

TO THE HONORABLE MEMBERS OF THE COMMITTEE

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

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

Current and Past Tax Credit Failures

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

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

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

The Competitiveness Argument Doesn’t Hold

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

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

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

Targeted Credits Are Poor Economic Policy

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

Prioritize Tax Relief That Benefits All Missourians

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

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

NOTES

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

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

Thomas Friestad at the Kansas City Business Journal wrote recently that an engineering firm (Gannett Fleming TranSystems, formerly GFT) is moving its offices to the H&R Block building in downtown Kansas City.

Longtime Show-Me Institute readers will recognize H&R Block as a poster child for the false claims that economic development subsidies drive job creation. But this latest news only makes the point more relevant.

The TIF project was adopted in July 2006 and will last for 23 years, through 2029. For the duration of that time, all the additional property taxes and half the increase in sales and income (earnings) tax generated at the site are returned to the developer to offset the costs of developing the site. According to the latest report from the Missouri Auditor’s office, as of April 2023, this subsidy has redirected $23.5 million in property taxes and another $73.4 million in sales and earnings taxes away from the basic services they would have otherwise supported (schools, roads, libraries, etc.), instead sending the money back to the developer.

GFT moving into the H&R Block building means that a portion of the taxes it pays, most notably the 1% earnings taxes levied on each employee, will now also be redirected away from basic services to the developer to pay down the cost of the H&R Block building.

A lot of time is spent talking about how Kansas City loses revenue when businesses leave the city. We need to remember that due to our generous subsidy culture, we often lose revenue even when companies remain.

Side note: One can immediately imagine a scenario wherein developer landlords in TIF districts lower their rents because they know they will capture the additional tax revenue, thus undercutting properties that actually pay taxes. These deals are no way to run a city.

The post The TIF that Keeps Taking appeared first on Show-Me Institute.

“We have gone from about 80 properties to about 480 properties,” Hulshof explained. “My cup runneth over.”

Like supporters of government-managed economic development programs everywhere, backers of the plan in Charleston think that if the government approves the right plan here, with the right subsidy there, with the right government agency approval soon, that government plans can magically turn a struggling city into a boomtown. As economist Dick Netzer once mocked these eco devo officials, “Who needs oil wells, when a state can be another Kuwait just by increasing the budget of a tiny agency?”

A Chapter 353 plan with mass property tax abatements would not help Charleston. It would, in fact, almost certainly hurt it more. If property taxes are too high for businesses in Charleston (which I doubt, to be honest), then the city, school district, county, etc. should lower the rate for everyone, not give some property owners in downtown Charleston a big tax abatement that will almost certainly force tax increases on everyone else to make up the difference.

There are a multitude of studies that demonstrate the fallacy of believing that government economic development agencies can successfully engineer economic growth through various subsidies. Here is one simple summary from two economists who have looked at the question thoroughly: “The best case is that incentives work about 10% of the time and are simply a waste of money the other 90%.”

There are other economists who wouldn’t even agree they work 10 percent of the time. As one economist said after he reviewed a similar tax-subsidy laden plan for north St. Louis:

Among the most vocal critics of the NorthSide plan was the chair of Washington University’s Department of Economics, Prof. Michele Boldrin, who testified at the trial that the benefits promised by McKee such as new jobs and increases in property value were “dreamy,” “out of thin air,” “unreasonable,” and “completely arbitrary” and further stated that “if an MBA student came up with it, I’d throw him out of my office.”

St. Louis and other cities in Missouri have been using tax incentives as a prop for politicians to claim they are “doing something” for decades. How has it worked out for St. Louis? As author Colin Gordon wrote in him study on that precise question in his book, “Mapping Decline”:

The overarching irony, in Saint Louis and elsewhere, is that efforts to save the city from such practices and patterns almost always made things worse. In setting after setting, both the diagnosis (blight) and its prescription (urban renewal) were shaped by — and compromised by — the same assumptions and expectations and prejudices that had created the condition in the first place.

If you think the results in Charleston are going to be any different, I have a bridge over the Mississippi to sell you. A Chapter 353 plan for Charleston will allow politicians and planners to claim they are doing something, it will benefit the politically connected and the lucky, and it will empower city government to get more involved in the local economy. All of these things are, by the way, bad things. What a 353 plan won’t do for Charleston is help revitalize the city or grow the economy.

The post A Chapter 353 Tax Abatement Plan is the Last Thing Charleston Needs appeared first on Show-Me Institute.

In St. Louis County, parts of the county are still recovering from the tornado, the county executive is under indictment (everyone is innocent until proven guilty), and county government’s 2026 budget forecast says there is an $80 million budget shortfall. The last part is the focus of this post.

Every government budget can be cut, and in every government budget there is enough waste and fat to be trimmed to make a difference. That said, cutting government spending is hard (I wish it weren’t). County governments in Missouri are not bloated bureaucracies wasting money hand over foot. They tend to operate fairly efficiently, at least by government standards. So, while making cuts should be the highest priority for the budget shortfall, I doubt that there is $80 million in waste and fraud to be trimmed. Some tough choices are going to have to be made. So, beyond cutting all the waste that it can, what should St. Louis County do?

First, if you are in a hole, stop digging. St. Louis County continues to inexplicably grant tax abatements and other subsidies that never live up to their promises. If these subsidies worked—and by “worked” I mean generated long-term revenues that outweighted the short-term costs—then St. Louis County wouldn’t be in this predicament in the first place. St. Louis County needs to stop giving away taxpayer money as part of a delusion that government planning grows the economy. And yes, this includes getting rid of the senior property tax freeze among other subsidies.

Privatization and outsourcing some services are always an important option for local governments. St. Louis County’s options here are limited, in that the county doesn’t operate any public utilities and it already provides many services via outsourcing. (This is, of course, all a good thing.) The biggest mistake county government has made in recent years is the debacle with the animal shelter. The county should never have taken the animal shelter back in-house. St. Louis County officials should admit their mistake and once again outsource management of the animal shelter.

One of the reasons St. Louis County is in this situation is that it has gone over a decade without a qualified county auditor catching mistakes and making suggestions for fiscal improvements. Hopefully, the recently hired county auditor can change that.

Now let’s talk about the revenue side. Nobody likes tax increases, but sometimes they are necessary. If the county were to consider raising taxes, what taxes should it either institute or increase?

St. Louis County voters have rejected a use tax several times, most recently in April, 2022. A use tax (which is a sales tax on online purchases) is probably the best tax option for the county from a revenue perspective. Two other options could be imposing a small county gas tax to help fund roads or a modest property tax increase. Both of these would be politically complicated.

Beyond all of this, cuts will have to be made. Those may be cuts to services people like, such as the police department or highway projects. But elected officials are there to make hard choices.

The post What Should St. Louis County Do about Its Budget Shortfall? appeared first on Show-Me Institute.

Prevailing wage laws are harmful because they inflate the cost of projects taxpayers pay for or, in these cases, subsidize. Research on the subject suggests that prevailing wage laws can increase the total cost of public construction projects by as much as 25 percent. For local governments with many projects needing to be built, that could mean lower-priority but beneficial projects will go undone for lack of funding. Repeated year after year, the harm done by leaving these projects uncompleted compounds, leaving the community with fewer and inferior government services compared to what market labor rates would have otherwise allowed.

DBE programs require that a certain amount of work involved in a project go to contractors and subcontractors owned by women or minorities. DBE programs also inflate the cost of projects for taxpayers and have often been vehicles for fraud and abuse. Increasing costs and encouraging criminal activity . . . where do I sign up?

Finally, the proposed law requires that bidders offer apprentice-training programs, which are generally found in union shops. There is nothing wrong with apprenticeship programs, but instituting such a mandate is blatant favoritism for union shops over nonunion competitors. It would be a substantial burden for a typical independent, nonunion company to create an apprentice program before it could bid for a project. Whatever that burden may be, the county council has absolutely no business mandating it. This is a blatant ploy to guarantee that union companies will win all county bids.

Not surprisingly, much of the language in the bill was put in by unions, according to the Post-Dispatch story.

I am a strong opponent of tax incentives and subsidies for businesses, but imposing these types of regulations on all sorts of projects in St. Louis County is a terrible abuse of the political process. St. Louis County has no business making these rules, and, indeed, I question its legal authority to do so in some of these cases. Local government should address the major issue of incentive and subsidy abuse by saying “No” far more often. Saying “Yes, but with a bunch of new regulations and red tape” is the worst policy of all.

The post Two Wrongs Don’t Make a Right appeared first on Show-Me Institute.

The especially galling aspect of this property tax abatement by Wildwood—and many other deals like it—is that Wildwood does not levy a property tax. There is nothing wrong with that, but a city that doesn’t levy a property tax deciding on abatements that affect the school district, county, and other taxing districts that do depend on the property tax is terrible policy. You need to have skin in the game, and cities rarely have much skin in the game when it comes to property taxes. Missouri municipalities depend primarily on sales taxes, not property taxes. Again, there is nothing automatically wrong with that, but we don’t let school districts give out exemptions on local sales taxes (which they don’t impose), so I don’t know why cities get to abate property taxes.

The evidence that local tax subsidies fail in their ostensible goal of economic growth is overwhelming. Among the myriad problems:

• Local officials can’t predict the future
• Local officials allow politics to influence their decisions
• Companies and developers rarely need the subsidy (they ask because the money is there for the taking)
• Greater use of subsidies leads to increased local economic planning

Please read these reports and articles if you would like a detailed summary of these arguments.

It’s frustrating to see Wildwood go down this path. History shows that once a city approves one of these subsidies, the dam usually breaks, and they become common. I hope that doesn’t happen in Wildwood.

The post Wildwood’s Big Mistake appeared first on Show-Me Institute.

The primary candidate under consideration now, David Cameron, the current city manager in nearby Republic, is controversial, so I read, because he is a “disrupter.” That’s great if you are leading a start-up in Silicon Valley. Is it great for a midwestern city? You tell me. According to the story in the News-Leader:

David has probably stepped on a few toes along the way, it would be impossible, unrealistic to think that you would be able to make everybody happy in the process of doing your job,” [Springfield Chamber of Commerce Chairman, Bob Helm] said. “His leadership style is bold. He operates with confidence. He’s become a great problem-solver and has also been very responsive to those who approach him along the way.

If his disruptive leadership style is used to push the city employees in Republic, to work harder, then that sounds great to me. If is it used to think “bold” and offer lots of tax incentives, then count me out. Here is a story about how Republic gave a big tax break to Amazon to open a distribution center there and how the city manager got a pay raise because of it. (The story is also noteworthy as it does a good job of looking at all sides of the issue instead of just repeating press releases from the government about how great tax incentives are.)

Too often, “visionary” or “bold” local leadership just leads to local delusions about how great a city can be instead of just trying to provide the necessary services to its residents.

In fairness to Republic, the city, overall, doesn’t appear to offer that many tax incentives, so legitimate criticism of the Amazon deal needs to acknowledge that. In Springfield, they are taking their time to decide on the city manager position, and getting that decision right is worth the wait.

For much more on the evidence about the plusses and minuses of professional city management, check out my first free-market municipality guide, which goes into that debate in detail.

The post Springfield Takes Its Time Hiring a City Manager appeared first on Show-Me Institute.

That truce, however tenuous, is now over. And the legislative safeguards that underpinned it? Those are collapsing too. Missouri’s border war limitations on cross-state tax subsidies are set to expire in August. Earlier this year, legislation was introduced to preserve the truce by eliminating the expiration date entirely. Lawmakers added it to Senate Bill 10, which passed both chambers independently—but couldn’t get reconciled before session’s end. So the bill died, and with it, hopes for ending the economic arms race.

Kansas Governor Laura Kelly indicated last year she was never really serious about the truce. But now Missouri has let the truce expire. And in doing so, our lawmakers joined Kansas in an economic race to the bottom. It’s bad policy. Worse, it’s profoundly unserious governance.

Economic development isn’t war. It’s not supposed to be a battlefield where neighboring states trade artillery in the form of publicly issued bonds and tax abatements. Yet here we are again, watching legislators in Jefferson City and Topeka dress up like Civil War reenactors—reenacting the Border War with new costumes and worse math.

Meanwhile, Missouri public officials continue their own subsidy spree, throwing tax breaks at data centers and entertainment districts while the state is unable to keep the streets repaired or safe. If lawmakers were serious about our state’s economic health, they’d rein in their own giveaways first.

Instead, we’re back to playing an expensive, performative game—one that enriches developers, flatters politicians, and drains public coffers. Legislators in both states want to be seen as “fighting” for jobs, but all they’re doing is trading fire in border skirmishes that make the region poorer.

The original truce was imperfect, but it pointed in the right direction. It said we could grow the region without cannibalizing each other. That we didn’t have to subsidize the illusion of progress. That good policy could also be good politics.

By breaking the truce or letting it expire, politicians on both sides demonstrated they are not interested in sober economic stewardship. They may win a few headlines or ribbon cuttings. But the public—taxpayers, students, local governments—will be left paying the bill.

If this is a reenactment, let’s at least admit it: The weapons are new, but the economic costs are the same.

The post Border War is Back On! appeared first on Show-Me Institute.

Soltas takes a close look at New York City’s 421-a tax incentive, a voluntary program meant to coax developers into adding affordable units to new construction. His conclusion? The marginal cost of delivering just one of those “affordable” units is about $1.6 million. Not per building—per unit.

To put that in perspective, housing vouchers or programs like the Low-Income Housing Tax Credit (LIHTC) can often serve a family for a fraction of that price. In fact, Soltas finds that the 421-a program is about six times more expensive than either LIHTC or Section 8 on a per-unit basis.

Supporters of these policies often say the premium is worth it because it moves low-income households into higher-income neighborhoods, opening up long-term opportunities. But even that goal comes with trade-offs. We can’t pretend money is infinite. When we choose to spend $1.6 million to house one family in a high-rent ZIP code, we are choosing not to house five or ten families elsewhere. Every dollar we overpay in one neighborhood is a dollar not spent reducing waitlists, repairing existing housing stock, or investing in other services.

The more we subsidize these costly outcomes, the more we distort the market—and not in subtle ways. Developers are rational. When inclusionary mandates make a project unprofitable, they don’t build. When they can get tax breaks for minimal public benefit, they take the deal. Soltas’s paper even shows that developer “windfalls” aren’t the biggest issue—it’s the simple fact that it costs far more to make units “affordable” in already expensive neighborhoods.

What this all points to is a deeper issue in housing policy: the unwillingness of lawmakers to prioritize. Inclusionary housing tries to solve everything at once—cost, segregation, opportunity—but ends up creating a system where we pay top dollar for minimal benefit. It’s the public policy equivalent of spending a fortune on a single winning lottery ticket while others go hungry.

We don’t have to take that path. There are more cost-effective ways to support housing affordability that don’t rely on distorting incentives or showering subsidies on high-income developments. Targeted vouchers, flexible zoning reforms, and letting supply meet demand are all better places to start.

Policymakers should stop asking, “How can we mandate more affordable housing?” and start asking, “What’s the most effective way to help the most people with the dollars we have?”

The post The Real Price of “Affordable Housing” appeared first on Show-Me Institute.

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Spoiler alert: It’s taxpayers. Taxpayers foot the bill.

The scale of these data centers is staggering. As Friestad reports, the energy demand from these facilities is equivalent to 100 Walmarts or 40 hospitals​. Their massive electricity needs—driven in part by artificial intelligence—have led Evergy, the regional utility provider, to plan two new natural gas plants and expand renewable energy production by 3,000 megawatts over the next decade​.

While Evergy insists that existing customers won’t subsidize these projects, some experts aren’t convinced. The Missouri Office of Public Counsel warns that the increased demand could drive up energy prices across the region​. Even if Evergy builds enough capacity, ratepayers may still bear the costs of maintaining infrastructure that primarily benefits tech giants.

Kansas City approved up to $8.2 billion in tax incentives for Meta alone, a package more than three times the city’s annual budget​. Google has also secured generous tax benefits, though the full scope is still unclear​.

These incentives were pitched as a way to boost local schools and communities. But as Friestad’s reporting shows, and as regular readers of this blog have come to expect, the expected windfalls have been slow to materialize. The Smithville School District, which was promised rising tax revenues, has instead seen a fraction of what was projected. In 2024, Meta paid just $86,839 in property taxes to the district—far short of the more than $1 million in annual payments initially forecast​. Construction delays and city permitting issues have further postponed expected revenues.

The pieces highlight an important debate: Did Kansas City need to offer such massive subsidies at all? Economic development officials argue that data centers wouldn’t come without them, but others suggest that factors like cheap land, energy access, and infrastructure play a much bigger role​.

A broader trend is at play. At least 36 states now offer incentives for data centers, creating a nationwide bidding war​. Critics like Good Jobs First director Greg LeRoy argue that these subsidies often do little to sway a company’s decision, while shifting tax burdens onto residents​.

And while data centers bring major investments, they don’t create many full-time jobs—typically around 100 per facility, despite requiring billions in public support​.

As they have with entertainment districts, hotels, and sports stadia, Kansas City leaders are making a massive bet on data centers, banking on future economic gains. But as the Kansas City Business Journal’s reporting makes clear, the immediate costs are real, and the benefits remain uncertain. Will the promised revenues materialize? Will taxpayers ultimately bear the burden of subsidizing these projects?

The people of Kansas City should demand answers. If policymakers want to keep handing out billions in incentives, they owe the public clear, transparent explanations of when—and if—the promised returns will actually arrive.

The post Kansas City’s Data Center Boom: Another Costly Gamble appeared first on Show-Me Institute.

This is just the latest example over the years of City Hall favoring wealthy, connected corporations with taxpayer subsidies and special treatment.

Port KC CEO Jon Stephens framed the incentives as a “small, supportive element” aimed at ensuring Kansas City retains high-quality jobs. The project promises to add 150 jobs with an average salary of $126,000 while retaining 600 current employees. Yet no precise value for the tax exemptions was disclosed. Its not clear if PortKC attached performance requirements to the deal, but Friestad indicates there was no such discussion of it among the commissioners when the subsidies were approved.

Readers may recall Stephens backed subsidies for an independent baseball team in Kansas back when the team couldn’t pay its utilities. If nothing else, he is consistent in his apparent desire to redirect taxpayer money to private corporate interests

Such a deal is nothing new for JE Dunn. The company received a lucrative incentive package when building its headquarters in 2009. That project fell under the East Village tax-increment financing plan, redirecting $19 million in public funds for a parking garage, demolitions, and blight removal.

This latest deal follows a familiar script in which major corporations, including Cerner, H&R Block, Burns & McDonnell, and Commerce Bank have secured public funding for their private office projects. Research has indicated for years that such incentives do not significantly impact corporate decisions on location.

Port KC has repeatedly played a central role in funneling public dollars into private hands. Its recent involvement with JE Dunn reflects a long history of negotiating deals that often leave taxpayers holding the bag, such as the millions each year taxpayers must fork over to cover bond payments on the Power & Light District owned and operated by Cordish Company. (Stephens is a former manager of that project.)

As Kansas City grapples with persistent infrastructure needs, ballooning public debt, and limited funding for essential services, its continued reliance on subsidies for corporate renovations raises questions about priorities. For now, Kansas Citians can only watch as the city’s public funds are diverted to underwrite private gains.

The post KC’s Corporate Welfare: JE Dunn’s HQ Renovation Gets Public Support appeared first on Show-Me Institute.

Governor Parson said that Missouri would “do everything we can” to keep the teams in Missouri.

This is dangerous. The reason state and municipal leaders welcomed a truce in the economic Border War was not because of the damage it inflicted on others—it was because of the damage it inflicted on their own cities and states. When signing the 2019 truce, Kansas Governor Laura Kelly noted:

In the past decade, folks in Kansas and Missouri had to watch and wonder why economic development forces in each state spent huge sums — together, some $330 million — to pull businesses a few miles across the border, and only to create an illusion of success with practically no economic gain.

Parson agreed, saying, “Sometimes common sense does prevail. Because you don’t have to be a scientist to figure out [the Border War] was a bad deal for both states.”

Just because Governor Kelly is violating her own executive order does not mean it is in anyone else’s benefit to re-arm and ride to the sounds of guns.

The only ones who benefit from such skirmishes are the corporations that pit the two states and their various municipalities against each other. A prime example was Applebee’s, which crossed State Line Road repeatedly, adding no economic benefit to either side, but racking up sweet taxpayer-funded incentives for itself each time.

All that Kansas did the other day was provide the Chiefs and Royals leverage to play the states against each other—potentially increasing the costs to taxpayers in both states. Should the Missouri side present a package that is competitive, the teams will very likely go back to Kansas and ask it to increase its offer. This is how negotiations work. Will Kansas, now that it has gotten its developers, municipal leaders, and residents excited by the prospect of hosting the two teams, be able to say no? Or will it sweeten the deal, just a little bit, to meet this “once in a lifetime” opportunity?

Anyone can see how this quickly becomes a race to the bottom.

Many Kansans are happy to have Jackson County foot the bill—and the hassle—of dealing with the Hunts and the Shermans. Conversely, there are plenty of Missourians who wouldn’t be bothered if Kansas decided to pick up the tab—and the bond risk—of hosting those teams and all their demands of taxpayers. But responding in kind to Governor Kelly’s gambit is not good for Missouri.

The only way to grow an economy is for government at all levels to be good at the basics. Maintain your infrastructure, keep the public safe, protect property rights, and do so as effectively and efficiently as possible. Missouri leaders ought to keep that in mind.

The post The Border War Is Bad Because It Hurts Us appeared first on Show-Me Institute.

First of all, the city has finally agreed to allow earnings tax refunds to remote workers. The decision made by the city at the start of the pandemic to improperly apply the earnings tax to remote work was a terrible one. After losing two rounds in court, the city has finally done the right thing and started to once again do what the law requires—it will not collect the earnings tax for work done outside of the city.

Secondly, the mayor has created a new commission to study the long-term tax revenue situation for the City of St. Louis. That’s a fine idea. Hopefully, it will do a better job than a similar committee did for Kansas City over a decade ago. In Kansas City, the Citizens’ Commission on Municipal Revenue recommended repealing the city’s land tax—which was the best tax the city had from an economic perspective—in favor of higher sales taxes. In my opinion, that commission served more as a pretext for the politicians to do what they wanted to do. Hopefully, the process will be different here in St. Louis, but filling 6 out of the 12 commission positions with city employees isn’t a great look.

The PFM Group out of Philadelphia has given the city commission a detailed head start on revenue options. There are many options, but in the simplest terms the long-range plans for the city need to involve more reliance on property taxes combined with ending the tax incentives and subsidies the city so generously gives out. It’s easy, of course, to be generous with other people’s money.

The first true test for the city on the earnings tax is coming soon. When the city passed its senior property tax freeze last year, it only applied the freeze to city taxes and no other taxing districts, such as the school district. (The city deserves credit for that.) Now the legislature has made limiting the freeze like that illegal (assuming the governor signs the bill). So, the city has to choose between scrapping the senior property tax freeze entirely (which it should do), or applying it to all property taxes. Ending the senior property tax freeze would move the city in the right direction of less dependency on the earnings tax and more reliance on property taxes.

What the city does with the senior property tax freeze will likely be a good indication of how it will move forward with the entire commission process.

The post St. Louis Is Finally Taking the Right Steps on the Earnings Tax appeared first on Show-Me Institute.