Missouri House Speaker Jonathan Patterson suggested to Fox4 news in Kansas City that Missouri’s contribution to a Royals stadium could reach around $700 to $900 million. Patterson said:

“I think if you look at the numbers, and there was an audit in 2023, the teams generate almost $60 million, and so if you take half of that, then it would be $30 million, then times 30 years, it could be that number. I think those are good estimates that you’re working with.”

That number is way off.

In 2025, during a special legislative session, the House and Senate passed, and the governor signed, Senate Bill (SB) 3, the Show-Me Sports Investment Act. While the bill does not specify a bonding formula, it does set limits: that state spending “shall be no greater than . . . baseline year state tax revenues,” that appropriations may “not exceed thirty years” and that “the net bond proceeds . . . shall not exceed fifty percent of the total costs of the project.” In setting those boundaries, the bill also limits revenue to that “derived directly from the facility.”

Patterson’s estimate of stadium revenue is from a 2023 Jackson County Sports Complex audit, which reports $55 million in tax revenue generated by both teams (the Chiefs and the Royals). But that figure includes all tax revenue collected by state, county, and local jurisdictions. Of that $55 million, only $34,929,233 went to the state—which is what SB 3 covers.

But SB 3 further limits potential support for the Royals to revenue generated only at Kauffman Stadium. Let’s assume half that number, $17 million, is from the Royals’ Kauffman Stadium,* which aligns with estimates provided by Governor Mike Kehoe. If that entire amount were bonded at 6% interest over 30 years, Missouri would be able to give the Royals $234 million.

Another news outlet assumed a 4.5% interest rate over 30 years and concluded the state would be able to give the Royals about $274 million.

Either way, it’s a far cry from $900 million.

There is a lot more to learn about this deal, but SB 3 provides real constraints on what can be counted and borrowed against. Based on the legislation, the 2023 Jackson County audit, and different interest rates, Missouri could contribute roughly $234 to $274 million toward a downtown ballpark. That’s a lot, but only a small portion of what many believe to be a nearly $2 billion project.

*Note: Although the Royals play more games at their stadium than the Chiefs, Arrowhead Stadium has a larger capacity and also hosts concerts for musicians such as Taylor Swift.

The post By the Numbers: What Missouri Might Give the Royals appeared first on Show-Me Institute.

Longtime readers of the Show-Me Institute blog won’t be surprised by this admission, but hearing the governor finally acknowledge our state’s spending problem hopefully signals a coming course correction. This stands in stark contrast to Missouri’s lawmakers in recent years, who have largely ignored how out of control state government spending has become, despite all the data to the contrary.

Prior to state Fiscal Year (FY) 2026, which began on July 1, Governor Kehoe signed a $50.8 billion spending plan, which was about $2 billion less than what the general assembly sent him. It should be noted, and lauded, that the governor applied some fiscal sanity by vetoing more than 200 spending items. But it’s also important to keep perspective on our state’s current financial mess and how much work fixing it will require.

It’s easy to forget that as recently as FY 2019, Missouri’s government only spent a little more than $27 billion in total compared to the $50 billion for 2025. What’s changed? Missouri’s spending has exploded on almost everything: welfare, education, transportation—you name it, and spending on it probably increased.

In 2019, Missouri’s budget included a little more than $9 billion in general revenue funds (primarily state sales and income tax collections) and nearly $9.6 billion from the federal government. Today, our state plans to spend more than $15.6 billion in general revenue and $24.5 billion in federal funds. If you compare this to the state’s estimates for general revenue collections in the coming year of $15.3 billion, you can see that even after the governor’s vetoes, Missouri’s government is still expecting to spend $300 million more than it projects to bring in. That doesn’t even account for the high likelihood of supplemental funding requests later in the year, and that the state’s supply of federal funding is projected to fall by the billions.

Missouri taxpayers are stuck with a government spending far beyond its means. As recently as 2023, Missouri had nearly $8 billion in general revenue funds set aside that could have been saved for times of need, but instead the state has spent exorbitantly, whittling away at the surplus. Today, those excess funds have been almost entirely depleted. Governor Kehoe recently noted that without his actions to reduce spending, the state was expecting a billion-dollar shortfall going into the next fiscal year.

It’s hard to look at what’s happened with Missouri’s budget over the past five years and view it as anything but a squandered opportunity. Our elected officials managed to take historic tax revenue growth, unprecedented federal investment, and an $8 billion cash reserve and turn all that into a billion-dollar hole in the budget right as the state’s revenue forecasts are taking a turn for the worse. Going into next year, Missouri’s tax collections are projected to decline and there will be no more excess federal dollars to prop up the state’s unsustainable spending. It should go without saying that it is imperative that Missouri’s lawmakers finally get serious about getting the state’s finances back on track.

There’s no longer any dispute about whether Missouri’s finances are a problem. The better question is whether it’s too late to stop the bleeding. Perhaps the most important task for our state’s elected officials over the next year will be finding a solution that’s better than something akin to putting a Band-Aid on a bullet wound.

The post Missouri’s Squandered Opportunity appeared first on Show-Me Institute.

After passing the enormous budget, lawmakers declared mission accomplished. While it is true that the approved total budget will be the first in a decade that is smaller than the previous year’s, that is less of an accomplishment than one might initially think. Missouri’s budget has almost doubled over the past five years, from approximately $27 billion in fiscal year (FY) 2019 to nearly $53 billion today. Going into next year, the federal funds that helped make this budgetary growth possible are drying up, and state tax revenues are expected to stagnate or decline. In other words, due to Missouri’s balanced budget requirement, a smaller budget was all but assured before our elected officials took any action.

What is surprising about the budget is the way state tax dollars are spent. The approved budget calls for approximately $15.3 billion in general revenue spending (the fund where state tax dollars go). To put this number in context, in FY 2019, Missouri only spent $10.8 billion in general revenue, and we’re on track to spend about $15.8 billion this current fiscal year. To make matters worse, we’re only expecting to collect about $13.2 billion in net state tax dollars next year. To put it plainly, we’re planning to spend more than we take in. See the table below.

To spend more than we take in, the legislature will have to pull from reserves to make ends meet. Fortunately, the state does have some money set aside that could be used for this purpose, but using those funds may not be the best idea. The current year’s budget relies on spending down the state’s surplus. Doing so again would leave little excess funds left for future years, which is worrisome considering the financial headwinds our state is facing.

All told, Missouri’s budget for FY 2025, which begins on July 1, 2024, plans to spend about 90% more than the state government did in 2019. This level of spending should not be celebrated and is simply unsustainable. It’s time Missouri’s elected officials stop playing with fire, because it’s state taxpayers who are going to be the ones who ultimately get burned.

The post Legislature Playing with Fire appeared first on Show-Me Institute.

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

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

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

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

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

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

The article compares 2019 and 2020 taxable sales throughout the St. Louis area. Most of the St. Louis area saw a decline in taxable sales when comparing the second quarters of 2019 and 2020. St. Louis County taxable sales were down by just over 10 percent, while St. Louis City taxable sales were down by over 25 percent. The image below from the NextSTL article shows the change in taxable sales by zip code. Notably, taxable sales were down 89 percent in the Downtown zip code, 76 percent in the Airport zip code, and 75 percent in the Downtown West and Midtown zip code.

Taxable Sales/Use % Change Apr-Jun 2020 v 2019

This makes sense—a lot of these zip codes rely on visitors, bar and restaurant patrons, and office workers spending their money away from home. All these things became rarer during the economic shutdown.

So what is one takeaway from the pandemic? Our governments need to take a hard look at how they are generating revenues. If revenues are unpredictable, promised public services can be compromised.

The post Taxable Sales Down in Many St. Louis Areas appeared first on Show-Me Institute.

Certainly, the vast numbers of people simply out of work will hit cities’ earning tax bottom line. But even those who are still working—and doing from homes outside Kansas City and St. Louis—may present a secondary hit to revenue. Chapter 68-383 of the Kansas City Code of Ordinances, “Allocation of earnings of nonresident individuals,” includes this:

Working days. If the amount of such earnings depends primarily upon the amount of time devoted by such individual, then the portion of such earnings subject to tax shall be that portion of such earnings which the total number of days worked within the city bears to the total number of days worked within and outside the city.

St. Louis’s ordinances are similar. The section on non-resident taxation reads:

If the amount of the earnings depends on the volume of business transacted by the individual, then the portion of the earnings subject to tax shall be the portion of the earnings which the volume of business transacted by the individual in the City bears to the volume of business transacted by him within and without the City.

Each city has created forms for non-resident wage earners to claim a refund for days worked outside the city. St. Louis’s is here, Kansas City’s is here.

The hit to these cities’ earnings tax revenues may be severe in 2020, but there may be a long-term impact. The experience of adapting to COVID-19 is demonstrating to many that working from home is a viable option at least a few days a week. If it also offers the opportunity to cut one’s own taxes, it may become much more common.

The post More People Working from Home Means Less Earnings Tax Revenue appeared first on Show-Me Institute.

Just last week, Governor Parson restricted an additional $47 million in state funds in response to Missouri’s rapidly declining tax revenues. Restrictions are one of the mechanisms the governor can use to withhold state funds from being spent in an effort to keep the state’s budget balanced, as is constitutionally required. This second round of restrictions brings the current year’s estimated revenue shortfall to over $210 million, and there’s no end in sight. Over the past few months, we’ve seen the important role that governments play in responding to public health emergencies, but we’re also just beginning to see the economic toll of those efforts.

Missouri’s yearly revenues come almost exclusively from income and sales taxes. These are taxes that suffer dramatically during an economic downturn, or a period of quarantine where people are not working or shopping as much. The impact from a slowdown can be felt almost immediately, as Moody’s (a major credit rating agency) recently estimated that Missouri could see up to a 30 percent decline in revenue collections over the coming year.

Falling revenues mean that further reductions in funding will be immediately required because of the state’s balanced budget requirement. To compound the issue, when the economy worsens, spending on programs such as Medicaid increase. Dealing with COVID-19 means there will be less and less money for policymakers to spend while the cost of simply maintaining the status quo becomes more expensive.

So, what should Missourians expect going forward? First, Missouri’s government-funded programs and services will likely be impacted by the shortfall for years to come. For example, Missouri’s tax revenues in 2014 were still below what they were before the start of the 2008 recession. And since roughly 65 percent of Missouri’s collected revenues go toward funding education and Medicaid, there will likely be changes to programs that hundreds of thousands of Missourians rely upon.

These challenging times will require solutions beyond what the federal government can provide. Missouri’s policymakers must re-examine the state’s programs and determine the best ways to fund them. It is now more important than ever to get government out of the way and allow the market to work in order to move Missouri forward.

The post Rough Road Ahead for Missouri’s Budget appeared first on Show-Me Institute.

Growing concern about the spread of the coronavirus has led multiple localities to institute stay-at-home orders and order many businesses to close. We are now starting to see the impact of statewide efforts to practice social distancing on Missouri’s economy. As the number of unemployed or laid off Missourians continue to rise, it’s fair to also worry about how drastically these workforce changes will negatively impact both state and local tax revenues for the coming year. Keeping Missouri’s budget balanced, as is required by the state’s constitution, will require cuts in funding to many state programs when income and sales tax revenues come in much lower than expected.

Missourians bracing for at least another month at home should also prepare for an economic landscape that looks different going forward, because the resulting constraint on economic activity will have significant consequences.

The post Missouri Descends into Economic Downturn as Jobless Claims Soar appeared first on Show-Me Institute.

The study, from the Pioneer Institute in Massachusetts, concludes that completely eliminating occupational licensing would result in revenue gains for Missouri. The key is that there would be more tax revenue generated from additional people earning income than is currently generated in licensing fees. According to the study, allowing citizens to work without licensing restrictions would generate an additional $328 million in state and local tax revenue in Missouri. While Missouri would lose $150 million in fees collected from licensure, revenues would increase by about $178 million. Basically, complete licensing reform would more than “pay for itself” in Missouri (as well as 28 other states listed in the study).

Though this study examines the complete repeal of all licensing, no one has yet proposed that in Missouri. However, it’s interesting to think of licensing reform through the often-overlooked lens of public finance. Government officials seem to be hesitant to eliminate a source of revenue, but this study suggests an elimination of fee revenue may not reduce total revenues.

The licensing reciprocity bills proposed in the Missouri Legislature are much more modest than the reforms suggested in this study, but they present exciting economic opportunities for Missourians. This study adds to the overwhelming evidence that it’s time to rethink Missouri’s occupational licensing.  

The post Occupational Licensing Reform Could Save the State Money appeared first on Show-Me Institute.

The quotation above is from Aaron Hedlund’s new report, an exploration of what happens when tax rates change. Among the findings:

• The effect of tax policy on the size of the tax base can be as important as the actual tax rate.
• Looking only at the impact of taxes on the incentives of primary earners yields can lead to misleading projections about the revenue a tax hike will generate; a household’s secondary income earners, as well as those considering entrepreneurship or investments in their own human capital, can be more sensitive to tax rate changes than primary earners.

Click on the link below to read the entire essay.

The post Report: How Do Tax-rate Changes Impact Revenues appeared first on Show-Me Institute.

City Hall officials say it’s difficult to establish what Kansas City gets in return for it its investment in incentives.

Kerrie Tyndall, director of economic development for Kansas City, said the benefits of incentives are spread over several years and agencies and, thus, “extremely difficult to quantify.”

Extremely difficult? The city just spent $350,000 on a report Tyndall oversaw that concluded, “each incentive dollar invested generated $3.83 in additional tax revenue.” So to quantify the benefits of incentives for 2018, we just take the $175 million spent on incentives and multiply by 3.83. That gives us . . . $670,250,000 in additional tax revenue! Voila!

Even if that $670 million in additional tax revenues doesn’t appear right away, Kansas City has been doling out more than $100 million each year in incentives for quite a while. Where exactly in the budget might we find that tax revenue windfall?

Nowhere. The city sees nowhere near the return on incentives claimed by CDFA in a report Tyndall personally oversaw for two years. The fact that she doesn’t mention the multiplier today suggests that even she knows it is laughably wrong. Laughable, that is, if these subsidies weren’t so tragically destructive to Kansas City.

The post Even Kansas City’s Director of Economic Development Knows that CDFA’s Incentive Study is Bogus appeared first on Show-Me Institute.

                Before diving into the numbers, it is important to note once again that the proposal before city leadership is not the end result of a negotiation with the Rams or Stan Kroenke. The Rams organization has remained completely silent on what, if anything, the city can do to keep the team in Saint Louis. The NFL, which could possibly block a move, has also failed to make firm commitments to the city. With the caveat that nothing is final, if the stadium funding plan goes through the city will likely be financially worse off than it is now, for the following reasons:

1.       It will cost the city more than last time. In building the Dome, the city agreed to make $6 million a year in bond payments for 30 years. For the new stadium, Saint Louis will add remaining Dome debt to new stadium debt, to make payments that start at $4.5 million and escalate to $9 million over the course of 36 years. That does not include the millions that city residents have paid already through sub-municipal governmental bodies.

2.       It has hidden, unaccounted-for costs. Stadiums cost millions of dollars every year to maintain and operate, little or none of which is covered by NFL teams. The current plan does not account for these costs, aside from proposing adding new taxing districts. But if the future stadium costs and Ram’s tax revenue is anything like it is now, those districts will be wholly unable to cover costs. And speaking of revenue…

3.       It means less tax revenue than before. The city plans to give the vast majority of taxes (sales and otherwise) collected at the new stadium, which the city would normally collect, back to the Rams. Saint Louis City only collects about $4.2 million in total from the Rams right now, and this plan would likely mean the city gets even less in the future.

4.       It diverts needed money from the Dome. For the Edward Jones Dome to operate into the future, it reportedly needs about $100 million in capital improvements and continued maintenance. The revenue stream that currently funds the Dome would be diverted to pay for a new stadium, with nothing to take its place.

The bottom line for the city is that with this deal, to which the Rams have not agreed, the city is likely to pay more and earn less than it has for the last 20 years. Worse yet, maintenance for the new stadium and on the Dome are not accounted for, virtually guaranteeing that someone (not the Rams) will need to pay more later on. Is football so important to Saint Louis residents that they would mortgage their city’s future to give millions of dollars to an uninterested billionaire?

Unfortunately, the government sued itself to prevent a public vote, so we have no way of knowing the answer to that question.

The post Riverfront Stadium Deal May Be Worse for City than Dome Lease appeared first on Show-Me Institute.

But there is ample reason to be skeptical of the CVC’s tax revenue claims. First, the estimate was generated using estimates of estimates, which could easily lead to miscalculation. Let’s assume that the numbers are correct, and convention goers who use the dome go out and add $23 million to city coffers. That still does not ensure that the dome generated $23 million.

Why not? Imagine you owned a passenger train that generated $5 million annually. You decide you can get more riders if you make the train bigger. Post investment, revenue increases to $6 million. Did the improvement generate $6 million or $1 million in new revenue? Obviously $1 million. You were already making $5 million before you spent a dime. Passengers are likely substituting their use of the old train for the improved train; the investment itself may be attracting few passengers. Even worse, you have to consider opportunity cost, or what you could have made had you invested the improvement dollars elsewhere. If you could have earned more putting your money in other projects, the train improvement was a bad investment.

When the CVC claims the dome makes $23 million annually, they ignore substitution effects, assuming much convention spending would disappear without a dome. They also ignore opportunity cost, or that convention center investment could have gone to other projects. In doing so, the CVC is not only coming up with questionable estimates, they are ignoring historical data.

According to the Brookings Institution, the opening of the dome in 1995 had little impact on hotel occupancy. In 1991, downtown hotels combined for 1.16 million room nights. In 1998, three years after the dome had opened, room nights were 1.15 million (10,000 fewer room nights). As the author put it:

In terms of filling more hotel rooms, the city’s investment in more and newer convention center space and a dome had done absolutely nothing to either fill existing downtown hotel rooms or to prompt the private development of more hotels.

And it’s not just hotel occupancy that remained stagnant. The city’s general tax revenue actually fell in the dome’s opening year:

Revenue growth in the 1990s was faster before the dome opened rather than after. This is not to say the dome decreased revenue growth, just that there is no obvious evidence that the dome created significant revenue expansion.

To sum it up, there are many issues in calculating revenue impact of the dome today. In addition, historical data does not show that the dome significantly impacted the city’s hotels or tax revenue. For that reason, I’d take the CVC’s $23 million estimate with a football-sized grain of salt. 

The post Be Skeptical of Dome Convention Claims appeared first on Show-Me Institute.

The post When It Comes to a New Stadium, John Oliver Tells Saint Louis to “Make Them Pay!” appeared first on Show-Me Institute.

Why the discrepancy? Well, let’s look at the Post-Dispatch‘s “back-of-the-envelope” calculations:

• They assume roughly $1 million a year from taxes on the Rams’ profits. We have no problem with that.
• The Post-Dispatch counts the total $151 million of player payroll as taxable, when it isn’t. Rams players play half of their games in other states/cities, so they pay income taxes to those states. This is double counting, since they also count visiting teams’ income taxes too. Taking this into account, Joe and I estimated the income taxes generated by players’ salaries—along with those generated by the coaches, staff, and other employees of the Rams—comes to roughly $11 million.
• Taxes from sales of merchandise and food and beverages have to be balanced against what would have been received from local businesses had the Rams been absent. The Post-Dispatch gave no indication that they took this into account. According to our calculations, the net sales tax revenue along with ticket tax revenue amounts to roughly $3 million.
• Add in the Rams’ rent, and you get another $250,000 in revenue.
• Like the Post-Dispatch, we found it difficult to determine how much the city, county, and state would receive in additional hotel tax revenue.
• Overall, we estimate the Rams generate between $15-16 million in tax revenue ($10-11 million for the state, $3-4 million to the city, and the remainder to the county). That’s a far cry from the $24 million the city, state, and county put in to finance the dome. Plus, the Post-Dispatch makes no mention of the annual maintenance costs of the dome, which totaled $7 million last year and are projected to run between $5-9 million going forward.

I like football and want the Rams to stay in Saint Louis, but the only way I want to pay for them is by buying a ticket on game day. Giving further subsidies to the Rams will not be a boon to the local economy (which the editorial board, to its credit, recognizes), and it probably will end up being a net loss for taxpayers.

The post No, Post-Dispatch, the Rams Don’t Pay Their Way appeared first on Show-Me Institute.

In his article, Ingraham calls for raising alcohol taxes, stating: “Higher taxes make alcohol more expensive. More expensive alcohol makes people drink less of it. And when people are drinking less, they’re less likely to suffer costly health problems or do stupid things like drive drunk.”

If Ingraham’s ultimate objective is to make people drink less alcohol, why not just ban it? Wouldn’t prohibition really reduce the health problems associated with alcohol consumption? However, we’ve already tried Prohibition, and it didn’t work out too well. So Ingraham’s alternative is to raise taxes to cut down on consumption. Except, there are problems with that approach as well. Increase taxes too much and people will resort to smuggling. It’s happening in New York with cigarettes. What’s to say it wouldn’t happen with alcohol?

Both Ingraham and I want to cut down on drunk driving. Thankfully, drunk driving is already on the decline. Since 1986, alcohol-related fatalities have seen a 54 percent decline! Why solve a problem that is already fixing itself?

There are negative side effects to raising alcohol taxes as well. Because of our low taxes on alcohol, cigarettes, and gasoline, commuters from out of state make it a point to purchase these products in Missouri. If we raise taxes on alcohol we are removing an incentive for people to shop in Missouri. If less people shop here, Missouri businesses will suffer and the state will see less tax revenue. How will that help anybody?

I can sympathize with Ingraham’s efforts to curb the more negative effects of heavy alcohol consumption, but the biggest problem, drunk driving, is becoming less of one over time. Coupled with the fact that increased alcohol taxes can hurt Missouri businesses, we should leave tax rates alone and focus on other ways to improve public health and safety.

The post Alcohol Tax Rates Are Low . . . and They Should Stay That Way appeared first on Show-Me Institute.

The crux of his argument is that taxes on growing NFL salaries (starting at $10 million in 2017 and growing at 3 percent thereafter) would help raise about $300 million. However, if we assume that the total income taxes from the Rams is $10 million a year growing at a rate of 3 percent, the actual present value of 30 years of state income taxes would be less than $200 million, assuming the recently passed tax cuts take effect. Even if the economic development director’s number is accurate, $300 million is still less than the total public cost of the stadium plan ($405 million).

The economic development director likely meant that the state, as in just the political entity of the state of Missouri, could make millions on a new stadium. But only half of the cost is the state’s, with the other half coming from the Saint Louis area. Saint Louis City has an earnings tax, but, even accounting for that income tax, revenue is most likely to remain between $250 and $300 million, well under the public cost of the stadium.

Stating that the stadium plan would fall short of recovering tax subsidies and fail to promote economic growth is not an anti-Rams position, it is the opinion of most economists. As one researcher put it:

There are absolutely no publicly subsidized stadiums and arenas that generate enough direct or indirect tax increases to balance the initial (and ongoing) public outlay. . . . In fact, some research suggests that sports stadiums actually decrease economic activity and tax revenue in areas where they are built. . . . However, strategically placed stadiums and arenas can sometimes ride existing redevelopment trends, but they are never the cause of these trends.

The state of Missouri and the city of Saint Louis should be honest with residents. If we use public dollars to keep the Rams, it will be about pride, not tax revenue or development.

The post Rams to Make Missouri Millions? appeared first on Show-Me Institute.

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In this video, the Show-Me Institute’s David Stokes and Amy Lutz interviewed several Chicago Blackhawks fans visiting for a Saturday night hockey game against the Blues. Many, but not all of them, knew that Missouri’s tax rates were lower. But after learning of the lower tax rates, all of them planned on purchasing items such as gasoline while in town.

Lower taxes can lead to higher revenues — and keeping taxes low will keep the money flowing into the state of Missouri.

The post Gasoline, Cigarettes, Alcohol and Taxes: When Less Is More appeared first on Show-Me Institute.

Every day, Missouri has approximately 195,000 commuters that come into the state to work. That is the fifth highest total for any state. It is 55,000 more than leave the state to work each day. That ratio (+ 55,000) is the third highest number for any state. In both cases, Missouri trails only states along the eastern seaboard. (Our source for this is the 2000 Census, and we will update these numbers as soon as they are released from the 2010 Census.)

Missouri has low excise taxes. We have the lowest cigarette tax, the sixth lowest gasoline tax, the lowest beer tax, the ninth lowest wine tax, and the third lowest tax on spirits (liquor). What do excise rates and commuter totals have to do with each other?

Low excise taxes serve as an inducement for the 195,000 commuters to Missouri to voluntarily choose to purchase these goods while in Missouri. Missouri gains the tax revenue, and those commuters then bring many of the costs of the externalities of these items back to their home states. Low taxation levels on items that are often bought as part of a special trip serve as an incentive for commuters into Missouri to make those special trips when in Missouri. (This is opposed to, say, lowering the tax on lettuce, which is generally purchased as part of a comprehensive trip to the grocery store.)

These goods (gas, alcohol, tobacco) have other properties that make them a target for purchasing by commuter consumers. They can be purchased very quickly. This is a function of the standard quantity the goods are bought in, and the lack of search costs for most of the products. The reduced search costs are themselves a function of either no brand loyalty (gas) or extreme band loyalty (cigarettes). Among these three goods, only alcohol will generally see comparison shopping, but even there brand loyalty is very strong. These goods also do not spoil. (Cold beer is an exception.) Commuter consumers are not going to buy groceries on their lunch break, or before a long commute home in traffic. Finally, all of these items are more difficult to purchase online than other goods, for fairly obvious reasons and certain legal restrictions.

Missouri’s low excise taxes don’t just benefit Missourians who use these goods. They benefit the entire state by encouraging 195,000 daily commuter consumers to make these purchases while in Missouri. On the other side, they encourage the 140,000 Missourians who leave the state each workday to hold off on these purchases until they return to Missouri. This maximizes the tax revenues received by Missouri, while the costs of the externalities are spread among many states.

NB: As a matter of internal policy, the Show-Me Institute does not hold opinions. All opinions expressed in Show-Me Institute publications and video are those of the respective authors or speakers.

The post Gas, Booze, and Cigs: How Lower Tax Rates Make Money for Missouri appeared first on Show-Me Institute.