April 18, 2014

Saint Louis Taxi Commission Takes Consumers For A Ride

The only nice thing I can say about the St. Louis Metropolitan Taxicab Commission (MTC) is that at least there is only one taxi licensing agency doing a terrible job for Saint Louis. We used to have two (city and county), and they did a really terrible job.

Short of that, the MTC has made it plain for all to see that its role is to protect incumbent cab companies from competition. Who cares what changes technology brings? They are going to operate the same way no matter what. Mobile phones, GPS, Internet maps, new phone apps, who cares? They have a job to do, and limiting new entrants into the market is job No. 1.

Why does the new technology matter? It matters because it has dramatically evened out the information advantage that taxi drivers used to have over customers. Now, even a first-time visitor to Saint Louis arriving at Lambert-St. Louis International Airport can check out in just a few minutes on their phone: 1) online reviews of cab companies, 2) the clearest route to the destination, 3) estimated fares for the trip, and more information if needed. Consumers are ready and able to negotiate for themselves, and most cab or mobile app-based drivers know that.

We do not need the MTC protecting us. Just as important, by restricting competition, the MTC is actively hurting taxi consumers in Saint Louis (and Kansas City as well).

Bring back the crooked assessor.

Here We Go Again . . .

One of the biggest fights out of last year’s Missouri legislative session was about Missouri House Bill 253, which cut individual and business income taxes. Missouri Gov. Jay Nixon vetoed the bill and the legislature failed to override his veto. This failure didn’t stop the legislature from passing a new tax cut bill, Senate Bill 509. Below are some highlights of the bill:

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

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

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

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

April 17, 2014

Pennsylvania’s Tax Credit Scholarship Program…Winning!

This week, the Show-Me Institute released our third and final case study about tax credit scholarship programs in other states: “Pennsylvania’s Education Improvement Tax Credit Program: A Winning Educational Partnership.”

The study’s author, Andrew LeFevre, is well acquainted with Pennsylvania’s tax credit scholarship program, having served as the executive director of the REACH Alliance and the REACH Foundation, statewide school choice organizations. He wrote:

In 2001, Pennsylvania became the first state in the nation to enact a highly innovative public-private partnership in the form of an education tax credit aimed at corporations. Since then, the popular Educational Improvement Tax Credit (EITC) Program has provided more than 430,000 scholarships to students from low- and middle-class families . . .

In 2012-13 alone, the program provided more than 68,000 K-12 and pre-K scholarships. “The EITC Program has accomplished what many have been advocating for years: a way for the business community to be involved in children’s education and provide more schooling options,” LeFevre said.

I encourage you to check out this new case study along with our studies about tax credit scholarship programs in New Hampshire and Arizona. I also invite you to learn more about tax credit scholarships by attending our event on April 25, “Expanded Opportunities: A Discussion About Tax Credit Scholarships.”


April 15, 2014

Unappointed Charter School Commission Undermines Intent Of Law

School Icon

In 2012, the Missouri General Assembly passed a bipartisan charter school law. As the St. Louis Post-Dispatch reported, the bill “could expand charter schools statewide while making it easier to weed out underperforming ones.” That was the intent of the law, to expand and to improve charter schools in Missouri. A key part of this effort was the creation of “The Missouri Charter Public School Commission.” Last year, the Missouri Legislature approved $300,000 for operations of the commission. Yet, almost two years after being established in state statute, that commission has yet to be appointed.

Senate Bill 576 (2012) states the “commission shall consist of nine members appointed by the governor, by and with the advice and consent of the senate.” The governor is to select four candidates, from slates that the commissioner of education, the commissioner of higher education, the president pro tempore of the Senate, and the speaker of the House of Representatives provide. The governor appoints the remaining five candidates, but one must be selected from a slate that the Missouri School Boards Association provides.

The commission would play an important and needed role.  Like universities, it could sponsor and oversee charter schools, but it also could serve as an important safeguard. The Southeast Missourian noted, “Under current law, the State Board of Education can suspend a charter school sponsor, but the board then takes responsibility for the schools.” The passed and signed legislation “would make the Missouri Charter Public School Commission responsible for those schools.”

By not appointing this commission, the intent of the law is not being fulfilled. I’m told that the slates have been submitted, but still no appointments have been made.  There is no reason to delay these appointments further.

Sales Tax Is Wrong Way To Fix Roads

Last weekend, my commentary about a proposed 1 percent sales tax to fund transportation infrastructure, which recently passed the Missouri House of Representatives, ran in the Columbia Daily Tribune. I argued that this sales tax, which would mostly be used to pay for roads and bridges, is not good economic policy and unfair to those who choose to drive less. As the commentary stated:

Paying for highways based on how much people shop, and not how much they drive, creates a free-rider problem. It promotes congestion, road degradation, and sprawl. It also is fundamentally unfair to force occasional drivers to pay as much or more for new roads as daily commuters and interstate trucking companies.

The better way to fix road funding in Missouri is to implement tolling or to raise the gas tax. With the Missouri Senate now considering this sales tax, it is more important than ever that people are informed about the policy implications of using general taxes to pay for transportation infrastructure.

Hazelwood Tax Increases And Places To Cut Spending

City officials in Hazelwood, a suburb of Saint Louis, are considering a proposal to implement a 6 percent utility tax in order to raise revenue to offset decreasing funds coming from sales taxes. The proposal is expected to raise $1.3 million in revenue. Now, I’m not opposed to raising revenue in all cases. However, I only favor revenue increases when it is absolutely necessary. If there are places in the budget to cut, do that first, before asking taxpayers for more money.

Case in point. In the course of my research regarding public pensions, I found that the city of Hazelwood maintains a pension for just its mayor and city council. It isn’t a very large pension. As of 2012, it had $96,000 in assets. But I question why such a pension exists in the first place. Is it really necessary for the council of a small municipality that meets only once or twice a month on average to have its own pension? No other municipality has a separate pension plan for its city council. Despite its size, the city still spends money on the plan. For fiscal year 2014, the city plans to spend $17,000 on the city council pension plan. That is $17,000 too much.

I’ll be the first to say that there is a large difference between $17,000 and $1.3 million. However, before asking for more taxpayer money, I would look at ways to trim the fat. As much as the law allows, I would phase out Hazelwood’s pension for the city council and save the city some money. It is not nearly enough to offset this proposed tax increase, but every little bit helps.

April 14, 2014

Proactive Is The New Reactive

There is a lot of talk these days in Jefferson City about being proactive in public schools. Currently, when a school drops below a set performance mark, the district becomes unaccredited. Students are then able to transfer out of the district to a nearby accredited one. Many view this as a reactive, nuclear option. What we need, they say, is early intervention. We need to be proactive when a school starts to struggle. I hate to get tied up in semantics, but by definition, targeting schools that are struggling is reactive, not proactive. It is a reaction to their declining performance.

Lawmakers have their hearts in the right place, but they place too much confidence in their ability to dictate solutions from Jefferson City. After I testified before the Missouri House Elementary and Secondary Education Committee about the student transfer issue, one representative asked me what lawmakers should do to help those struggling school districts.

“What advice would you give us?” she asked.

“I would tell you that you cannot mandate excellence and you cannot dictate innovation,” I said.

“You would have us do nothing?” she asked.

“No, I would have you get out of the way,” I said. “Remove unnecessary restrictions and burdensome regulations. Free the local schools to innovate.”

Missouri could:

Reform teacher tenure policies; remove Last In, First Out provisions; and reform teacher pensions so schools have more flexibility in staffing decisions.

Change seat time and class restrictions that inhibit some blended learning and online learning models.

Try something like Kentucky’s “Districts of Innovation,” where school districts can become “exempt from certain administrative regulations and statutory provisions.”

Responding to government failure with more government action is not being proactive. Policies like the ones cited above are proactive. They put the power into the hands of the school leaders on the ground. A proactive system is one that gives school leaders the freedom to be innovative and gives parents the ability to choose.

Streetcars (Still) Do Not Reduce Miles Driven In Cars

NextRailKC.com is the website promoting the streetcar/lightrail extension in Kansas City. The site is supposed to present information, but more often than not, it offers data so cherry-picked that it can only be considered intentionally misleading. This is a shame, because people are eager to understand the very complicated issues at hand.

Here we will address the site’s claim regarding Vehicle Miles Traveled (VMT). Previously, we have explained that rail transit does not remove cars from the road. But NextRailKC persists in making claims that, well, confuse people who honestly seek information.

The almost indecipherable graphic, which was produced for the Charlotte Area Transit System (CATS) and reposted on the NextRailKC site, seems to suggest that rail transit results in fewer vehicle miles traveled per person. But this is wrong on several points.

First, just as with economic development claims, there is absolutely no peer-reviewed data to support the claim that rail reduces VMT. None. As written in Reason Magazine, “VMT is influenced by a host of factors. Density is the most important but land-use, development patterns and politics also matter. The prevalence of transit is maybe the 25th most important factor.”

Second, the cities they chose skew the results to the point that they are meaningless.

New York has lower VMT because it is extremely congested, located on water and built before World War II when cars were less prevalent on a pre-planned street grid. Even without its fantastic transit network it would still have a much lower VMT.

Dallas has a lower VMT because congestion is much more severe. Worsening congestion to lessen VMT is a perverse policy goal. Further, Dallas is the poster child for how not to build rail. Despite populations increases and the addition of a light-rail network, fewer people take transit in Dallas in 2013 then before the light-rail network was built. When a region spends billions to build transit and the total number of people commuting by transit declines, you have made some major mistakes.

Kansas City’s population and density are not like the population and density in New York or Dallas. Additionally, Kansas City’s needs are different. We cannot look to New York or Dallas for any meaningful prediction of the impact of rail in Kansas City. The comparisons are absolutely meaningless, to the point of being misleading.

Perhaps most indicative of the city’s lack of desire to engage seriously with taxpayers is that officials NextRailKC can’t even be bothered to develop their own misleading infographics — instead, they chose to borrow Charlotte’s.

April 11, 2014

Tell Taxpayers Where Their Money Is Going

On Thursday, the mayor of Kansas City, Mo., disclosed that the city is ponying up another $65,000 to woo the 2016 Republican convention. Jackson Co., Mo., Wyandotte Co./Kansas City, Kan., and Johnson Co., Kan., also are chipping in an additional $65,000 each. This $260,000 total is in addition to the $100,000 that Kansas City, Mo., already spent. We participated in a KSHB TV story about the spending and asserted that taxpayers ought to be told what is being promised in their name.

Kansas City Mayor Sly James argued that hosting the convention is a once-in-a-lifetime opportunity, and he may be correct. Certainly, we all are proud of Kansas City and eager to show off on the 40th anniversary of the last time we hosted. Those are arguments for spending the money — they are not arguments for not telling taxpayers how the money is being spent. If the mayor is so confident about his choices, there is no reason to hide who is getting the money and for what. Furthermore, taxpayers ought to know what additional commitments the city is making to the convention committee. Remember, the $165,000 spent so far is just for the bid to host. Hosting itself will cost millions.

The city claims that the convention will have a large economic impact. We previously have written that those estimates are largely useless as they assume that without the convention there would be no economic activity — which is just silly. The city’s “fact sheet” suggests the economic impact to Kansas City would be similar to Tampa’s in 2012: $214 million. The city likely is getting that from a Tampa Tribune story in which they cited a University of Tampa analysis:

The total impact takes in $214 million in direct spending by the groups that put on the convention, including the Tampa Bay Host Committee, the City of Tampa, the convention’s Committee on Arrangements and corporate sponsors.

Note that in addition to ignoring any economic activity that would have happened without the convention, this impact includes spending from Tampa’s taxpayers.

Lastly, it was gratifying to read in their “fact sheet” that the city thinks we have sufficient hotel rooms and bus service to accommodate the convention, and that our airport has more than 50 direct flights. Let’s hope city officials remember this the next time they advocate committing public funds to convention hotels, streetcars, and new airport terminals.

Mark Your Calendars For Our April 25 Tax Credit Scholarship Event


When I speak about tax credit scholarships, I get a lot of questions: What is a tax credit scholarship? How would that work? What are the chances of that passing in Missouri?

If you want to find out the answer to these and other questions, join us on April 25 at Lindenwood University in St. Charles, Mo. We are partnering with the Hammond Institute for Free Enterprise at Lindenwood University to present a dynamite event, “Expanded Opportunities: A Discussion About Tax Credit Scholarships.”

Jason Bedrick, of the Cato Institute, and Jonathan Butcher, of the Goldwater Institute, will present information about how these programs are working in other states. You can download their recent case studies for the Show-Me Institute about the New Hampshire and Arizona programs directly from our website.

Attendees also will be able to take part in a panel discussion with Missouri Sen. John Lamping (R-Dist. 24), Sen. Maria Chappelle-Nadal (D-Dist. 14), Missouri Speaker of the House Tim Jones (R-Dist. 110), and Rep. Michael Butler (D-Dist. 79).

RSVP online, mark your calendars, tell your friends, and join us on April 25.

April 10, 2014

Let’s Fix The Transfer Problem ‘One Piece At A Time’

One Piece at a Time” is one of my favorite Johnny Cash songs. In the song, a young man goes to “workin’ on a ‘sembly line” in a Detroit auto plant. He devises a plan to build a car by sneaking parts out one piece at a time. In the end, he has created a “’49, ’50, ’51, ’52, ’53, ’54, ’55, ’56, ’57, ’58, ’59 automobile.” I was reminded of this song as I drafted my testimony for Missouri Senate Committee Substitute for Senate Bills 493, 485, 495, 516, 534, 545, 595, 616, 624. It wasn’t just the name of the bill that reminded me of the song, but the way that so many different parts that seemingly do not go together were crammed into one bill.

Though the bill touches on many different topics, I tried to limit my testimony to the crux of the bill — the student transfer issue. As I said in my testimony:

Ever since the Missouri Supreme Court upheld a student’s right to transfer from an unaccredited school district to a nearby accredited one, Missouri school leaders have coordinated efforts to put an end to the transfer law. Some concerns regarding the transfer program hold merit. For instance, the current law has the potential to lead to the bankruptcy of unaccredited districts or to lead to overcrowding in accredited ones. Unfortunately, these problems have led many to ask, “How can we end student transfers?” rather than, “How can we make the transfer law work for students?”

Missouri Sen. David Pearce (R-Dist. 21) reiterated this point, stating that this bill is intended to reduce the number of students transferring.

Allowing students to choose their school is a good thing and we can make this program work for students if we institute four changes.

  1. Give accredited school districts the right to determine how many students they will accept.
  2. Fix the tuition calculation so that unaccredited districts will not be forced to pay rates that are higher than they spend themselves.
  3. Expand choice to private schools in the same or adjoining counties.
  4. Establish a fund to provide transportation for transfer students. Appropriations from general revenue and donations from the public could fund this.

You can read more details about my suggestions in my full testimony.

April 8, 2014

Gas Taxes vs. Transit Fares

In a post on NextSTL, the author points out that gas taxes in Missouri have not kept pace with inflation (the last time the tax went up was in 1996) while fares for transit have increased faster than inflation. The takeaway:

As you can see the value of the gas tax has been eroded by inflation while Metro fares have out-paced it. Of course this isn’t the whole picture. Property and local sales taxes and the Federal gas tax (hasn’t increased since 1993) and general revenues also fund streets, roads, and highways, and local sales taxes, Federal, and a minute amount of state money goes into Metro. But this puts into perspective just who is paying their “fare” share.

My position on the gas tax is pretty clear. I have written testimony arguing that Missouri should raise its gas tax, not general taxes, to pay for highways in Missouri. But the fact remains, indirect taxes on drivers mostly pay for roads while only a tiny sliver of the cost of transit in Saint Louis comes from fares.

First for the roads. In 2013, the Missouri Department of Transportation (MoDOT), which maintains federal and state highways in Missouri, took in $2.1 billion in revenue. Only 23 percent of that came from the state gas tax. But that’s not the end of the story. Forty-four percent of MoDOT funding came from the federal government, the vast majority of which the federal gas tax funds. MoDOT gets an additional 27 percent of funds from vehicle sales taxes and various forms of licensing fees. All told, approximately 80 percent of MoDOT’s revenue comes from taxes and fees on drivers. That’s too low, but adjusting the state and federal gas tax for inflation and controlling road spending would go a long way to making that number close to 100 percent. In addition, one should remember that the Missouri gas tax is split, with 4.5 cents of the 17.6 cents going to local governments, where it is a significant source for local road repairs.

The story is very different for transit. Taking the example of St. Louis Metro, from 1991 to 2012, fares covered only 14 percent of the costs of building and maintaining Metro. Just looking at 2012, fares covered only 16 percent of the system’s total costs. And while fare revenue has increased faster than inflation, the costs of operating Metro have increased even faster, as the chart below shows:


Essentially, fare revenue has covered less and less of Metro’s cost over time. The rest of the funding comes primarily from general local taxes and the federal government (much of which comes from the part of the federal gas tax that is designated to mass transit funding).

Has the government been irresponsible with the gas tax? Many would say yes. But that does not mean that people who use transit are paying more for transit than drivers pay for highways, because they are not.

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