March 28, 2014

Further Remonstrances On Clayton Tax Increases

Last week, I blogged about the Clayton economic development sales tax proposal. While that is a bad idea in and of itself, it is unfortunately part of a much larger package of tax hikes. There are four (four!) different proposed tax hikes for voters to consider on the April ballot. If you think that is a lot, well, . . . it is.

I want to focus here on the property tax aspect. The proposals call for two different bond issues, each requiring a separate tax increase. One is for neighborhood road improvements in Clayton, and one is for improvements to Shaw Park, mostly the ice rink. If they both pass, the property tax increase would be 24 cents per $100 of assessed valuation.

Supporters of this tax hike, and most tax hikes, like to make the numbers seem small. “Only 25 cents added to an average restaurant meal” or something similar. For this tax hike, I keep hearing it is less than $20 a month for an average Clayton home. Fair enough; that does not sound so bad. (Math is $500,ooo home x 24-cent tax increase per $100 of assessed valuation = $228 annually.)

However, Clayton residents benefit from the enormous business concentration there, and businesses don’t get a vote on the tax hike. (They can vote with their feet, metaphorically.) What is the tax hike here on a Clayton business?

Well, we don’t know it by business, but we can easily figure it out by building. Take one of Clayton’s nicest buildings: 7701 Forsyth. If these two property tax increases go through, it’s owners would pay $21,175 more each year. That is $21,000 more to support park and road improvements that will benefit the businesses far less than the residents. (The road bonds are all for neighborhoods, not the business areas.)

Take its sister building, 7733 Forsyth. That property would pay $32,000 more in property taxes under these proposals. This for a building whose owners already pay well over a million a year in property taxes. That means higher rents in Clayton. These higher rates would also apply to business property (factory equipment, copiers, computers) so there would be less capital investment in Clayton, though I admit that effect likely would be very small.

That is $53,000 per year from two buildings that already pay an extra downtown tax assessment that can be used for their central business district streets. (It usually isn’t, but it can be and likely has been in the past.) At some point, asking Clayton businesses to pay much higher property taxes that will primarily benefit the residents is a poor policy choice, in my opinion. At a minimum, the proposal to increase the property tax for park renovations should be shelved in favor of privatizing the rink’s operations (but not ownership) just like the Saint Louis City has done with Steinberg Ice Rink.

March 14, 2014

Bloodletting In Clayton

For centuries until approximately 200 years ago, bloodletting was a common treatment for illness. If you were sick, you would go get a nice bleeding. We finally learned what should have been obvious: with the exception of one or two illnesses, bleeding was a terrible idea that did more harm than good. The Missouri local tax equivalent to bloodletting is the economic development sales tax.

Government does a terrible job planning the economy, whether it is a Soviet five-year plan or retail TIFs (tax increment financing) in Saint Louis County. Municipal government can improve the local economy by doing the things it needs to do well: police, fire, local roads, etc. It does not need to “develop” our economy, especially because “economic development” in Missouri is synonymous with taxpayer subsidies and corporate welfare.

Clayton, the Saint Louis County seat and the region’s other downtown, is considering an economic development sales tax, along with three other tax increases, on the April ballot. Doing four tax increases at once (four!) is crazy, but the point of this post is just the economic development sales tax.

Clayton has been careful in its use of tax incentives and other economic development tools in comparison to other Saint Louis County municipalities, which admittedly is a very low bar. Clayton deserves credit for that. So I can’t understand why it would propose raising a tax to do more of something it should not do in the first place: government planning of the local economy.

Clayton officials likely would claim that the intention for the new tax funds is not more use of subsidies or more local planning, but a continued focus on business recruitment, retention, etc. I believe them, and in the short run, I am sure that would be true. But, in my opinion, the increased use of, and funding for, government economic development activities will almost certainly be followed by heavier use of various subsidies and tax incentives. Cities such as Clayton should be moving in the opposite direction with less or zero use of these types of programs, not increasing taxes to do things they should skip from the start.

More to come on these four tax increase proposals next week.

March 11, 2014

Lust For Licensure

I honestly think that one of these days someone is going to propose requiring a Missouri license to hypnotize chickens. During this year’s legislative session in Jefferson City, the quest to unnecessarily license new occupations continues. Next up: home health care agencies, electricians statewide, and expanded licensing rules for landscape workers. None of these new or expanded regulations are justified.

Did you know that areas with stricter electrician licensing actually have higher rates of electrocution? It’s true. Licensing increases costs, increased costs lead to more do-it-yourself work, and that leads to more accidents. Similarly, is there a current crisis in Missouri regarding landscaping that I am oblivious to?

Missouri has fewer licensed occupations than other states. We should be proud of that. Simply put, all of the occupations that have some sort of legitimate role for licensing are already licensed at the state or local level. We need to be removing unnecessary licenses and making it more difficult to implement new ones. When it comes to licensing rules in Missouri, we need to pass rules setting demonstrated needs and benefits before new occupations can be licensed. We don’t need to add new occupations to an already too-long list.

February 19, 2014

Columbia Says No To A TIF

There was very big news out of Columbia, Mo., Monday night. The Columbia City Council shot down a large Tax Increment Financing (TIF) proposal in a 5-2 vote. The list of TIF rejections in Missouri is, unfortunately, short. Hopefully, this is the start of a trend, not just in Columbia but around the state.

The Columbia city manager and mayor had proposed an enormous TIF district covering large areas of downtown. The idea was that the TIF on several new, very large student housing developments would pay for infrastructure improvements that most people seem to agree downtown Columbia needs. In general terms, this TIF proposal may have been better than most, but that is like saying Mao was better than Stalin. Just because this money would have — at least in the proposal — gone toward infrastructure does not justify passing a TIF that would have enormously changed the tax make-up of downtown Columbia for up to 23 years and put the other taxing districts at a severe disadvantage.

Sometimes it takes political leadership to argue for tax and fee increases. In following this debate, it seemed as if just giving the new developments a subsidy and then using that subsidy for infrastructure was the easy way out. That is how warped we have become in Missouri. Subsidies such as TIF, Enhanced Enterprise Zones (EEZ), etc. are so common that they have become the rule, not the exception. Let there be no doubt about it: If this TIF proposal had passed, then subsidies like it would have become standard for everything in Columbia. And heavy use of TIF and other subsidies would be very bad in the long run for Columbia, just like it has been for the Saint Louis and Kansas City areas.

If there are infrastructure needs in downtown Columbia, they can fund improvements the same way they were funded for a century: bond issues and fee increases, with any new developments paying the full share of tapping into the system. Better yet, privatize the water and electric utilities and use that money to fund necessary improvements. Whatever you do, don’t count on subsidies to do the work that leadership should do.

February 16, 2014

Missouri Needs Fewer Legal Restrictions On Nurses

couple of important bills will be considered in a Missouri Senate committee next week involving Advanced Practice Nurses (APRNs, or nurses with particular advanced nursing degrees and certifications). Currently, Missouri has unnecessary legal impediments to allowing them to serve patients without a doctor’s supervision. The fact is that many parts of rural Missouri have limited access to doctors and hospitals, and allowing nurses to fill that void is a sensible, low-cost way to serve many (but not all) of rural Missouri’s medical needs.

The two bills would address these needs by loosening the restrictions on APRNs so that they would be more able to open clinics and otherwise serve patients without the unnecessary supervision (in most cases) of doctors. Yes, there are issues that nurses need to refer to doctors, but I trust nurses to be able to know that difference. Opponents of these measures would have us believe that nurses will all of a sudden start doing major medical procedures without these restrictions. (That’s not a straw man argument; I’ve heard opponents say that at prior hearings on related issues.) I trust that nurses will know when to bring in doctors and refer out patients. In any case, the choice in rural Missouri is usually not between an APRN and a doctor. It is between an APRN and no medical care.

I hope these bills allowing nurses to have more freedom and authority to serve patients are given serious consideration. I think they would be a positive change for health care in our state.

January 29, 2014

Brentwood Should Join Consolidated 9-1-1 System

The heavily fragmented government system in Saint Louis County leads to higher costs on taxpayers, but NOT quite as high as one might assume. That is because the many cities and other governments within Saint Louis County do a better job of cooperating than people may realize. To give one example, almost every municipality contracts with Saint Louis County for some types of public works inspections. Here is the matrix of city governments that contract with the county for various things.

Another long-time example of shared services is emergency dispatch. We wrote a number of blog posts about the issue several years ago. Few cities have operated their own emergency call centers, which is a good thing. There are obvious economies of scale in sharing resources here, which is why so many cities have done it.

Brentwood is a particularly wealthy city due to the high level of shopping within the city, the high assessed valuation combined with limited government-service needs of Brentwood Forest, and more. So, it has been able to do something on its own that other cities have not been able to afford, such as operating its own emergency dispatch. There is nothing automatically wrong with that, but now officials are thinking about trying to save money by participating in the East Central Dispatch Service 9-1-1 center, which serves many other cities in mid-Saint Louis County.

I think this is a no-brainer “yes” decision for Brentwood. Even if the short-term savings are small, the long-term benefits of being in the larger system would be noticeable, primarily, greater access to a larger pool of resources (technology, employees, back-up systems, etc). Phone calls do not take longer to get to Olivette than they take to get to Brentwood. There are certain things cities do NOT have to do themselves, and emergency dispatch is at the top of the list.

Let’s be honest here. Opposition to this is about protecting public sector jobs in Brentwood, not about public safety. Brentwood should participate in the East Central Dispatch Service.

January 16, 2014

Taxicab Reforms In Missouri

Kansas City officials are considering changes to the taxicab licensing ordinance that would make it easier for non-profits and churches to offer rides around the city. Tony’s Kansas City has the story here. I support the changes, even though I understand the concerns about treating non-profits differently than regular cab companies. It is a difficult call. If you support treating all companies the same (I do), but the treatment, a.k.a. the local regulations, is awful, do you force everyone to suffer from the same awful rules? In this case, I do not, and I hope loosening up the regulations for some will lead to less restrictive rules for all.

It is the same story of awful taxicab regulations in Saint Louis. Here is Uber, the nationwide, web-based private car service, explaining why they won’t enter the Saint Louis market. The same basic explanation applies to Kansas City, which means they are not giving consumers more choice in Missouri, while they do in many other parts of the nation. Are the safety and regulatory concerns in Missouri substantially greater than all those other cities? Of course not.

I know a little about taxicab licensing. I once opened a bribe for a county councilman from a taxicab operator looking for stricter regulations to protect his company from competition. That councilman and I reported the bribe to police instantly, but another councilman who had been taking bribes went to prison.

Taxicab licensing is there to protect the interests of the cab companies, not the public. Consumers now are more empowered by knowledge when dealing with cabs, like your cell phone and GPS telling you if a cabbie is taking you on a long route. Old rules such as uniforms, regulated fares, limits on cab licenses, and restricted areas (i.e., the airport) are no longer necessary. All that is needed is a basic cab registration with the city or county (for the protection of both the driver and passengers), driving record checks on the drivers, and inspecting meters (but not rates) to make sure they are accurate and properly posted. That’s all.

With these changes, maybe people in Saint Louis would be able to get a cab on New Year’s Eve.

January 7, 2014

Kirkwood Says ‘Yes!’ To Actual Capitalism

Tax Increment Financing (TIF) usage in Missouri is so out of control that we have actually witnessed cities reject proposals precisely because they did not ask for subsidies. You read that correctly. Developments have been killed due to their lack of a subsidy request, as cities want the subsidy because it gives them more control over the project.

So it has been with great interest that I have followed the debate in Kirkwood over the intersection of Kirkwood and Manchester Roads. Kirkwood asked for redevelopment proposals, and received two proposals without a TIF (one does have a smaller Community Improvement District), and one major development proposal using a large TIF package. In a normal world, it would be assumed the city would take the projects asking for either no subsidies or greatly reduced subsidies instead of the huge TIF, but Saint Louis does not operate under normal standards of free markets.

But, in excellent news, Kirkwood is going with the two proposals that did not ask for a TIF: a CVS pharmacy and a farmer’s market. Good for Kirkwood to say “yes” to free markets, competition, and actual capitalism.

The only good thing that would have come from the TIF is that I would have enjoyed the city having to declare “blighted” an intersection two-tenths of a mile from the richest city in America. That would have been fun to watch…

December 24, 2013

It’s Not A Celebration When You Engage In Poor Tax Policy

Kansas City leaders held a news conference to claim credit for cutting taxes, which is great except that they didn’t actually cut taxes. Yes, they eliminated some taxes, but the total tax effect was more than offset by increases in other taxes.

Here’s the kicker, though. What voters eliminated, strongly urged on by city officials who proposed it, were good taxes. What is a good tax? It is a tax that raises necessary money, is easy to collect and enforce, and does this without affecting normal economic behavior (”sin” taxes are an obvious exception to the last part.) Economists of all stripes are nearly unanimous that taxes based on land values are the premier way to fund government (especially local governments). So, what did Kansas City do as the only city in Missouri authorized to impose a land tax?

They got rid of it.

Here is the silliest part of the press conference statement:

[...] said elimination of the three small property taxes also makes the city treasurer’s tax collections easier and more efficient to administer because the city doesn’t have to calculate the small levies and each owner’s boulevard front footage.

But calculating the “small levy” is no more complicated than adding a column onto a spreadsheet. Nothing more. And the front footage totals were calculated years ago and rarely change. (Although this post is more about lamenting the loss of the land tax than the frontage tax.)

Missouri requires a reassessment system every two years for a number of tax purposes. Doing a land tax as part of that is, in fact, extremely simple.

For complicated reasons I don’t need to explain here (and don’t even fully know because we have never been able to find the court file that upheld the land tax decades ago), Kansas City is unlikely to be able to reimpose the land tax now. That is unfortunate. Raising the land tax instead of adding a new sales tax would have been the better move for long-term growth in Kansas City.

Read more here:

November 19, 2013

Spring Internships With The Show-Me Institute

The Show-Me Institute is now accepting applications for our spring 2014 internship program. All the information you need about the internship is available here. Please submit the required application by Dec. 6. The spring intern positions can be full- or part-time, and the jobs pay $10 per hour. You will note that is above the minimum wage, because we believe in the power of markets, not government mandates. Which basically sums up your entire internship program experience quite nicely.

October 11, 2013

St. Louis Development Corporation Just Making Stuff Up

The 2013 annual report for the St. Louis Development Corporation (SLDC) is out. Let’s give them credit for timeliness, at a minimum, being that 2013 is not even done yet.

The report is a great example of ridiculous government claims. I took the time to add up all the “jobs created” claims for each of the various subsidies on pages 6 and 7. The report claims that the work of the SLDC and its various subsidies (TIF, etc.) will result in 18,198 new jobs. If I added in their “jobs retained” or “construction job” claims, it would be even higher.

Let me give you an idea of how completely bogus these claims are. According to the U.S. Bureau of Labor Statistics, the entire Saint Louis metropolitan region only added 13,500 jobs in the year from July 2012 to July 2013. That is ALL job creation in our entire 2.5 million-person metro area. Yet the SLDC is claiming its actions in 2013, which only reflect subsidized jobs within the city of Saint Louis, will create more than 18,000 jobs. (To be clear, they are not claiming all the jobs came in 2013 or just within one year.)

These stats bring to mind the comments of economist Dick Netzer when presented with preposterous claims of success by economic development officials (p. 134):

“Who needs oil wells, when a state can be another Kuwait just by increasing the budget of a tiny agency?”

Let me repeat this. This city’s economic development arm (which is now combined with the county, but these stats are city-only) is claiming that the projects they are subsidizing in 2013 will produce almost 5,000 more jobs than the compilers of economic data at the BLS say were created in our entire region by all types of job growth during approximately the same period. (I recognize there is some gross vs. net difference here, but the claims are so entirely out of whack that it does not really matter. I’ll explain further in comments if anyone wants me to.)

A state audit found that the Missouri Quality Jobs Program has claimed to generate almost 27,000 jobs, but in fact had generated slightly more than 7,000. This is the same basic thing. These numbers from the SLDC should be taken with the same grains of salt (and subsidized salt, at that).

The idea that governments should be empowered to take other people’s money to support government-sanctioned, targeted business investments is absurd. Their evidence of government success is, too often, simply made up.

October 1, 2013

My Obamacare Story

I received a letter the other day cancelling my health care coverage and moving me into a different insurance package that is twice as expensive. Needless to say, I am livid. My family uses a high-deductible insurance plan associated with a health savings account (HSA) to pay for our health care. Because our insurance plan did not meet the insurance requirements of the Patient Protection and Affordable Care Act (PPACA, also known as Obamacare), it was eliminated. At some point in 2014, we will be moved to another plan associated with an HSA that does meet the requirements of PPACA, at more than twice the expense.

Never mind that our prior coverage met the standards for our family just fine. Never mind that we were fully covering our family and other taxpayers were not subsidizing us. Never mind that our insurance now provides us with additional coverage that we neither want nor need. The old plan suited our needs just fine.

Is it possible that we should be blaming our insurer instead of the government? Maybe, but because Obamacare made changes that eliminated the options for our prior plan, I think my anger is appropriately directed at the government and the people who voted PPACA in.  We were told that we could keep our health plan if we wanted to under Obamacare. They lied.

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