Almost certainly. (And I’m only adding the “almost” because it is being litigated over and you never know how it will turn out.)

This isn’t the first time grocery stores have been targeted by special taxing districts simply because developers want the significant money they generate. In Wentzville, a Schnucks store was forcibly included in a CID that was used to help fund a Walmart development. If that sounds insane, it is. One grocery company, Schnucks, was forced to levy a special tax against its will to benefit one of its main competitors.

In St. Louis, an existing CID board tried to expand the CID’s boundaries to include another  Schnucks, primarily to get access to all of the money it generated. Schnucks opposed that one, too, and good for the company. As the company explained in a letter to elected officials:

It is our position that addressing the problem goes beyond additional cleaning, and we would encourage the City to tap into funds available to address these issues, rather than institute an additional tax on citizens who are buying their needed groceries for their families.

Grocery stores are not large ATMs with food in them that special taxing districts can extort whenever they feel like it. Good for Hy-Vee for fighting back in Lee’s Summit, and good for Schnucks to have opposed these ideas previously. Special taxing districts like CIDs and TDDs are, in the vast majority of cases, nothing more than vehicles for corporate welfare. They are bad enough even when all the property owners agree. But compelling grocery chains to participate in them against the will of the stores is just the sour cherry on top.

The post Hy-Vee Wants to Give the Heave-Ho to a CID appeared first on Show-Me Institute.

Like most special taxing districts in Missouri, the Buc-ee’s CID will use public funds for private infrastructure. The new sales tax rate at Buc-ee’s will only benefit the company itself—the tax dollars collected at the gas station will mostly go toward constructing the building, access road, and parking lot. From its first day of operation, corporate welfare will support the business one Springfield resident referred to as “a beaver Walmart.”

Most residents of Springfield will have no say in this matter. The city drew the boundaries of the CID in such a way that all voters are excluded—only the city council got to vote on this. Show-Me Institute Director of Municipal Policy David Stokes called this “tax gerrymandering” in his testimony on this issue. In addition, four out of the five members of the Buc-ee’s CID board are listed as “Owner Representatives,” leaving only one seat for a citizen to provide a public perspective. Even once the CID is in effect, most of Buc-ee’s customers will likely have no idea about the extra hit to their wallets, since the CID Act doesn’t require any posting of added sales taxes.

Years of writing and research from Institute analysts on CIDs prove that proposals such as these are nothing new. Private developers use the public’s money to subsidize corporate interests with almost no public input. This process with special taxing districts has played out countless times before, both in Greene County and around our great state. You can see for yourself just how widespread CIDs are in Missouri by following the link to this interactive map from the Missouri Department of Revenue. Hopefully Springfield, and cities across the state, will soon learn that this isn’t a mistake worth repeating.

The post More of the Same in Springfield’s New Buc-ee’s CID appeared first on Show-Me Institute.

There are two good reasons for this program, which many, but not all, states have some version of. Reason one is that incentives matter, and if you provide incentives to businesses to get these taxes in on time, they will be more likely to do so. Reason two is that if you are going to force businesses to serve as tax collectors for the government, you should compensate them for it. It is not free for a business to calculate, collect, and remit these taxes to the government. The cost for a behemoth like Walmart may be far less than two percent, but it is not zero. Between the cost of doing the work for the government in the first place, and then providing an incentive to do it properly and on time, I think the sales and income tax timely filing discounts are perfectly reasonable and should be kept as they are.

The recent audit states that Missouri’s sales tax credit is more generous than other states. (I don’t know how the income tax withholding credit compares.) I presume the audit is correct on this, and to that I say, “Good for Missouri.” It’s nice to be number one in something beyond booze, BBQ, shoes, stools, and fountains.

As the saying went, “First in shoes, first in generous levels of sales tax remittance timely credit allowances, last in the American league.”

The post If Businesses Are Going to Be Our Tax Collectors, We Should Compensate Them for That appeared first on Show-Me Institute.

Few would have guessed what 2020 had in store for us, and fewer still need the challenges of last year recounted in detail. Missourians have faced threats to our health and to our democracy, to our communities and to our safety, and indeed to the health and continuity of our social and political institutions. Missourians rose to meet these challenges—challenges often imposed by their own state and local governments—and they succeeded in spectacular ways. Yet there are more obstacles to overcome, more work to do, and more reforms to pursue.

Indeed, great progress can happen in the face of great adversity. With this in mind, we offer our own “State of the State” today, looking backward not only at what Missouri was and has been, but forward with hope to what it is and still could be.

The coronavirus pandemic of 2020 was the biggest story of the past year, and the public education system’s response led to many of the state’s most severe and costly policy failures. And yet, most of the problems in Missouri’s educational system were only aggravated by the pandemic, not rooted in it: the lack of transparency and accountability throughout the educational system, and especially at the State Department of Elementary and Secondary Education (DESE); the inflexibility of the public school system, revealed in its inability to meet the individual needs of students; and the state’s failure to lead or even to follow other states in expanding charter schools and school choice.

The evidence is clear: wholesale reform must come to Missouri’s public schools. In the 2018–19 school year, less than half of Missouri students tested were proficient in Math and Language Arts. On the National Assessment of Educational Progress (NAEP)—a Congressionally mandated nationwide assessment of education systems in America—Missouri 4th-graders have dropped from the top half of the country for reading and math in 1996 to the bottom half today.

These failures didn’t happen all at once, but 2020 forced the problems into the spotlight. Today, 27 percent of parents report that they feel their children are now behind academically, compared to less than 7 percent before last year. Nearly 3 in 10 parents no longer trust their public school system to make decisions that are in the best interest of their children’s education.

Facts matter, and the fact that Missouri parents are losing faith in Missouri schools should alarm policymakers.

How will Missouri meet this challenge? Now more than ever, it is critical that the legislature provide all Missouri students and their families with choices for their education. Parents must have the opportunity to educate their children in other ways if they believe traditional district education is failing them.

To deliver on its education promises to parents and children, the state must pass three key reforms.

First, the state must create education savings accounts (ESAs) that give parents flexible access to a portion of their children’s public education dollars that can be used for other educational resources better tailored to their children’s needs.

Second, the state must unleash the power of charter schools by removing restrictions that unduly restrict their creation and by implementing school choice reforms, like Missouri Course Access (MOCAP), that are already the law. Specifically, the state must designate MOCAP as an independent local education association or charter school and get districts out of the equation.

And third, DESE must finally be the adult in the room and hold schools and districts accountable for what they have and have not done throughout this pandemic.

Especially in districts that have been unable or unwilling to reopen for traditional learning, parents and kids must have the opportunity to go elsewhere to ensure their educational needs are met. These three reforms would help meet not only the challenges of the pandemic today, but the challenges of the modern economy for years into the future.

At the core of the pandemic has been, of course, a health care crisis, and fortunately some headway was made last year in the face of these health care challenges. Thanks to the hard work of Rep. Derek Grier and the support of other public officials and stakeholders, Missouri took an important step in 2020 and removed licensing barriers that prevented out-of-state licensed professionals of all kinds, and health care professionals in particular, from readily providing services to Missourians. Moreover, Gov. Mike Parson acted wisely in ordering the relaxation of the state’s telemedicine and scope-of-practice regulations to better meet the needs of medical management in response to the pandemic.

These supply-boosting measures should be made permanent this year, and they should be the starting point for other necessary reforms. Along with making permanent the state’s telemedicine and scope-of-practice reforms, legislators must repeal Missouri’s certificate of need law, which unnecessarily caps hospital competition in the state, and they should take steps to deregulate health insurance to ensure that Missourians have ample choice and reasonable pricing in their health insurance products. Further, Medicaid will pose a policy and budgetary challenge to the state in the years ahead; legislators will need to work earnestly to mitigate its damage to other state priorities.

Damage to the state economy can happen in other ways, too, and nowhere is this more clear than in the condition of Missouri’s roads. Missourians depend on our roads to get to their jobs and to get their children safely to school; indeed, Missouri relies heavily on transportation for economic growth. Transportation and warehousing businesses employ over 83,500 Missourians, and over $700 billion of products travel over Missouri’s roads and bridges each year. These numbers are only expected to rise, and we cannot let an asset as important as our roads deteriorate through neglect.

Unfortunately, the Missouri Department of Transportation, or MoDOT, says it only receives a little more than half of the revenue it needs to maintain Missouri’s roads and bridges, both now and in the future. Notably, Missouri’s gas tax has not been raised since 1996 and is currently the second-lowest in the country. Toll roads, which work for Missouri’s neighbors, are an option that should also be considered here. Increasing user fees—to make sure that those who use the roads pay for them—is the fairest and best answer to address Missouri’s infrastructure funding problems.

Yet not all state “needs” for revenue are created equal. While increases to user fees in transportation might happen without a tax reduction elsewhere to help resolve MoDOT’s structural funding problems, that carveout from the principles of revenue neutrality and overall tax reform should be an exception, not the rule.

For instance, Missouri remains one of a dwindling number of states that does not require a sales tax on all out-of-state purchases. While proponents suggest, reasonably, that instituting the tax would “level the playing field” for local businesses, it also would increase the tax burden on the people of Missouri. Businesses don’t pay these taxes; Missouri’s families do.

Accordingly, the discussion about a new internet sales tax should start with revenue neutrality as its goal. No time is a “good time” for tax increases, and legislators should not think that hiking taxes as a way to generate new revenue during a pandemic and economic downturn is “good timing.” Taxes should sustain services, not backfill shortfalls, and the state should not impose new taxes on suffering families to solve its temporary, though difficult, budget problems.

And while legislators are “under the hood” of the state’s sales tax system, they should advance an array of other important sales tax reforms.

Those reforms should include a sales tax cap that puts a limit on how many layers of local taxes can be piled on Missouri consumers; the repeal of dining taxes; the reform of special taxing districts so that such projects can’t be used as fiefdoms of the private sector backed by the taxing power of government; and the movement of tax increase votes to November elections to ensure the will of residents is best represented in these elections.

But if state government really wants to help smaller retail businesses—to “level the playing field,” as we’re told internet sales taxes would do—it should start outside the realm of tax policy, by protecting Missouri businesses from the sorts of destructive, asymmetric lockdown orders that have crushed countless entrepreneurs across the state during this pandemic. We see no reason based in public health for allowing casinos to offer blackjack at all hours of the day while restaurants can’t offer dining; nor do we understand why, if Walmart can continue to sell shoes, competing shoe stores cannot also remain open.

No doubt, government officials have had to make hard choices, but they shouldn’t make those choices on the back of small business and to the benefit of their larger corporate competitors.

At the Show-Me Institute, we advance government policies that expand freedom and enrich the lives of our citizens. We also recognize the obstacles erected by special interests inside government itself that, unfortunately, can stand in the way of the public interest. Whether called rent-seeking, cronyism, or soft corruption, such barriers to freedom and the free market are wrong and must be fought at every turn. We’re happy to continue this fight on behalf of Missouri taxpayers.

In closing, here in her 200th year as a state, we’re happy to report that Missouri is strong and her citizens are resilient.

But she can be made stronger and more resilient. Much remains to be done, whether in education, or health care, or transportation, or taxation, or the fight against cronyism. We are more determined than ever to continue our efforts to make our state better, hold our leaders accountable, and offer greater freedom and a better life to our fellow citizens.

The post 2021 Show-Me Institute State of the State appeared first on Show-Me Institute.

Missouri is considered one of the most “conservative” of the 50 states. Is that a good thing or a bad thing? It depends on how you define the word.

Over the past several decades, Missouri has been going downhill both economically and educationally—as one of the worst-performing states in GDP growth and educational achievement in K-12 public education. Why?

Too often, Show-Me State conservativism has been characterized by a lack of urgency and a satisfaction with the status quo.

As I would define it, conservatism does not begin and end with the preservation of existing institutions, and it most definitely is not about protecting the privileges of the rich by exploiting the poor or being indifferent to the problems of the needy. Where it begins is with the desire to protect and enlarge freedom for all members of society—enabling people to work and live lives of their own choosing so long as they do no harm to others in the pursuit of their own betterment.

Here, then, are five New Year’s Resolutions for leaders in local and state government:

#1: Improve Missouri’s competitiveness; turn the Show-Me State from an economic sluggard into a great place to live, work, and own or operate a business. That means lowering taxes—leaving more money in people’s pockets to spend or invest as they choose. It also means removing obstacles to commerce and opportunity posed by excessive licensing and regulatory requirements.

#2: End crony capitalism—stop providing subsidies and tax carve-outs for politically favored businesses that are not available to all other businesses. In 2019, Missouri reported 524 tax-increment financing (TIF) projects from 100 political subdivisions across the state. These projects are anticipated to have $10.1 billion in TIF-reimbursable project costs. Such subsidies drain money from public services and have a bad track record of failing to deliver promised job, investment, or economic growth. Reductions in tax incentives and spending can provide some of the budgetary space to lower or eliminate individual income and earnings taxes.

#3: Don’t treat small, owner-operated businesses as the designated fall-guys in government-ordered lockdowns—calling them “non-essential” businesses while allowing their big-box counterparts such as Wal-Mart and Target to continue to operate.

#4: Don’t be penny-wise and pound-foolish when it comes to taking care of essential infrastructure on a timely basis. Interstate 70, an economic and transportation lifeline, is falling apart. Numerous other major roads are badly in need of repair. Travel on Missouri’s roads has increased by 12 percent since 2008, but the state’s transportation budget has fallen by 15 percent. According to Missouri’s Department of Transportation, it now gets only enough revenue to cover a little more than half the state’s needed road and bridge repairs. One thing is certain: Postponing needed maintenance on long-lived assets such as roads and bridges is not a smart idea. It leads to escalating costs and catastrophic failure.

#5: Expand educational choice for students and families at all income levels throughout the Show-Me State. There is no worse example of blind allegiance to the status quo than Missouri’s K-12 public education system.

Supported by nominally conservative lawmakers, the state’s educational establishment—meaning school superintendents, teachers’ unions, and DESE (Missouri’s Department of Elementary and Secondary Education)—have blocked almost every initiative aimed at expanding school choice from vouchers and education savings accounts to expansion of charter schools. Despite a long record of poor results in the so-called “Nation’s Report Card,” members of the establishment continue to oppose all forms of competition and choice in public education.

And who is hurt the most by this self-serving obstinacy on the part of the providers of public education? It is of course the users: students and their parents and families, and most especially lower-income families trapped in non-performing schools who cannot afford to move to other school districts or to private schools.

As I see it, true conservatism is really about an allegiance to principles—and to enduring values such as freedom, hard work, and equality under the law—rather than an allegiance to the status quo.

The post Five New Year’s Resolutions for Missouri Lawmakers appeared first on Show-Me Institute.

The problem in Kansas City and elsewhere, however, is that the rules created under the pretense of coronavirus mitigation are not being applied evenly, or perhaps even legally. Enter a lawsuit by The Blue Line, a bar in Kansas City’s River Market district, that takes issue not only with what the city’s emergency orders do, but even how they were imposed in the first place.

According to The Blue Line’s petition, the emergency orders, which KCMO announced Nov. 16 and that went into effect throughout the city and county on Nov. 20, are illegal without approval by the KCMO City Council or Jackson County Legislature and unconstitutional.

According to the lawsuit, The Blue Line said it pays “a premium to Kansas City and the State of Missouri” for a 3 a.m. liquor license and that 40% of its revenue comes after 10 p.m.

That makes the closure of bars and restaurants—while casinos are allowed to continue round-the-clock operations, movie theaters can stay open past 10 p.m., and alcohol sales are permitted to continue at liquor and grocery stores— “arbitrary and capricious,” according to the lawsuit.

I agree with the bar that these rules are arbitrary and capricious. Casinos have not acquired a special immunity to coronavirus that would permit them to remain open in ways competing bars and restaurants cannot—though I’ll note that my solution isn’t to shut down casinos, but rather to leave bars and restaurants alone or otherwise subject to the same set of rules these big businesses get to abide by. What’s good enough for Walmart is good enough for everyone else; likewise, what’s good enough for big entertainment venues like casinos is good enough for the corner bar and grill.

We know that state laws protecting gun stores from being shut down during emergencies work, with local shops and big retailers having demonstrated throughout this crisis that they can remain open and operate safely regardless of their size. The Missouri Legislature must pass a law to ensure that all businesses similarly situated are able to enjoy similar protections to ensure that small operators don’t have to sue local governments to be treated fairly by them. Until that happens, I hope The Blue Line’s lawsuit helps establish a red line against unequal treatment and cronyism that local policymakers will be more hesitant to cross in the future.

The post Kansas City’s Dubious COVID Orders Prompt Lawsuit appeared first on Show-Me Institute.

But you know who’s doing just fine? Box stores like Walmart and Home Depot and online giants like Amazon. For those massive commercial players, coronavirus evolved into a windfall so great that some of these businesses had to shorten their hours or delay shipping packages.

You know who else is doing just fine? Gun stores, but not because of the goodness of local officials’ hearts. Under Missouri law:

The state, any political subdivision, or any person shall not prohibit or restrict the lawful possession, transfer, sale, transportation, storage, display, or use of firearms or ammunition during an emergency.

Despite attempts to temporarily shut down gun shops around the country, local officials in Missouri largely resigned themselves to applying social distancing guidelines rather uniformly against gun retailers, from Cabela’s to tiny mom and pop gun shops. The purpose of Missouri’s gun law—protecting individuals’ Second Amendment rights—is straightforward. But the effect of the law was to level the playing field between big and small gun retailers, which stands in stark contrast to how local officials treated other small businesses.

Small gun shops could stay open as legally “essential.” But what about small businesses that sold candles, or sporting equipment, or anything else that Walmart and a cadre of other protected operators sold throughout the pandemic? Those small businesses did not get to enjoy the protections of state law, were often deemed “inessential” by local officials and were shut down—in some cases for months.

That’s wrong.

If Walmart can stay open and sell, say, candles, Missouri’s locally owned candle makers should be able to stay open. There is no reason to believe that small businesses can’t undertake rational social distancing and cleaning practices that large retailers have used throughout this pandemic.

How do we know this? Because local gun shops did it. Missouri law should reflect this reality for all small businesses and ensure that Missouri’s entrepreneurs aren’t the victims of disparate treatment by panicked local bureaucrats.

And Missouri should come back into special session and pass a law that makes this clear: If Walmart is essential, all of Walmart’s competitors should legally be, as well. Whether this requires the creation of a brand new statute or can be achieved by expanding the section that already protects gun retailers, it doesn’t matter. What’s important is that legislators act now—before another round of the pandemic hits, and before local businesses can be victimized a second time by inequitable and uneven local public health enforcement.

The post There Oughta Be A Law: If Walmart is Essential, Small Retailers Are Too appeared first on Show-Me Institute.

By state law, local taxing jurisdictions can opt out of the annual sales tax holiday. This year, 50 counties, 156 cities, and 90 Special Taxing Districts decided not to give Missouri families a tax break. Of the 90 Special Taxing Districts, 83 were either community improvement districts (CIDs) or transportation development districts (TDDs). But unlike taxes collected by cities and counties, most of these districts’ sales tax revenues help the private interests that set up the districts rather than funding public services. Many of these districts are found in the most popular shopping areas in the state and encompass large retail stores like Walmart and Target. Some examples include the Arnold Retail Corridor, the Delmar Loop, and the Hanley Road Corridor in Maplewood/Brentwood.

These overgrown microgovernments have already taken over a billion dollars in taxes from Missourians to fund the development or redevelopment of commercial districts, with privately owned businesses reaping the benefits. One 3-day weekend without sales tax revenue would hardly put a dent in the millions collected the other 362 days of the year.

Absent any action from a special taxing district’s board of directors, the district, by default, participates in the tax holiday. However, the board of each of these districts—usually elected by a small number of property owners—instead voted to keep charging the district sales tax rather than give Missouri families a break. Unlike state, county, and city sales taxes, the taxes collected from the special taxing districts formed by developers do not contribute to the funding of public services for the average taxpayer. Instead—perhaps due to the lack of accountability and oversight—they go toward subsidies that primarily help big businesses.

So if you found yourself confused by the presence of a tax amount on your receipt this past weekend, thank the misguided laws that govern special taxing districts.

The post Eighty-Three Special Taxing Districts Opted Out of Tax-Free Weekend appeared first on Show-Me Institute.

Why is there such a difference between the two? Charles Silver and David Hyman, authors of Overcharged: Why Americans Pay Too Much for Health Care, argue that it is because of the free market.

Traditional providers, like hospitals and clinics, are expensive and inconvenient for the consumer because their pricing is primarily based on what insurers will pay. In comparison, retail providers, like the clinic found in your grocery store, have to price their services in order to attract customers and strive for convenience. The two offer many of the same services but have completely different ways of doing business.

Retail providers are becoming an increasingly disruptive challenger of traditional providers. This should not be surprising—when providers are able to compete the results typically are lower-priced and more attractive options for the consumer. Just as internet shopping is disrupting brick-and-mortar businesses, retail medicine is disrupting traditional medicine, an industry that is used to being insulated from competition.

A great example of this is the way retail medicine is transforming audiology. While traditional audiologists charge steep prices for hearing aids and hearing checks (with additional charges for things like testing, warranties, and damage coverage, which can often make up 70 percent of the total price of a hearing aid), retailers are improving services while lowering costs. Costco Hearing Aid Centers offer similar services to that of audiologists without the additional charges.

Silver and Hyman write:

As more retailers enter the field, prices will become easier to compare and competition will intensify. Bargain-hungry consumers will look for better deals, but they will be interested in quality too . . . With pressure on both quality and price, retail offerings are bound to improve. (pg. 325)

Competitive pricing offered by the retail sector also allows people to avoid markups that come with using third-party payers. While most retail providers take insurance, patients pay out-of-pocket one-third of the time. In contrast, patients who visit primary care doctors pay out-of-pocket only ten percent of the time. Silver and Hyman view this as an important factor in the success of retail providers:

When we pay for health care the same way we pay for other services—by spending our own money instead of an insurer’s—good things happen: prices fall and quality improves as providers compete for business. (pg. 320)

Competition provides good things indeed. Want to learn more about market solutions for health care problems? Join us in St. Louis or Kansas City to learn more from Cato Institute scholars Charles Silver and David Hyman as they discuss why the American health care system is so dysfunctional and costly.

The post Health Care Desperately Needs Competition-Retail Medicine Provides It appeared first on Show-Me Institute.

First, if the district is extended, the district and its taxes can continue up to an additional 15 years beyond its originally scheduled termination. Put more simply, that means up to 15 more years of collecting taxes that would not otherwise have been levied. To say that’s not a new tax is like a bank adding over a decade’s worth of payments to your home mortgage and telling you there’s nothing to worry about because the payments aren’t “new.”

Second, TDDs were meant to raise funds for critical infrastructure projects; what they actually raise funds for is often anything but that. A recent report by the Missouri State Auditor exposed TDDs in Missouri as routinely “engaging in questionable practices with little oversight or transparency.” One example has been the CVTDD itself, which used over $500,000 taxpayer dollars to construct a “beautification wall”—a project whose questionable use of tax dollars has been documented before.

Third, the ballot initiative language for extending the CVTDD is hardly reassuring to those interested in good government. The language provides an extensive laundry list of items that revenue from the CVTDD may be used to fund. While a casual reader might assume the list is exhaustive, such an assumption would be incorrect. The list of permissible expenses is preceded with the words, “including without limitation.” The scope of spending could exceed even the problematic spending priorities that are explicitly spelled out to voters. The items articulated on the ballot aren’t limits; they’re examples.

Fourth, if this ballot initiative passes, then anyone who shops in the CVTDD—not only the well-to-do, but also single mothers, poor families, and those of meager means—will be subsidizing the recreation of the CHA through the sales tax that they pay at Walmart and other stores in the district.

Setting aside the deficiencies of the ballot language and even assuming that taxpayers’ money is efficiently used within the explicit scope of the project, the proposal itself remains troubling. It would commit an entire community, through the vote of only a few, to subsidizing significant amenities for members of a narrowly tailored special interest organization—not to mention that there has been no showing of need that cannot be met without a tax that is inherently regressive. That a private group may end up with a public windfall, thanks to the state’s broken TDD laws, should bother us all.

The post One More Lap around the Ice Rink appeared first on Show-Me Institute.

In just 20 years as a public company, it has experienced a thousand-fold growth in sales – going from $148 million in 1997 to $138 billion in 2016 and a projected $160 billion in the current year. Adjusted for splits, the price of the stock has gone up 200-fold – from a high of $5 a share in 1997 to $1004 a share today.

To paraphrase the bard, Amazon doth bestride the narrow world of retailing like a colossus. Others quake at its every movement. Back in June, when the company announced the acquisition of Whole Foods, the stocks of other grocery chains plummeted – with Kroger falling 26 percent in the two days following the announcement and SuperValu down 16 percent. Wal-Mart fell 5 percent. Within days, Amazon’s market cap went up nearly as much as the $13.7 billion it agreed to pay for Whole Foods.

In many years of writing about business and economics, I can think of no other enterprise that has come so far so fast. Even so, waxing biblical in your 2016 letter to shareholders, you said it is still “Day 1” (the first day of creation) in the company’s evolution. When someone asked you at a recent “all-hands meeting” what Day 2 would look like, you answered:

Day 2 is stasis. Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.

Your words prompt me to warn you that Day 2 may be approaching much more quickly than you think. Surely you don’t want to turn Amazon into a subsidy junkie. If that happens, Day 1 will turn into Day 2 in the blink of an eye.

Right now, cities and states across the country are competing with one another to throw big money – taxpayer money – at Amazon in the hope of being chosen as the site for Amazon’s proposed second headquarters. With one hand, you dangle the promise of up to 50,000 jobs paying an annual average of more than $100,000 per employee. With the other, you rattle a tin cup, stating in your request for proposals:

Incentives offered by the state/province and local communities to offset the initial capital outlay and ongoing operational cost will be significant factors in the decision-making process . . . . Outline the type of incentive (i.e., land, site preparation, tax credits/exemptions, relocation grants, utility incentives/grants, permitting, and fee reductions) and the amount. The initial cost and ongoing cost of doing business are critical decision drivers (emphasis added).

A few years ago, Boeing Commercial Airplanes, your cross-town neighbor in Seattle, initiated a similar nationwide bidding war for production of its latest big new wide-body – the 777X. In the end, Boeing decided to keep production at its massive facility in Everett, Washington – but only after winning nearly $9 billion in tax breaks and subsidies from the state legislature. That worked out to more than $1 million per promised job, or about $50,000 per year per job over a 20-year period (the tax breaks do run out eventually).

Maybe that sounds great to you. From your perspective, it may seem like the equivalent of having local and state governments pick up half of the anticipated HQ 2 payroll for a long time.

But think of the downside of making Amazon and its people deeply dependent upon corporate welfare. Think of the gross unfairness of huge tax carve-outs for Amazon that are denied to other smaller businesses (which have to pay for their initial costs and ongoing costs out of their own hard-earned dollars). How do you want your company and its people to succeed – by winning in the marketplace . . . or by securing a fatter portion of government largesse?

Last but not least, think of the hypocrisy of preaching a gospel of “obsessive customer focus” as the key to maintaining “Day 1 vitality,” while gouging money out of taxpayers. According to Consumer Intelligence Research Partners, there are now about 85 million Amazon Prime members – that’s 68 percent of all U.S. households! As Amazon becomes increasingly ubiquitous, most of every dollar that Amazon takes out of taxpayer pockets will be money stolen (or lifted) from its own customers.

As one of your customers told me, “I am never in favor of using my tax money to build someone else’s business so that it can sell products to me and profit off me a second time.”

The post Beware the Perils of Corporate Welfare: An Open Letter to Jeff Bezos appeared first on Show-Me Institute.

Now comes a story about the real costs of subsidies to the Walmart in Raytown. According to The Kansas City Star,

In a city of about 10 square miles officers made more than 500 arrests last year at the Walmart store at 10300 E. U.S. 350. The store is the scene of about 30 percent of Raytown’s reported serious crimes.

Meanwhile, Walmart does not contribute taxes for police services. The TIF deal that built the store a decade ago diverts about $300,000 in tax dollars away from public safety every year.

There is no such thing as a free lunch, and politicians who think there is no cost for diverting tax revenue to developers should think again. Walmart often makes for a convenient bad guy, but this same story is being played out with many different businesses. Kansas City, Raytown, and all of Missouri are bearing the burden of these sweetheart deals.

The post The Costs of Subsidies appeared first on Show-Me Institute.

1.Chesterfield is a hockey town, so investing in an ice facility makes sense. If the community wants a facility, what’s so wrong with the community helping to finance it?

Response: The community has no say in this. The overwhelming majority of Chesterfield residents would not be allowed to vote on whether to subsidize the new arena. Only voters in some 130 households within a special taxing district—less than 1 percent of households in Chesterfield—will get to vote on the proposal. But if Chesterfield is so enamored of hockey, why not let all residents vote? On the other hand, if hockey fever is confined to those 130 households, why should the rest of Chesterfield’s residents (and anyone else who shops in the Chesterfield Valley retail area, where the tax is levied) be asked to subsidize the proposed facility?

2.The Hardee’s Ice Arena in Chesterfield brings in a lot of business for the community. If we don’t replace it with a new facility, the economy could take a hit. Wouldn’t the positive economic impact of a new facility make a $7 million subsidy worthwhile? 

Response: While the Hardee’s Ice Arena is closing, its place is being taken by a high-end golfing entertainment facility, which should also generate economic activity for the community. So the Chesterfield economy may not take a hit at all with the closure of the Hardee’s Ice Arena. More importantly, if an ice facility is such a boon for Chesterfield businesses, why don’t they become investors in the project? Why should families buying groceries at Walmart have to pay extra to create demand for businesses they may never patronize? Moreover, is this really the kind of argument proponents of the subsidy want to make? Wouldn’t the same “logic” apply to other projects as well? Would the hockey community in Chesterfield be OK with subsidizing, say, a “knitting hall of fame” if it would generate economic activity?

Financing a privately-owned ice facility through a tax increase that affects anyone who shops in the valley retail area—regardless of their interest in skating or hockey—amounts to asking an entire community to help pay for the recreational activity of a small group of people. Chesterfield City Council members should keep that simple truth in mind, “hockey town” or not.   

The post Conversations on an Ice Facility in Chesterfield appeared first on Show-Me Institute.

This evening, the Chesterfield City Council will hear details on a proposed ice complex in the valley retail area. Show-Me Institute researchers have followed and testified on the proposal for several months now, and we look forward to learning more tonight. What interests us about the proposal, and what might concern taxpayers in Chesterfield, is that it calls for $7 million in public handouts.

The subsidy, which would cover nearly a third of the project’s costs, would require authorization from voters within a special taxing district, known as a transportation development district (TDD). That district, the Chesterfield Valley TDD, was authorized in 2005 to collect a 3/8 cent sales tax to fund a variety of transportation projects, not all of which have been completed. But TDD voters might be asked to extend and redirect the 3/8 cent sales tax to subsidize infrastructure and parking improvements for the ice complex.

There are far too many questions about the proposal to ask in a single blog post, but below are a few that anyone who lives or shops in the Chesterfield valley area might want to think about.

• A recent market analysis concluded that “current demand for ice time has not exceeded the supply which has resulted in creating a ‘buyer’s market.’” Given this, and the fact the existing ice facility in Chesterfield, the Hardee’s Ice Arena, is going out of business, should policymakers invest taxpayer dollars in a new ice complex?
• The Chesterfield Valley TDD collects sales tax on the entire retail area south of I-64. Why should shoppers in the valley help subsidize a privately-owned facility they may never use? That is, why should shoppers buying groceries at Walmart or craft materials at Michael’s have to pick up the tab? Shouldn’t those who use the facility be the ones who pay for it?
• Is subsidizing a private ice complex appropriate business for a TDD? TDDs are meant to finance transportation improvements that benefit the entire public. How does paying for infrastructure for a private facility benefit the public?
• If Chesterfield is, as some argue, a “Hockey Town,” why must the public pick up the tab for an ice facility? If there is so much demand for ice time in Chesterfield, why does the public have to subsidize a new ice facility?

We encourage taxpayers across the state, and those in the Saint Louis region especially, to think about these questions. Even if you don’t live or shop in the Chesterfield valley, you may very well patronize businesses located in special taxing districts like the Chesterfield Valley TDD. And that means you could be subsidizing an ice facility—or who knows what else—of your own sooner or later.

The post Questions for the Chesterfield Valley TDD appeared first on Show-Me Institute.

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The partners have expressed interest in developing a vast retail, commercial, and residential district that, if subsidized, could cost taxpayers millions. Unfortunately, history in the Saint Louis region shows that if you ask you shall likely receive, even if the project is of questionable merit. A prime example of this occurred in 2010 when a Walmart located in both Saint Ann and Bridgeton (two adjoining suburbs of Saint Louis) relocated a spot in Bridgeton 2 miles down the road in order to capture $7 million in public subsidies. Kroenke's plan would not only be costly for Maryland Heights residents; it would also likely move economic activity from other areas in the region, rather than creating new activity.

Periodically reshuffling existing businesses across the metro area was not the original purpose of tax increment financing (TIF). TIF was intended to encourage the development of blighted areas in need of economic growth. Instead, it is often used as a subsidy to attract businesses to areas that are already economically healthy, forcing other government entities like school districts to shoulder the costs of those decisions.

Then there is the separate question of whether it's wise to subsidize construction in a flood plain.  Flooding is still a threat in the areas where the Kroenke development would be built. In fact, as recently as last year hundreds of families were forced to evacuate their homes as a result of flooding. Saint Charles County and the Great Rivers Habitat Alliance (GRHA) have sued Saint Peters over flood plain developments in the past for environmental endangerment, and David Stokes, executive director of the GRHA and a former Show-Me staff member, contends that further development on the flood plain “will just make the [environmental] problems we’ve experienced in the past even worse.” 

Fortunately, Saint Louis is beginning to acknowledge the TIF problems we’ve been discussing for years at the Show-Me Institute.  In the past, municipalities could simply override a county veto with a two-thirds vote and proceed with the projects of their choice, but this year legislation passed both the House and Senate that would limit municipality overrides to financing costs of demolition and clearing land. If this law goes into effect on August 28 as expected—the governor has not technically signed off on it yet—then the seemingly limitless public financing of projects like Kroenke's might be scaled back considerably. 

If subsidizing construction on the flood plain is economically questionable, would hurt local school funds, and could actually threaten the safety of nearby residents, shouldn’t the flood plains be left alone?  

The post TIF in a Flood Plain–A Recipe for Trouble appeared first on Show-Me Institute.

This February, Doug McMillon – the current CEO – agreed to raise the hourly wage at Wal-Mart to no less than $9 an hour in April and to $10 an hour (or 33 percent above the current federal minimum wage) in early 2016.

How is the sharply elevated internal “minimum wage” working out for the world’s largest retailer and (by a wide margin) the nation’s largest private employer?

So far, not at all well.

In announcing the company’s third-quarter results this Tuesday, McMillon acknowledged that the wage hike had been “by far the biggest driver” in causing a 13.3 percent reduction in corporate earnings over the first nine months of its current fiscal year (ending on Jan. 31, 2016). Higher wages have added $1.2 billion in annual costs in this fiscal year and will add another $1.5 billion in costs next year.

Net income at Wal-Mart hit an all-time high of $17.0 billion in calendar 2012 (fiscal 2013, ending in January 31, 2013). According to Value Line estimates, it will drop to $14.8 billion at the end of this year and to $12.6 billion next year, which would be the lowest annual earnings for Wal-Mart in a decade.

That is no big deal to critics like Robert Reich, who served as Secretary of Labor under President Clinton. Reich pointed to Walmart and McDonald’s in a petition that he launched on MoveOn.org in 2013 urging the biggest employers to increase wages so workers can finally “get a fair share in this economy.” “Your typical employee is now earning $8.25 to $8.80 an hour,” Reich wrote. “They [Walmart and McDonald’s] can easily afford to pay [workers] $15 an hour without causing layoffs or requiring price increases.”

In regarding any profit as proof that a company can afford to pay more to its workers – without doing harm to its customers – that viewpoint disregards the realities of a competitive marketplace.

For one thing, Wal-Mart competes with other public companies in striving to maximize returns to shareholders. To say that Wal-Mart has been getting hammered in this regard is something of an understatement.

Wal-Mart’s shares have lost a third of their value since the beginning of this year – falling from a high of $90 a share in January to $60 at the close of business on Nov. 17. Meanwhile, its biggest rivals have done substantially better. Costco has climbed from $140 a share to $159, and Amazon.com has more than doubled in price.

In July, Amazon passed Wal-Mart to become the most highly valued company in the retail sector and it has shot further and further ahead since then. It now has a total market capitalization of $308 billion, compared with $195 billion for Wal-Mart.

Wal-Mart lags far behind both Amazon and Costco in productivity – measured in sales per employee, with Wal-Mart at $219,000, Costco at $565,000, and Amazon at $578,000. It is clear that Wal-Mart is intent on closing the gap by slowing the growth of bricks-and-mortar stores while putting much greater emphasis on e-commerce. As McMillon put it in his presentation on Tuesday:

We will be the first to deliver a seamless shopping experience at scale. No matter how you choose to shop with us – through your mobile device, in a store or a combination – it will be fast and easy. Online retailers are testing physical store experience because they recognize the same customer desire that we do. There’s a race to do this right.

But consider the impact on total employment at Wal-Mart if the company were to close the productivity gap between itself and Amazon by 25 percent over the next three years while also achieving its stated objective of growing annual sales from about $485 billion to $530 billion or more.

In this situation, Wal-Mart would need a global workforce of 1.7 million associates, compared to the 2.2 million it has now – a loss of approximately 500,000 jobs. That would entail a loss of about 320,000 associates out of the U.S. workforce of 1.4 million associates.

While those numbers are speculative, they clearly point to the conclusion that Wal-Mart will no longer be the great job-creation machine that it was years past, which is something that self-declared champions of working class should be thinking about in agitating for higher wages. Paying higher wages has made the company more focused on achieving higher levels of productivity.

At the same time the company may water down if not abandon its historic commitment to serving less affluent shoppers with rock-bottom prices across a vast array of merchandise. The late founder Sam Walton said his dream was “to serve the under-served.” That is less of a priority today. “Globally, we know growth will come from middle- and upper-income households in years ahead,” McMillon stated at an analysts’ meeting in October.

The post Killing the Golden Goose: How Walmart’s Left-Wing Critics Destroy Job Creation appeared first on Show-Me Institute.

It appears from the testimony that Mr. Fefer supports raising the minimum wage. The first thing to notice when listening to his testimony is that a lot of it simply relates to the number of workers making below a certain wage level. For example, Mr. Fefer says that 44 percent of the workers in Saint Louis City make less than $15 an hour and 14 percent of workers make the minimum wage or less. Even if Mr. Fefer’s numbers are correct, and for the sake of argument, let’s say that they are, these statistics don’t tell us a whole lot. A key point people need to understand in discussing the minimum wage is that people who earn low wages aren’t necessarily in poor households. A man working as a greeter for $9 an hour at Wal-mart might be an upper-middle class retiree who just wants to stay active. Of course, he might not be, but Mr. Fefer’s statistics don’t tell us one way or another. This information is useful in that it captures the raw number of workers who could see pay increases, but nothing much beyond that.

A bigger problem with Mr. Fefer’s testimony is that he overstates the evidence in support of his position. Mr. Fefer states, “The theory that raising the minimum wage results in job loss has been proved wrong in just about every case.” That’s simply inaccurate. One can point  to several studies that show that raising the minimum wage does harm employment.

The minimum wage is certainly a contentious issue. Voices on both sides should be heard and given due consideration. However, it is important that any information which is presented to the public is put in the proper context and any errors are corrected. 

The post Some Comments on a Minimum Wage Testimony appeared first on Show-Me Institute.

In a free market, as workers compete for jobs, businesses also compete for workers. If a worker won’t bring enough value to an employer to justify his/her salary, he or she will not be hired. On the other side, if a business doesn’t provide an attractive wage to a worker, that worker will find work elsewhere. Thus, both sides have to provide enough value to the other.

You might think that big business might be immune from these forces, but you’d be wrong. Even the largest companies have to offer decent wages to their employees. Take Walmart for example. It has the highest revenue of any company in the world and is one of the largest private employers in America. Even it has to compete for employees. That competition results in jobs paying higher than the (current) minimum wage.

I took the above picture at a Walmart in Saint Louis County last Wednesday. The starting wage is $9.00 an hour, which is higher than the minimum wage. Is Walmart making this offer out of the goodness of its heart? That’s doubtful. They’re probably offering a high starting wage because they recognize that if they don’t workers will head over to Target, Costco, or Walgreens instead.

That’s how the free market is supposed to work. Increasing the minimum wage is popular with the public, but it is not good policy. An individual and a business should negotiate compensation that is mutually agreeable to both parties. Mandating a higher minimum wage will end up mandating unemployment.

The post Employers Need Help-and They’ll Pay Too appeared first on Show-Me Institute.

If you are a Saint Louis City alderman who wants to keep the National Geospatial-Intelligence Agency (NGA) from moving to Fenton or Mehlville or even possibly Scott Air Force Base, there is a good chance that you’d say yes. That’s why plans to use eminent domain to seize property as part of the plan to keep the NGA in Saint Louis are moving forward. Yet despite this “progress,” that doesn’t mean the aldermen are correct. For the people of North Saint Louis, the abuse of eminent domain is imminent.

Eminent domain has a legitimate purpose. Sometimes it is necessary to seize property to use for the public good, such as highways or sewers. Yet, there is no reason in this case to think that using eminent domain would serve as a public good. Unlike highways, which must go more-or-less in a straight line, the new NGA headquarters is flexible in how it is laid out and where it can locate. Even if the NGA moves to the county or to Scott Air Force Base, NGA employees living in the city are unlikely to move. Why violate somebody’s private property rights when it is not necessary?

The truth is that the city stands to lose millions in earnings taxes if the NGA moves out. It’s understandable, especially when budgets are tight, that the city would want to try anything to avoid losing even more revenue. However, people’s homes matter more than extra tax revenue. Being hard up for money doesn’t give the city a valid reason to take people’s homes.

The post An Imminent Eminent Domain Case appeared first on Show-Me Institute.