If 17 lobbyists cannot get you what you want, then I do not know what can.

At the conclusion of the 2013 legislative session, Missouri senators shut down the tax credit that would have opened up millions more to Saint Louis NorthSide developer Paul McKee.

I would like to take credit for this. But unfortunately, there is no one who can really take credit for this happening. Making a bill become a law can often be a confusing and messy process. In this case, the Distressed Area Land Assemblage Tax Credit (DALATC) was set to expire this year, and there were bills proposed to extend the credit. At the last minute, however, the DALATC extension was tacked on to a different bill, House Bill 698. HB 698 was a hodgepodge type of bill including various tax credit provisions.  Eventually, a senator filibustered the bill so it did not pass. (Show-Me Institute Policy Analyst Patrick Ishmael has more detail about the legislature’s failure on this bill here.)

Is this going to stop or hinder in any way NorthSide development? Of course not. McKee’s project has already received more than $40 million in state tax credits, and the City of Saint Louis has promised close to $400 million more in local incentives. Plus, the project still has potential to tap up to $20 million in credits from the state before the DALATC expires later this year.

There is no doubt that McKee wanted access to the $45 million more that extending this tax credit would have opened up. But the project will just have to “make do” with the $440 million in government assistance it will receive.

The Missouri Legislature has embarrassed itself once again on the tax credit issue, and this year’s failure to protect taxpayers from out-of-control tax credit spending was particularly excruciating. After the House and Senate conferenced and produced a suboptimal, but passable, tax credit compromise last Thursday, the legislation fell to a filibuster in the Senate on Friday — the last day of the session. The bill had both good and bad elements to it, capping and eliminating some credits (the good) while creating and extending others (the bad). In the net, it would have been an important first round of tax credit reform, albeit a small step.

But even that couldn’t get through the legislature. Like a college sophomore starting an essay the night before it’s due, the legislature produced tax credit legislation at the latest possible moment with the smallest margin for error available. In school, you don’t get a passing grade for “I started late and my computer crashed!” or “My dog ate my homework!” You don’t get an “A” for “effort.” You get an “F” for “failure.”

Missouri’s heavy use of tax credits encourages government to pick winners and losers in our economy, leading to rampant abuse, distorted economic priorities, and tightening budgetary realities. It’s maddening that practically nothing has gotten done on tax credits that have sapped the state’s coffers in recent years — and whose consequences led to more than $400 million in economic development tax credit issuances in fiscal year 2012 alone. Let’s be blunt here: the legislative dysfunction on the tax credit issue is an unmitigated state disgrace. This year I was hopeful that the legislature had finally gotten past its dark tax credit days, whose depths were deeply plumbed with 2011’s Aerotropolis boondoggle.

But apparently not. As someone who takes notes on the floor debates in the state House and Senate, I cannot tell you how many times I heard a legislator say “I don’t agree with tax credits, but . . .,” and then go on to explain why their pet tax credit needed to be extended or created. (This is especially common in the House.) Bona fide tax credit reform supporters and opponents can disagree civilly, but I have little tolerance or patience for policymakers who are all hat and no cattle on this issue — happy to carve out special tax credits for their special groups as they blithely gore other credits. That’s the worst kind of hypocrisy. Sen. Jolie Justus, a tax credit supporter, was right on Friday to criticize such behavior from the floor of the Senate, and I’ve independently noted the same sort of behavior Justus observed.

The legislative intransigence on tax credits is stomach churning. Coupled with the governor’s leadership void on basically every issue, the legislature’s inaction on tax credit reform is a shameful low note of the session. Taxpayers deserve better than this shabby treatment.

Earlier this week, Chief Executive magazine issued its annual “Best & Worst States for Business” survey, which asked business leaders nationwide how they view states in key policies areas such as taxation, regulation, quality of workforce, and living environment. As with most surveys, your mileage will vary based on what you think of the survey’s methodology.

Yet, it is worth noting that the business leaders who responded to Chief Executive did not hold Missouri in especially high regard. The Show-Me State ranked 31st in business friendliness compared to the rest of the United States. Lucky for us, our neighbor Illinois came in at an abysmal 48th place; unlucky for us, Kansas came in at a comfortable 19th. (Incidentally, the Chief Executive survey results resemble the Kauffman Foundation’s findings last month on business friendliness.)

Houston, we have a problem.

Speaking of Texas, there is one other thing worth noting about Chief Executive’s survey — what the states in the top five have in common. Three of the top five states — Texas (first place), Florida (second place), and Tennessee (fourth place) — do not have an individual income tax. Indiana (fifth place) just enacted legislation to cut its income tax; North Carolina (third place) is pushing hard to reduce its income taxes as well.

I have talked before about the Growth Corridor developing in the Midwest. Missouri should cut income taxes of all sorts, not only because they harm growth in a vacuum, but also because we are surrounded by neighbors who are enacting pro-growth policies in an effort to grow their states’ businesses . . . and to attract ours. Kansas may be the most visible example these days of a state’s tax policy posing a threat to Missouri’s economic future, but it is not just about Kansas. It is about the whole region.

We cannot wait any longer to start cutting these taxes. Missourians need tax relief, and they need it now.

It appears the Missouri House is set to approve a bill that would grant a tax break to gun manufacturers (hat tip: John Combest). My first reaction was that this is a stunt. Yet, worse ideas have come out of the Missouri Legislature so maybe the House is for real.

Stunt or not, this is a bad idea. According to the bill’s own sponsor, gun companies are moving because of strict gun regulations. There is no mention of the tax environment. No matter one’s opinion regarding gun control, giving tax dollars to companies that do not need them does not make sense. It is not like other tax credit programs have covered themselves in glory.

If the state really wants to make Missouri more appealing to all businesses, including gun manufacturers, it should eliminate business income taxes. That would be too simple, though, wouldn’t it?

The first step in overcoming a problem is admitting it exists. The state seems to give at least lip service to that via the Tax Credit Review Commission. But just when you think there might be hope to get our tax credit problem under control, you see stuff like this. Hopefully, this will not actually become law, but who knows at this point?

In Part Four, I wrote about how the number of jobs in Saint Louis’ “central core” fell dramatically in the last decade. The Brookings Institution found that in the 3 miles surrounding Saint Louis’ business district, the city had lost almost 28,000 jobs from 2000 to 2010. Of the job growth the region did experience, those jobs predominantly materialized far outside the city center.

Kansas City feels Saint Louis’ pain. Like Saint Louis, Kansas City has undertaken a series of urban redevelopment plans of its own that, again, have focused on attracting the “hip” class to the city center, oftentimes with significant tax incentives. And as has become commonplace, the hip have come, but the jobs have not.

A report released [...] by the Brookings Institution said that in 2010 just 16.9 percent of the area’s jobs were in the core, defined as within three miles of Kansas City’s downtown. That’s down from 20.5 percent in 2000.

Dragged down by the Great Recession, the raw number of jobs in the central core also shrank from 180,000 in 2000 to 140,000 in 2010, according to the study.

For areas between 3 and 10 miles from the city center, the number of jobs also dropped. But between 10 and 35 miles from the central business district? As in Saint Louis, the total number of jobs rose — and in Kansas City’s case, they rose significantly.

The chart below, created by the Kansas City Star, tells the decade-long tale.

Indeed, all of the regions in Kansas City were buffeted by the Great Recession. Notably, the 10- to 35-mile band was still shy of its intra-decade high as of 2010. But the downtown Kansas City job figures tell a pretty unambiguous tale: jobs have been falling in Kansas City’s central core. Like Saint Louis, population in downtown Kansas City rose over the decade, but . . . (emphasis mine)

. . . new residents hadn’t translated directly to job creation in the core by the time the Brookings information was compiled.

Since then, “we’re seeing some small businesses locate in the Crossroads and the like, but they don’t employ that many,” said Jeff Pinkerton, economist at the Mid-America Regional Council. “And we haven’t had any major employer move downtown recently.

“The fact is that jobs follow rooftops, and housing is growing in the suburbs.”

As has been explained before, “the hip crowd” does not typically have much in the way of jobs coattails. Unfortunately, it seems, Saint Louis and Kansas City know this all too well.

In the high-stakes arena of legislating, the Missouri Senate and House are going heads up. In March, the Senate drew a pair of fives with Senate Bill 26, its version of substantive tax reform. It is a decent hand, but the House just one-upped the upper chamber.

House Bill 253, “The Broad-Based Tax Relief Act of 2013,” would eventually create a 50 percent deduction for pass-through entity income and cut the corporate income tax rate in half. Moreover, HB 253 ends up costing less in revenue. According to the Committee on Legislative Research-Oversight Division, the estimated revenue shortfall that would occur once HB 253 is fully implemented comes to $364 million. That is less than the $438 million in lost revenue that the state expects to occur if SB 26 were to be fully implemented.

I think HB 253 is a superior tax proposal to SB 26. Importantly, HB 253 cuts more in the areas that will produce the biggest immediate and long-term growth benefits. For its part, SB 26 creates a 50 percent deduction for pass-through income and reduces both the corporate income tax by .75 percentage points and the individual income tax rate by two-thirds of a percentage point over five  years.

Business income, i.e., profits, are the returns to capital owners after labor is paid. There is a strong academic basis for believing that taxes on capital, which business income is, are among the most economically damaging a taxing entity can impose. It is good that both SB 26 and HB 253 seek to enact cuts in these taxes. However, from a growth perspective, bigger business income tax cuts would better enhance the returns to capital owners and should be preferred to considerably smaller across-the-board cuts. HB 253 does this.

If legislators want to pursue a more ambitious proposal, they could also leverage the state’s tax credit liabilities against the tax that is left over after HB 253’s cuts. Combining HB 253 with the provisions of SB 120, which passed the Senate in March, the state could set out a course to enact further reductions in business income tax rates. Something to consider.

As I have reiterated many times during this series, Missouri’s taxpayers have ample reason to be skeptical of whether “hip” developments, often fueled by tax incentives, are producing valuable dividends to the state and region. But let’s focus on just Saint Louis’ downtown area for a moment longer. As I observed in Part Three, Saint Louis’ downtown population rose from about 4,000 people in 2000 to about 7,000 people in 2010. But what happened to the net number of jobs downtown during that time?

In a study published last week, the Brookings Institution found that Saint Louis’ “central core” — which Brookings defines as the 3-mile radius around a city’s central business district — lost almost 28,000 jobs between 2000 and 2010. That is the equivalent of almost one-in-six jobs disappearing from the downtown area in one decade. Areas just a bit further outside the central core fared similarly. Between 3 and 10 miles from the city center, the Saint Louis region lost almost 39,000 jobs.

The only area that saw growth in Saint Louis was the 10- to 35-mile ring, which gained a paltry 572 jobs. The math is not in hip developments’ favor, despite what some consultants might say.

But the math also makes another conclusion inevitable: that Saint Louis’ central core — the area where the “hip” development disproportionately predominates — lost employment market share to its outer-ring rival between 2000 and 2010. Today, only 13 percent of Saint Louis’ regional jobs are in the central core, about half the national average; meanwhile, more than 60 percent of the region’s jobs are between 10 and 35 miles away, compared to the national average of 43 percent. Saint Louis is now the fifth-most decentralized city in the country in terms of regional job distribution — behind only Detroit, Chicago, Atlanta, and Philadelphia.

While the resident population in downtown Saint Louis has grown, the number of jobs in the 3-mile ring around Saint Louis’ central business district has actually fallen. And again, all the while, the overall population of Saint Louis city has declined. This does not sound like an urban development plan that is working. City centers were built to facilitate commerce. In Saint Louis, that commerce appears to be bleeding out into some of the furthermost stretches of its region.

But Saint Louis is not the only major Missouri city experiencing a job drain. Stay tuned.

Today, the St. Louis Post-Dispatch published a commentary by Stephen Acree, president and CEO of the Regional Housing and Community Development Alliance (RHCDA). The editorial extolled the virtues of the historic preservation tax credit under the headline “St. Louis: Rebuilt with the historic tax credit.” Setting aside the demonstrable absurdity of that proposition, I think it is worthwhile to highlight an important fact-nugget that did not find its way into Acree’s piece — namely, that the RHCDA acts as a consultant for the historic preservation tax credit, as well as other tax credits. From the organization’s website (emphasis mine):

We provide Residential Development Consulting services to both non-profit and for-profit organizations. We provide expertise in structuring developments utilizing a variety of public and private resources, including federal CDBG and HOME funds; tax-exempt bond financing; and low income housing tax credit, historic tax credit and new markets tax credit transactions.

That probably should have come up at least in the author’s bio. Unfortunately, it did not.

While we are discussing the RHCDA’s portfolio of tax credit expertise, it should be noted that the Associated Press made this revelation about the New Markets tax credit program just this weekend (emphasis mine):

Missouri has authorized more than $120 million of tax credits through a program intended to entice wealthy investors to pour money into businesses in low-income areas, but the initiative has yet to produce even half the jobs that were anticipated, according to state figures provided to The Associated Press….

At the request of the AP, the state Department of Economic Development compiled a spreadsheet documenting every New Markets tax credit that has been authorized. The 9,679 “anticipated jobs” associated with the tax credits far exceeds the 823 “actual new jobs” and 3,141 “jobs retained” under the program, though those numbers could continue to rise.

This “tax credit job-shortfall” storyline is not unique. Indeed, the AP report on the New Markets program follows earlier, similar revelations about the Quality Jobs tax credit program, which I testified about earlier this year. In the case of the Quality Jobs program, 45,000 jobs were promised; according to state records, only about 7,000 jobs were created in reality. As I said then (emphasis mine):

In practice, there is no particular consequence to the state and its public officials claiming that new jobs will be coming, even if the jobs never materialize. That may explain the difference between the number of jobs state officials promise when a tax credit project is announced and the number of jobs actually created when the project winds down. To some officials, big tax credit promises look better than small tax credit promises, even if those promises do not pan out.

The same can be said of the consultants who go to bat for these credits. Acree even has the audacity to claim that the historic preservation tax credit is “Missouri’s most useful economy-boosting program.” A program that returns 23 cents on the dollar is our “most useful economy-boosting program”?! Does this suggestion horrify anyone else?

I have a better idea: Cut taxes with the money instead and let taxpayers invest their money themselves in their own businesses. Better yet, eliminate a tax or two instead of underwriting the projects of the politically well-connected. Missouri’s most useful economy-boosting program is the hard work and innovation of its taxpayers, not some bloated, special-interest government handout.

As story after tax credit story bears out, tax credit proponents/consultants have a terrible track record of substantive, sustainable, and enduring successes. The historic preservation tax credit is a central player in this ongoing, budget-busting, decade-long state development debacle. Suffice to say, I am looking forward to the findings of the state audit of the program, due to come out later this year.

This is the statewide version of the tax credit map our readers saw in Part Three of the “Hip” series. You can peruse the underlying data here. Feel free to double-click and zoom on areas in which you are interested. To drag the map with your mouse, hold the shift key first. Hover over dots to see more information.

On Tuesday, people in both Saint Louis City and County will vote on an increased parks sales tax to support changes to the Arch grounds and increased funding for local parks. In my opinion, the various arguments for and against it are all washed away by one fatal flaw in the proposal. The state legislature, when it authorized the tax to go before the voters, did not exempt TIF funds from the sales tax. That means in most — if not all — of Saint Louis City and County, the almost 200 TIF districts will be able to keep half of the new sales tax revenues — supposedly going to parks and the Arch — and use it for themselves.

The infuriating thing is that when the legislature passed the bill allowing this tax last year, they also passed the enabling legislation for a new parks tax in Kansas City as part of the very same bill. And for that KC tax, they exempted the new sales tax from TIF. So this was not some oversight by legislative supporters of the tax in Saint Louis. If they knew to exempt the KC tax from TIF, they could (and should) have done so for the Arch tax. The fact that they did not can only be seen as an effort to help developers and other consistent TIF users by adding this new tax to the pot of money available for subsidies. That alone makes this new tax a bad idea for Saint Louis.

Last week, Kevin McDermott of the St. Louis Post-Dispatch’s Political Fix blog wrote briefly about the “hip development” debate we have discussed here and asked this about Saint Louis’ recent downtown redevelopment projects: “Economic engine or not, does anyone really think that area was better, in any sense of the word, 15 years ago than it is now?” Yes, the area around Washington Avenue obviously looks nicer. There are also more people living there. But this is a classic example of seen benefits with unseen costs.

Below is a map of tax credits that the Missouri Department of Economic Development issued in Saint Louis City spanning the years 1999-2011. The legend is denominated in dollars of credit issued. The larger the circle, the larger the credit awarded.

You can find the statewide distribution spreadsheet here. You can also hover over the dots to view some details on individual projects, and you can zoom the map out to see tax credit projects in other parts of the state. (To drag the map with your mouse, hold the shift key first.)

Dump hundreds of millions of dollars anyplace and something sure as heck better happen there. Washington Ave. is a good example of this. State tax credits have blanketed the central corridor of Saint Louis City over the last decade, and indeed, the population has risen in the area. But by how much? In a blog post titled “The Heavy Hand of Demographic Change” for the blog Rooflines, Alan Mallach of the Brookings Institute compared Saint Louis’ downtown growth to that of other cities.

Saint Louis’ downtown population rose from just shy of 4,000 people in 2000 to about 7,000 people in 2010, a net increase of more than 3,000 people and nothing to sneeze at. But outside the downtown area? Saint Louis City’s overall population fell from 347,000 people in 2000 to 319,000 in 2010, a net loss of about 28,000 people. The state dropped hundreds of millions of dollars into the heart of Saint Louis’ downtown through tax credits and moved the population needle some; meanwhile, thousands of residents outside the city’s central corridor were heading for the exits. Some “creatives” have come, but development “coattails” clearly did not.

That is a development paradigm that is simply not working. Empower individual innovation, not government “experts.” Trust city residents, not hip developers. It may be less “cool” to redevelop our cities this way, but it will probably be far more effective.

Last year, I wrote about a Missouri circuit court’s finding that the Missouri Science and Innovation Reinvestment Act (MOSIRA) — a package of incentives for tech companies that the Missouri Legislature passed in 2011 — was unconstitutional as passed. On Tuesday, the Missouri Supreme Court agreed.

MOSIRA had strong support of St. Louis-area biotech groups, and it was the lone accomplishment of the fall 2011 legislative session that was devoted to economic development. But lawmakers voted to approve MOSIRA that fall contingent on passage of a broader tax credit reform measure, which never happened. That led to a lawsuit by Missouri Roundtable for Life – which is concerned that MOSIRA could lead state funds to be used for stem cell or cloning research – and the program’s being overturned before ever launching.

In their opinion Tuesday, the justices wrote that the 2011 bill’s contingency clause violated the “single subject provision” of state law, and that the contingency clause could not be severed from the larger legislation, as it likely would not have passed without that clause in place.

Trivia: Do you know the bill upon which MOSIRA’s implementation was contingent? The answer: A package of tax credit legislation that included . . . the highly controversial Aerotropolis project. As went Aerotropolis, so went the 2011 session . . . and now, MOSIRA. Which is to say, nowhere.

Of course, there is an easy solution to avoid court fights such as this. Why not eliminate business taxation for all of Missouri’s companies? Stop picking winners and losers and set up a system of tax collection that incentivizes all businesses to stay in or come to Missouri. If the state wants to diversify its “investments” and support existing and emerging industries, why not tell all businesses, here and elsewhere, “We want you to invest in Missouri”? If the state did that, Missouri would, for once, force other states to respond to our pro-growth taxing proposals, rather than the other way around.