While researching Tax Increment Financing, I visited the St. Charles city website. While there (it is a very good municipal website), I noticed the business license link. So, I clicked on it (as I am want to do) and was greeted with this page:

Business Licenses

Per City Ordinance (Chapter 110), anyone doing business in the City of St. Charles must have a business license issued by the City of St. Charles. This includes:

• All businesses with a St. Charles address
• Residents working from their homes
• Out-of-city businesses such as contractors, sub-contractors, delivery businesses, etc.
• All professionals

There is just one problem with these statements; they aren’t accurate. First, there are several occupations commonly considered “professionals” that state law specifically excludes from local licensing requirements. Lawyers, CPAs, doctors, dentists, and several other professionals are exempt from local business license fee requirements.

Furthermore, there are other types of “out-of-city” businesses that are exempt from licensing fees unless they fit the first example and have a specific city address. While the examples detailed on the website (contractors, etc.) are correct, other businesses, such as insurance brokers and engineers, are exempt from local licensing unless they have an office in St. Charles.

I bet there are a lot of cities requiring the same thing, and attempt to collect business license fees from firms that don’t know they are exempt. Does the typical land surveyor know he or she is exempt from having a business license? Perhaps. I bet it is less that cities attempt to collect the license fee from exempt businesses as much as they allow people from firms that don’t know better to pay for the license without telling them otherwise.

Is it possible that city officials tell those who are exempt from local licenses that they are so exempt when they arrive to pay for the license? Sure, but that is putting a lot of faith in individual employees to correct the misstatements on the website.  

The city of Saint Louis does a good job of displaying a link to the exemptions on the website of the license collector. St. Charles, and probably many other cities, could stand to take a (web)page from that. I am a big fan of the new mayor of St. Charles. Hopefully, her new administation can correct this soon.

During the recently-completed not-so-special Missouri legislative session, some lawmakers continued to push for a new set of tax credit programs, arguing that tax credits can encourage economic growth.

Today, the Show-Me Institute is releasing a new policy study on the effectiveness of tax credits: “Tax Credits as a Tool of State Economic Development Policy.” This study, by Howard J. Wall, director of the Institute for the Study of Economics and the Environment at Lindenwood University, reviews academic studies of tax credit programs in other states and discusses some of the broad arguments made in favor of tax credits.

One of the most striking findings in Wall’s study is the following: “State tax credits do not tend to lead to higher levels of employment for local residents, nor, by extension, do they lead to higher levels of employment for state residents.”

Consider the academic evidence:

• In a 2009 Michigan study, the authors found that tax credits were associated with a decline in employment.

• Some academics say that tax credits would be effective if used in distressed areas. However, an Ohio study found that tax credits generally are not awarded in distressed areas – a pattern that I suspect exists here in Missouri. Just look at The Chase Park Plaza, a luxury hotel and recipient of a great deal of tax credit money.

• In fact, tax credits may be awarded to companies that would have expanded anyway. A Georgia study found that 75 percent of tax credits were awarded to companies that would have hired more workers without receiving tax credits.

• There have been three prominent surveys of tax credit research in recent years. None of the surveys concluded that tax credits are an across-the-board, effective tool. In fact, one concluded that legislators should abandon tax credits altogether.

Most academic research on tax credit programs across the U.S. has shown that tax credits don’t work. Why do some legislators think that the situation in Missouri is any different?

First, a hearty congratulations to the St. Louis Cardinals. The team’s late-season and post-season play has been the stuff of sports legend, and I’ll be watching the game closely tonight.

If you visited the Cardinals’ official website today to buy tickets, you’ve probably seen this page:

Now for the good news: Tickets to the game are still available! The bad-ish news? It’s going to be expensive if you want into Busch Stadium tonight. The lowest price going on StubHub right now is $489, for standing room only.

The most expensive ticket for the game: more than $12,000. David Stokes, a Show-Me Institute policy analyst, wrote Wednesday about the effect of legalizing scalping on the cost of after-market ticket purchases. From the article he quotes:

The ante rises during the playoffs, when a box seat can fetch more than $1,000 and even the price of standing through a nine-inning ballgame can run as high as $300.

We are well beyond that point today. But simply put, secondary markets – whether on the street or online – usually do a fine job of reducing product inventories by matching willing sellers with willing buyers. Those that value a ticket literally as much as a house payment can buy one; those seeking to unload their ticket can sell it; and those making the market receive their own cut for the service they provide. Everybody wins.

(By the way, originally I was going to write that “thousands of tickets are still available,” but that’s rapidly becoming untrue. During the 20 or so minutes it took to write this post this afternoon, the available number of tickets dropped from approximately 2,100 to 1,800. Prices are high, but they’re obviously not too high.)

This all naturally flows into David’s other post on the World Series regarding parking prices. Websites like StubHub (which is, not surprisingly, owned by eBay) are great because the market is pretty clearly informing what sellers are charging. World Series tickets, while they may have some collectible value after the fact, are ultimately perishable: they’re used for a game, or they’re not. That’s why if you want to go to a regular-season game and don’t mind missing the first inning or two, you can get better deals, as scalpers try to avoid getting stuck with tickets when the music stops. That “wait and buy” opportunity will, for the most part, be non-existent tonight (I think) but the moral of the story is that people place different values on different products, services, and conveniences. Parking lots around the stadium wouldn’t raise their prices if they didn’t think those spaces were valuable to parking customers. World Series ticket prices are very similar in that regard.

In any case, enough economics. Here’s to you, Cards. May the rally squirrel be with you.

Despite the recent adjournment of the Missouri Legislature’s special session (which cost Missouri taxpayers more than $280,000), it wasn’t a complete waste. During the debate about Aerotropolis, the Missouri House passed a corporate income tax cut that lowers the rate from 6.25 percent to 5.5 percent. Unfortunately, the tax cut didn’t become law, but I commend the House for at least trying.

Why is cutting corporate taxes important?

First, everything else being equal, cutting corporate taxes will leave more money available for business owners to reinvest in their companies. A company seeking to expand will have an easier time using its own profits instead of issuing debt or equity to raise capital.

Second, it’s fair.  As we have seen in Missouri, when legislators want to incentivize investment in the state, often they create targeted tax credit programs (like Aerotropolis). This allows the state to place a bet with taxpayers’ money on favored industries. Also, evidence shows that tax credits aren’t very effective. A corporate tax cut applies to every corporation in the state and thus companies can succeed on their own merits and not on how well-connected they happen to be.

Third, corporate tax cuts make a company more competitive. If Company A and B are in two different states and they make the same product at the same cost, but Company A has a higher tax rate than Company B, then Company B will have a competitive advantage. However, Company B would have a competitive advantage not of its own making; instead, the company would have an “artificial” edge due solely to its location. Company B can use that tax advantage to cut its prices and thus gain more customers than Company A.

Having a competitive advantage is important, especially in today’s economy. This applies to individual companies as well as states. If a state wants more job growth, then it needs a competitive tax environment. According to the U.S. Department of Labor (hat tip to Tax Foundation), most mass job relocations occur from one U.S. state to another and not to overseas locations. People in Kirksville, Mo., have more to fear about their jobs moving to Des Moines, Iowa, than to Delhi.

According to data obtained from the Tax Foundation, Missouri has the sixth-highest corporate tax rate compared to its neighbors (the states sharing a border with Missouri). However, if Missouri cut its corporate tax rate to 5.5 percent, it would have THE lowest corporate tax rate compared to its neighbors. In a time when every job is precious, and with the way things are in Washington, D.C., shouldn’t the state do everything it can to make doing business here more attractive?

During the special session of the Missouri Legislature, there was no shortage of personal attacks levied at individuals and organizations who dared to question the wisdom of offering more than $300 million in tax credits to corporate interests in the state.

As the St. Louis Business Journal put it: “…devotion to God, country and the region was [questioned] by almost anyone who dared question the planks of the China proposal.”

From today’s St. Louis American, which is generally sensitive to incorrect negative stereotypes: “…and some rhetorical heat was added by tea party types who created hysteria around a threatened ‘Chinese invasion’ of Missouri subsidized by Missouri taxpayers.”

The claim above is similar to those echoed in online forums and elsewhere that the widespread public opposition to the Aerotropolis tax credits was based on a fear of increased international trade with China, or that concerns voiced came from uninformed individuals.

Ostensibly, the purpose of the tax credits was to encourage increased international trade at Lambert-St. Louis International Airport. However, the tax credit proponents made numerous claims that lacked evidence, or were flat out wrong.

I don’t dispute that well-informed individuals can disagree on a policy proposal. But throughout the past year, I have spoken to many community groups about tax credits and answered questions from many other individuals who were concerned about the Aerotropolis proposal. The accusation that those concerns are rooted in xenophobia is false.  I am disappointed that some tax credit proponents have characterized the advocates for reform in that way.

Look, the primary concern I heard was genuine interest in encouraging legislators to abandon corporate welfare policies of the past. True, some focused specifically on the Aerotropolis tax credits. But many voiced skepticism and concern about tax credit programs in general — on the grounds that state government shouldn’t be favoring some industries or individuals over others.

I hope that when the legislature reconvenes in 2012, we can have a public debate regarding the merits of tax credit programs, instead of resorting to name-calling.

Ticket scalping was one of the first issues this blog tackled when we started in 2007. This story in today’s St. Louis Post-Dispatch gives an update on how the situation has unfolded in St. Louis for the 2011 World Series baseball playoffs. Just as predicted, using basic economics, legalization of ticket scalping has resulted in lower prices and greater consumer choice (StubHub!, etc.). One scalper doesn’t bother with political spin:

“You made more money when it was illegal — it wasn’t even remotely close,” said Tony Green, a ticket broker for 20 years. “We knew all the cops, so they wouldn’t bust us.”

So, how did my 2007 prediction on ticket scalping work out? There may be no way of knowing if more people are paying above face value for their tickets to these playoffs, but I still think that is a reasonable belief. However, my predicted overall price decrease for major sporting events was apparently dead on (not that it was a difficult prediction).  

In case you have not watched it yet, please enjoy this video of the Show-Me Institute turning all of our interns loose in a ticket-scalping competition last summer.

Occupy Saint Louis is in full effect, and my co-worker Patrick Ishmael and I dropped by last Friday for the group’s afternoon march. I can only claim superficial exposure to the pulse of this particular group at that particular time, because I was in the crowd but not of it, and I didn’t take the time to talk to anyone while I was there. Most of the signs I saw and chants I heard involved “jobs,” though there was also a call-and-response that got a lot of play: Call: “Whose streets?” Response: “Our streets!” I’m not really sure what that one meant.

I have been reading quite a bit about the protests going on in New York City, in the rest of the country (my cousin participated in Occupy Omaha, he’s the one in the suit near the center) and even around the world. The protests and the protesters are not totally united in their goals or their beliefs, but there are certain common threads that bind the movement and represent a shared objective. One of the most common complaints you’ll hear is anything along the lines of “get Wall Street out of Washington.” This is an expression of the idea that business and government should not have such cozy relationships. The word for this concept in popular usage is “corporatism,” and although the protesters may not realize that a free-market think tank represents an ally in their fight, we have published countless studies and commentaries asserting that government should not be in the business of picking winners and losers in the marketplace.

We oppose tax credits such as the Aerotropolis subsidy package, film tax credits, and other publicly-funded business incentives. Indeed, so strong is our stance against corporate welfare that it’s one of our six main policy areas.

The Occupy protests and the people calling themselves the 99% are fired up and out on the streets for a reason. H.L. Mencken said “Every decent man is ashamed of the government he lives under,” but when left and right are aligned in opposition to pervasive policy that hurts all but a very few well-connected people, and when thousands take to the streets to voice their disillusion, there’s a glimmer of hope for real change to the status quo.

I enjoy the Bernie Miklasz show on 101 ESPN FM and 101sports.com. I also enjoy his writings in the St. Louis Post-Dispatch. But the other day, while listening to his show on the way back from lunch (I think it was last Friday), I heard him complaining about parking lot operators in downtown St. Louis raising prices during the baseball playoffs. This, of course, is flabbergasting to someone like myself. Why, on God’s green earth, shouldn’t parking lot operators raise prices in response to increased demand for parking brought about by the playoffs?

There really is no legitimate argument against it. There might be legitimate gripes or complaints against it, but those aren’t arguments. Every person reading this, or listening to Bernie’s show (probably more of the latter), would – if they owned a parking lot downtown – raise prices in this situation. Parking for sporting events like this is an example of market-day supply, like the fish market in your economics textbook. The supply of parking is fixed for any individual baseball game. With the increased attendance for the playoffs (the dominant, but not only, factor, increasing demand here), the demand for parking increases. Because the supply of parking is fixed, prices will increase. This will happen in every situation everywhere, and there is nothing wrong with it. (Note: the supposition that the supply of parking is fixed in a single day is correct, but there might be some exceptions. You can’t build a new parking lot in a few days because the team makes the playoffs. However, some things could be added to the supply in response to high demand. For example, a private parking lot may open itself to the public in response to high demand and high prices. That, of course, would result in more supply and lower prices.)

None of this says that parking lot operators are taking advantage of monopolistic power. People have plenty of choices here. Parking farther away from the stadium will still be less expensive than parking closer. If you are willing to walk further, you can save money. You can carpool and share parking expenses. You can take a bus or Metrolink. If parking lot operators set the price at $1,000 per spot, they won’t sell many spots. Every parking operator is going to set the price at a level they think will result in selling all their spots for as much as they can. If they set their prices too high, they will lower them quickly as market equilibrium sets in.

Of course, Mr. Miklasz would do the exact same thing with his show and column. If his ratings skyrocket, he wil increase the advertising rates for his show. Now, he might not be able to increase his rates today in response to more listeners during the playoffs.  But that is not because he is behaving morally and parking lot owners immorally. It is likely because he has chosen to sell long-term advertising agreements with customers for so many spots over a period of time because that is the best way for him and his station to operate. The parking lot operators who service the ballpark are not under such constraints.  

If Bernie was to say, write a terrible book that for some strange reason millions of people buy and it becomes a terrible movie, he will demand a raise from his employers. If they don’t give him the raise he feels he deserves, he can write more terrible books and make money that way. If he has enough time and desire, he can try to do all of these things at once. But he will sell his services, and the various items that accompany his services (ad rates, etc.) for the highest price he can based on the ever-changing market conditions. 

The parking lot operators do the exact same thing. There is absolutely nothing wrong with it.

This is a depressing sign of the new reality. A group of young entrepreneurs is requesting government assistance. This new organization, which consists of young people who are probably pretty awesome in many ways, is looking to the federal government for assistance:

The Young Entrepreneur Council is proposing a Youth Entrepreneurship Act that would address the barriers that he [Scott Gerber, founder of the YEC] says young entrepreneurs face. One element would be a program to forgive student loans and debt for young entrepreneurs, which he says would address a major hindrance to recent graduates who want to set up their own shop.

“Now more than ever, with young unemployment being so high, we have to be educating people that youth entrepreneurship is a viable career path and not some renegade choice,” Gerber said.

You know what would really be a renegade choice? Not requesting special legislation from the government.

In the interest of full disclosure, I used to work for the government and when I had a small business in the 1990s it had a few government agencies as clients. I make no claim to moral purity here, but just wanted to note how depressing it is that a group of young innovators and risk-takers (of all people) would adopt the nasty habit of seeking government handouts as their standard practice of doing business.

Working at the Show-Me Institute, located in the highly walkable Central West End, my colleagues and I often take short walks to lunch. Recently, food trucks have entered the competition for our dining dollars.

Given the large crowds that form around these trucks, they seem to be a hit, but apparently this is not the case for everyone. This week, police have cracked down on food trucks in the area — allegedly in response to a complaint.

A regulation in the city code forbids street vending within the Central West End, but until recently the restriction had not been enforced. Earlier this week, officers and inspectors issued warnings to multiple food trucks asking them to leave the area or face fines for violating vending regulations.

Christine Harbin, a former SMI policy analyst, wrote numerous times on these restrictions on private enterprise. First spotting food trucks in the Central West End back in March, she later followed up on the issue in a video interviewing both food truck owners and their customers. The verdict is still clear: there exists a strong consumer demand for these food trucks. Why should government inhibit healthy competition and growth of consumer choices?

Some people worry about the safety and health concerns associated with food trucks, but like any other restaurant or food provider, they must undergo government health and safety inspections to obtain permits for legally selling their goods.

Another common concern is the potential increase in street congestion. In Dr. Donald Shoup’s book, The High Cost of Free Parking, he explains the best way to manage street traffic is to introduce market determined parking fees.  Parking is not a free good, and should not be treated as one. Busy streets with more traffic and higher demand would have higher parking fees, while quiet less crowded streets with lower demand would cost less. This would force food trucks to internalize the externality of over consuming street parking.  If the trucks wanted prime location they would have to pay extra for it.

These trucks may be “technically illegal” in the area, but clearly there is a demand here that the government is barring. Originally, the downtown area had this same restriction, but now it benefits from many popular street vendors and food trucks. Why should the Central West End or any other area be treated differently?

Consumers would benefit if this restrictive ordinance was repealed throughout St. Louis, allowing their preferences — not the preferences of bureaucrats — to dictate food trucks’ placement and success.

To follow this issue further, watch Christine’s other video on the subject in which food truck owner Jeff Pupillo and a number of customers weigh in on food trucks and the unwanted competition they provide for some local restaurants.

As labor unions shrink, new and exciting ways of promoting union membership are springing up all over. In April, I wrote about one university course in Missouri that delved into the finer points of using thug tactics in labor disputes, which is a pretty terrible threat to democratic principles on its own. Yet the threat of physical violence isn’t the only effective means of coercion available to the labor movement, or to any movement, or the most powerful tool in that tool kit.

After all, the government is well-equipped to bust some proverbial knee caps of their own, and it looks like the National Labor Relations Board (NLRB) and the Labor Department are taking out the big bats. First, it was Boeing’s decision to move some of its operations from Washington state to South Carolina, which the NLRB is now trying to block. This week, it’s the Labor Department’s turn to do some damage, tightening requirements on employers to report their anti-unionization activities. And today, the National Review editorial board lays out the NLRB’s latest plan to help organized labor and make employer attempts to dissuade employees from unionizing that much more difficult.

It is truly worrisome that the small, ideological leadership of these bureaucracies can so easily, and unilaterally, craft American labor law and interfere with the movement of labor without even a contemporaneous, affirmative act of Congress compelling these fresh rule-making activities. We already know that Obamacare didn’t empower the administration to offer waivers to the law. We know that the Obama administration wants to enact gun control through administrative procedure. Is there anything federal bureaucrats can’t do? If not, isn’t that an enormous problem?

National Review’s Kevin Williamson puts the problem this way (emphasis added):

If you are an entrepreneur thinking about starting a large industrial enterprise, or an incumbent firm thinking about building a new factory or launching a new line of production, you want to know that your tax and regulatory environment is livable — and that it is not going to change at the whim of one or two or three people in Washington, D.C. The NLRB has five seats (and four members serving; there’s a vacancy at the moment). The fact that such a tiny group of unaccountable political appointees can just wake up one fine morning, have some Pop-Tarts, and then decide to rewrite the nation’s union-election rules is terrifying. Such changes ought to require an act of Congress.

Roll out of bed, toast a pastry, pass a rule. Maybe a bat isn’t necessary after all.

There has been a great deal happening on the issue of privatization throughout our state. Tony’s Kansas City has been reporting that Missouri-American is in talks with Kansas City officials involving the city’s water division. Here’s hoping this is true. This would be excellent for Kansas City in both the short and long run. Private companies do a perfectly fine job of providing gas and electricity to Kansas City, and water to many other parts of Missouri. Private utilities are heavily regulated in Missouri, and local mandates can be included in any agreement between KC and Missouri-American Water. (I am not saying local mandates should be included, just that they could be if local officials think they are necessary.)

In economic terms, public goods are non-rivalrous and non-excludable. Except in extreme circumstances, the water I consume does not limit your consumption of water. In this case, the water in the Missouri River is non-rivalrous. However, with utility services — as opposed to national defense or local roads — it is easy to prevent someone from using the asset if necessary. They are excludable. It is hard to argue that water access and infrastructure needs to be provided by the government, especially when there are private providers operating in the area that have a proven ability to provide the product. And it is even more difficult to make that argument when a lease, management contract, or utility sale would be valuable to taxpayers. (To those who might scream about everyone having the basic right to water, you are all free to collect rain water to drink, and to take baths in a local stream all you want. This is about the demand for pressurized hot or cold water coming into your home on demand by turning a tap.)

To its credit, Kansas City’s water division at least charges for its water like a private good instead of a public good. The fact that Saint Louis still lacks water meters for most of its consumers is absurd. Even if Kansas City changes the debate some by charging for water more like a private good, the fact is that public utilities far too often lack the political will to charge what they need to charge for the asset.

Also in Kansas City, the private contract to operate the animal shelter has been pulled. This happened awhile back, and I touched upon it here, but this is a great disappointment. This is clearly not a failure of privatization, unless saving money and increasing adoptions is a failure. It might be considered a failure of this particular private operator, but I remain unconvinced. I think that there is a core group of activists/volunteers who will never be happy with any system until they get a no-kill shelter in Kansas City. I say this as a dog-lover who got my dog (who passed away last year at 10) back in 2000 from a local shelter.

I think the city caved to accusations, as this statement indicates:

“We’ve been receiving allegations from some of the volunteers who put in time out at the shelter regarding mistreatment of animals,” said David Park, director of Neighborhood and Community Services for the city. 

Park acknowledged the shelter has been run better now than in the past. 

“They’ve done a wonderful job, as far as increasing the number of adoptions. (Previously) the number of animals that were euthanized was far greater than the number that was adopted, and now the opposite is true,” Park said. 

According to Park, the city has to protect itself, even if the allegations have yet to [be] proved. 

“Until we have the formal results of the investigation back, we don’t want to renew a contract for a year, for another year, and then have something surprising come out of the Missouri Veterinary Medical Board — then we need to cancel right away.”

The private airport in Branson is struggling financially. It does not appear to be struggling in its day-to-day operations, but I’ll try to fly there next week to make a better judgement. They have two commercial airlines offering regular flights to Houston, Atlanta, and Denver, and more charter services. It remains to be seen how the airport’s debt issues will play out over time. I certainly hope that this experiment succeeds, but who knows? If it does fail, it will fail with (mostly) private money. Compare that to Mid-American Airport over in Illinois, and pick which style you want.