The St. Louis Rams’ counter-offer to the St. Louis Convention & Visitors Commission (CVC) has just been released. You can read the proposal yourself, but the key take-away is that the estimated price for this upgrade is in the range of $500 million to $750 million, with $700 million as the more specific estimate. The breakdown between private and public money is unknown, but presumably the public portion will be substantial.  Also, the plan would involve making the Dome unfit for conventions for two years, due to renovation work. Needless to say, operators of hotels and restaurants in Saint Louis would not be thrilled with such an arrangement in the short term.

Before even discussing the merits of such a proposal, it is imperative to ask, where would the city, county, and state find the money to pay for this, even if they wanted to? The state had enough trouble balancing the budget for its current obligations. Saint Louis City is looking to reduce the size of the police force and Saint Louis County is laying off workers to balance its budget.

Also, would the public be better off with an investment of this sort? I already pointed out the conclusions of a St. Louis Federal Reserve study showing that the impact of public investments into sports stadiums was negligible, or in the case of Saint Louis, negative. In a book written by Roger G. Noll and Andrew Zimbalist, “Sports, Jobs, and Taxes: The Economic Impact of Sports Teams and Stadiums,” the authors conclude: “the economic case for publicly financed stadiums cannot credibly rest on the benefits to local business, as measured by jobs, income, and investment.”

If the Rams want a first-tier stadium, they should be free to build one with private funds, like the Carolina Panthers did. However, if they want the taxpayers to pay for most of it . . . then that is a problem. It is time to choose between what the city, county, and state need and what they would like to have.

The Associated Press has published an excellent article about the tax incentive border war in Kansas City.

According to the AP, Missouri and Kansas have committed more than $750 million in tax incentives and bonds to lure companies across the state line. That amount of taxpayer money is incredible to promise away in just five years. Perhaps even more incredible is that the former head of the Missouri Department of Economic Development (DED) openly told the AP:

You get to a point where you have to say we are wasting taxpayer money.

For once, I agree with someone associated with the DED. It is certainly nice for elected officials to be able to issue a press release and claim to have created jobs and investment. But that practice is a raw deal for taxpayers. Research has shown that state tax credits have a lousy track record of delivering on promises. And, Missouri taxpayers support this foolish practice at a cost of hundreds of millions of dollars in state tax credits.

Though he has promised in the past to try and rein in tax credits, our governor does not seem to quite get it. Missouri Gov. Jay Nixon told the AP:

I’m going to compete for jobs for our state, I’m not backing up on that. But I think that the real long-term solution is how do we get more out of the region as far as joint economic impact?

Here is an idea: If a company wants to leave Missouri because Kansas has promised it a ridiculous amount of money, like $100,000 per job, let it go. That is a poor use of taxpayer dollars, and when a company moves a few miles, its employees frequently stay where they put. Those employees will continue to own homes, shop, and pay taxes in Missouri.

There are better ways to make our state competitive. Let’s lower the corporate income tax. Why not reduce the state income tax?

The way to encourage economic growth throughout the state is to provide tax relief to all Missourians, instead of participating in a tax incentive game that helps politicians earn political points.

In the final week of the legislative session, Missouri legislators may vote on the creation of a land bank in Kansas City. Given the attempts to attach the land bank legislation in its entirety to unrelated bills as an “amendment,” there is a good chance that some legislators will try to get the bill passed this week.

In addition to testifying and providing suggested changes to the legislation, I have also written here repeatedly about the pitfalls of creating a land bank, in light of the 40 years of failure we have experienced in Saint Louis City. If legislators — despite the evidence that land banking can lead to abuses of political power and poor decision making — still want to pass the land bank legislation, perhaps they should consider recent land banking news from other states:

The Columbus, Ohio land bank is asking the State of Ohio for money.

The fiscal note for the land banking bills (H.B. 1659 and S.B. 795), reports that passing the legislation will not cost the state money. However, the legislation itself mentions possible funding from the state several times. Columbus, Ohio provides a good example of what could occur if the Kansas City legislation is passed. The new land bank is requesting $8.2 million from the State of Ohio. A newly established Kansas City land bank could make a similar request.

The Saginaw, Mich. land bank bought a hotel, used it for police training exercises and now plans to spend up to $400,000 to demolish the hotel and build an “aesthetically pleasing parking lot.”

Regular Show-Me Daily readers know that we are not a fan of government development bets. Well, land banking takes that practice to the next level. Instead of government officials attempting to pick winners and losers by awarding tax subsidies, land banks can purchase and attempt to redevelop property. What could possibly go wrong?

Consider the case of Saginaw, Mich. In December, the Saginaw land bank purchased a hotel for $235,000. Since then, refrigerators and microwaves have been looted, and the sheriff’s department has conducted “emergency response exercises” there. The building is riddled with black mold, and the county is paying $15,000 per month for utility costs at the vacant hotel.

Government officials say that investors aren’t interested in the property, so the next step is to demolish the building and build a parking lot. The demolition is estimated to cost another $300,000 to $400,000.

The Missouri land bank legislation is modeled on Michigan’s land bank law. If legislators pass S.B. 795 or H.B. 1659, a Kansas City land bank would have the powers to make similar development bets with taxpayer money.

The Missouri Legislature passed land banking legislation in 1971, and it has been an abysmal failure. The Saint Louis land bank holds more property than ever, and pays more than $1 million every year just to mow the grass on its properties. Why repeat past mistakes?

The appropriators in Jefferson City have managed to finalize a budget before the May 11 deadline. The final version of the budget amounts to a little more than $24 billion. The key differences between the Missouri House and Senate budgets that held up the conference committee from crafting a final budget seem to have been resolved.

The most recent stumbling block involved funding for the Sue Shear Institute for Women in Public Life. The Institute’s goal is to help prepare women to run for public office. There is nothing wrong with that, but should taxpayers foot the bill? In economic times such as these, it should be a relatively easy call to cut funding for programs like this one. Apparently in Jefferson City, the call was not so easy. The Shear Institute gets to keep state funding. This fracas is indicative of the problems that plague Jefferson City.

If deciding on whether to cut funding for a non-essential program like the Shear Institute can cause the budgeting process to screech to a halt, what would happen if something much bigger was on the table, such as tax credit reform? Organizations on the left and the right have called for tax credit reform, but yet there seems to be little movement to actually enact any meaningful reform (a reform, by the way, that, if enacted, would do a lot to alleviate the current budget situation in which the state finds itself).

The budget impasse has been resolved. However, this situation is indicative of the obstacles facing any reform measure that might be proposed.

It was comical that Missouri legislators, apparently blind to irony, tacked a lengthy land bank bill onto a bill that was supposed to increase government transparency.

Well, lawmakers have done it again. The latest bill to get what I am now going to call the “Kansas City Land Bank Bump” is Senate Bill 692, a bill that was initially intended to help counties manage their budgets. This time, the bill ballooned from two pages to an impressive 93 pages. It appears that about 30 of those pages are dedicated to creating a land bank in Kansas City.

Given that a land bank created under this bill could entail unlimited amounts of debt, the addition of the land bank language to a county budget bill is almost as ironic as the previous act of desperation.

Moreover, these moves may not even be constitutional. The Missouri Constitution states that bills cannot contain more than one subject, and that subject must be clearly stated in the bill’s title. Does “decreasing county budgets” accurately describe a bill that would create a land bank? Perhaps, if SB 692 passes, a court will have to decide.

Look, if a land bank is such a great idea (and after extensive study, I do not think it is), why can’t legislators pass it on its own merits, instead of continuing to try and hide it as an amendment to unrelated bills?

Missouri’s major dailies have had quite a run over the past few days. Last week, the Kansas City Star told readers that the state’s governor needed “to promote reasonable revenue-enhancing measures” — taxes — and put more money toward state programs. The notion of “government investment” features prominently in the piece, as increasingly has become the case when “revenue-enhancing measures” are suggested, post-Stimulus. What the editorial board does not say is that the city’s own local taxes are already among the highest in the region.

Stratospheric municipal taxes overlaid with an even higher state tax burden? This will not turn out well.

But yesterday, the St. Louis Post-Dispatch, the Star’s cross-state peer, spectacularly one-upped the Kansas City paper. The law constrains Missouri legislators on how much they can tax and spend each year, and Missouri is billions of dollars below the limit. How much of that difference would the Post-Dispatch like to spend?

All $4 billion of it.

A lot of folks purchased Mega Millions lottery tickets last week dreaming about what they could do with $640 million. Imagine what $4 billion would do for Missouri.

Let’s be clear: That is a radical tax hike proposal, tucked into what is otherwise an uninspired editorial about state and local governing responsibilities. Combined state and local tax rates have stayed roughly the same for decades in Missouri, but the Post-Dispatch would have those rates hurdle skyward to provide more public services and somehow, some way, improve the economy above the status quo.

Even the suggestion that raising taxes and then spending more would help the state makes no sense by the newspaper’s own standards. State and local tax rates have actually increased slightly since 1980, the apparent “good ole days” implied in the editorial, from 8.6 percent then to 9 percent today. The newspaper cannot even claim that plummeting tax burdens are the reason Missouri is suffering economically, because, by its own metric, taxes have actually increased over the last 30 years.

The proposal is mostly academic here in Missouri, as taxpayers and policymakers would blanch at the thought of such a hike, but the suggestion is still troubling. If implemented, the plan would have awful real-world implications — giving families less to spend and taking capital out of the market for use in less productive government programs. It is a roadmap to ruin, and yet the Post-Dispatch apparently does not see it.

“Imagine what $4 billion would do for Missouri”? No, imagine if lawmakers took their cues from Missouri’s newspapers. What a nightmare that would be.

The Kansas City Star wrote an op-ed urging Missouri Gov. Jay Nixon (D) to expend some of his political capital in order to bring in more revenue to fund state programs. The Star states that lawmakers in Jefferson City should stop bickering about which programs to cut (they specifically mention the current fight about cutting funds from higher education or funding for a medical program for the blind) and focus on finding new sources of revenue. They specifically mention reigning in tax credits and raising the tax on cigarettes.

Why are tax hikes even on the table? Legislators have not even cut all waste and low-priority programs from the state budget, never mind bigger ticket items such as higher education and medical programs for the blind. Considering that the Missouri House passed an appropriations bill that includes funding for the Missouri Wine & Grape Board along with ethanol subsidies (and that is only for the Department of Agriculture), the state has plenty of places to cut.

The Star editorial is not all bad. It does call for reigning in tax credits, which the Show-Me Institute has pushed for repeatedly. However, it also calls on raising the cigarette tax. The Show-Me Institute has written on this issue and the situation is the same now as it was then; raising taxes on cigarettes is not the cure for what ails Missouri.

Missouri needs a healthy environment so its economy can thrive. That does not just mean low taxes; it also means lowering regulatory burdens. Doing so will ensure that the state receives enough revenue so that all PROPER functions of government have enough funding to work effectively.

In January, Missouri Gov. Jay Nixon (D) launched his opening salvo in what was sure to be a contentious session between the governor and the General Assembly regarding the fiscal year 2013 budget. Last week, the Missouri House passed its version of the fiscal year 2013 budget. Both budgets reflect differing priorities and seemingly difficult choices.

If both the governor’s and legislature’s actions indicate anything, there is seemingly nothing else to cut in the budget and thus the state is faced with the Scylla of higher education cuts and the corresponding tuition increases they entail, or the Charybdis of cutting health programs, specifically a program for the blind who do not qualify for Medicaid. However, despite proposed cuts in these programs, there are still egregious examples of programs that clearly have no business being funded but still receive taxpayer dollars.

I have previously blogged about programs such as the Missouri Wine & Grape Board and Missouri ethanol subsidies. According to the House Budget, the Missouri Wine & Grape board receives an appropriation of $1,826,275 while the state will appropriate $9,850,000 to various ethanol and biodiesel programs. Before fighting about whether to cut higher education or programs for the blind, shouldn’t state officials eliminate funding for programs like the two mentioned above?

Missouri is one step closer to having another tax credit program, the angel investment incentive tax credit. This tax credit program has some rather concerning features. For instance, certain industries are automatically excluded from consideration (business consultants and insurance companies, to name two). And for those businesses not excluded from the tax credit, the government must still find that they have “a reasonable chance of success.” Since when is the government good at determining what will be successful?

But wait, there is more. This tax credit has the potential for $6 million in new tax credits each year, which means that Missouri revenue could fall by as much. An amount of $6 million might sound insignificant, but this year, Missouri’s 60-plus tax credit programs are expected to dig an $835 million hole in state revenue. That $6 million figure is just less than half the average redemptions per tax credit program. Combined, these programs add up. Could this tax credit be the proverbial straw that breaks the Missouri budget?

Today, the Missouri House of Representatives approved a $24 billion state budget. What remains to be seen is whether that budget will pass the Senate.

Sen. Jason Crowell (R-Dist. 27) made waves when he spoke out on Wednesday against gimmicks that legislators are using to avoid tough budgetary decisions. The Columbia Missourian reports that Crowell blocked a vote that would extend the amount of time the legislature has to replenish the state’s “rainy day fund.”

Crowell also argued that the proposed state budget counts on uncertain sources of revenue ($70 million that is estimated to be received from delinquent taxpayers), and one-time sources of funding (a $40 million settlement that the state has not yet received).

In a very passionate speech, Crowell stressed the need for tax credit reform, something he has called for repeatedly. Crowell has sponsored several bills to subject tax credits to the appropriations process. Tax credits currently are not subject to appropriations, meaning that tax credit money (which has consistently been more than $500 million in recent years), comes straight out of state coffers, without consideration of whether the state can afford the expense.

During the hearing, Crowell asked Sen. Kurt Schaefer (R-Dist. 19), the budget chairman,  ”When are you going to pick Mizzou over Jeff Smith? That’s what this is all about, Senator.”

Crowell was referring to a developer who the St. Louis Post-Dispatch editorial board has called out for benefiting greatly from the state’s Low Income Housing Tax Credit, and alluding to the cuts that have been made to state higher education. These are the kinds of trade-offs that could be considered if tax credits were subject to appropriations; instead, legislators continue to passively give priority to tax credits.

Indeed, St. Louis Public Radio reports that Crowell promised to filibuster uses of one-time funding unless serious overhauls of the tax credit system, prison spending, and state pensions are considered.

Good luck.

The tuition hikes that the University of Missouri is instituting are affecting real families all across the state. The Show-Me Institute spoke to one family from Saint Charles County who will be doubly impacted. With an annual increase of $260 per student, the family’s mom, Laura (not her real name), said they will have to pay an additional $520 for their two children to attend Mizzou. Will this extra $520 bankrupt the family? It will not, but it will force them to cut back on some much-needed home and auto repairs.

Due to faulty electrical outlets in the home’s bathrooms, Laura said that they are forced to dry their hair in the kitchen, and with the extra money needed to pay for college, they will be forced to continue this practice. Laura also said that the family may have to forego putting new tires on their son’s car. It is not difficult to imagine the unnecessary worry this young man’s parents will feel when their son drives to and from Columbia on old and worn out tires, especially if it is raining or snowing.

While the University of Missouri raises tuition on families such as the one described above due to state cuts in higher education funding, historic tax credit authorizations in Missouri are on an upswing. In fact, the $91 million in Historic Preservation tax credits authorized in the first six months of fiscal year 2012 have almost surpassed state estimates for Historic Preservation authorizations for the entire year.

The question should be asked whether handing out tax credits of questionable value (like the $1 million tax credit issued to Norwood Hills Country Club)  is worth more to the citizens of the state than preventing a tuition increase that will affect families across the state.

Considering that the state of Missouri faces a large budget shortfall, it would behoove the state to make sure that, at the very least, tax credits go to worthwhile projects. A possible avenue for oversight of the tax credit system would be to subject tax credits to the appropriations process. Missouri Sen. Jason Crowell (R-Dist. 27) has submitted a bill (SB 436) that does just that, and there are items in the bill that deserve commendation. Subjecting tax credits to appropriations would enable the state to keep closer tabs on these programs and help ensure that questionable issuances are examined. Considering the price that all Missourians pay for these tax credits, is subjecting tax credits to some sort of appropriations process too much to ask?

It seems that the Show-Me Institute can be pretty hard on the state government sometimes. For that, we make no apologies (it is in fact one of our Prime Directives). However, while we may be tough, we also strive to be fair. That is why I must commend the effort currently underway in the Missouri Legislature to reform our tax structure. Senate Bill 472, sponsored by Missouri Sen. Will Kraus (R-Dist. 8), would modify various tax credit programs and require the Missouri Department of Revenue to apply any increase in revenue generated from these modifications to a decrease in the corporate income tax rate.

Some (but by no means all — Historic Preservation and Low-Income Housing are capped, but not eliminated) of the various tax credits that will be repealed include the rolling stock tax credit, the charcoal producers tax credit, and my favorite (not really), the wine and grape production tax credit. The money saved if the state abolished these tax credits would go toward offsetting revenue lost if the corporate income tax is reduced. In fact, the fiscal note for this bill states that there will probably be little to no net impact on general and total state revenue. However, I would caution that estimating the fiscal impact when it comes to tax credits is difficult, because it is difficult to determine when or if tax credits will be redeemed.

I have made the case before about why corporate income taxes should be cut (or eliminated), but I want to summarize the benefits of a lower corporate income tax. Lower corporate income taxes are fair because they apply to all corporations and not favored industries. Lower corporate income taxes also allow a company to reinvest more of its money into the company, and they can make a company more competitive compared to companies in other states, without having to resort to corporate handouts like tax credits. Combined with the elimination of some tax credits, which have a record of not being successful in generating economic development, SB 472 has potential to do some good for a state that ranks 49th in job creation.