Sadly Prop P Passed

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“Every penny taken from you in taxes is a penny someone else decides how to spend. It’s a penny you earned but forfeited to someone else’s arbitrary discretion,” said Bill Hennessy co-founder of the St Louis Tea Pary Coallition. Today is a sad day for the residents of St Louis County and St Louis City. Prop P passed, which only means more money stolen from hard working citizens to be abused by balloted governing bodies. What’s frustrating is that if everyone got out and voted the real majority probably would have shut down Proposition P. In this election 80% of registered St Louis County voters didn’t even vote! That means 80% of voters in the county don’t have a right to complain when they have to sit idly by and watch another tax hike go into place. And chances are they will. When it comes to tax hikes in Missouri we usually vote pretty conservative, for example the victory we had In shutting down the exesive tabacoo tax in 2012. The only reason we shut down that tax hike and not this one is because the people didn’t vote and now we all have to suffer due to their laziness. My frustration with Proposition P, the deceptively named bill blinds people of its real impact. Why does the title even include the word arch when only 30% of the bill goes to the Arch? Why do we have to pay for other municipality’s parks when they did not even include Prop P on their ballots. Some towns didn’t even have the tax hike on their ballot but will still reap the benefits! For instance St Charles immediately opted out of Propostion P but will now reap the benefits from our tax dollars while they see no increase in there spending tax. Fair? I think not. For the next 20 years every time you purchase something in St Louis County or the City make sure account for an additional 2 cents on every 10 dollars you spend. See how that can quickly adds up especially when live and shop in St Louis for all your needs and wants. We can not allow the government and small few who vote in these local elections continue to destroy our spending power! When it comes to tax hikes Missourians usually agree. Enough is enough. We need your vote. You need your vote. In all elections.

‘Saint Louis Has High Taxes!’ Say International Accountants

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KPMG, one of the world’s Big Eight, Six, Five, Four accounting firms, released a study last week that ranked Saint Louis as having the second highest tax burden of major American cities. I admit that I was surprised Saint Louis ranked that poorly. (Perhaps our “progressive” citizens are proud of this, and now have a goal to shoot for being No. 1.)

There are two frustrating things about the study. First, as the St. Louis Post-Dispatch’s David Nicklaus noted, it does not make clear whether it is referring to just the city or to the entire region. Obviously, that has repercussions. If they applied the city’s 1.5 percent earnings and payroll tax to the entire region (as I think they did), that would be an error. Second, it is frustrating that Kansas City was not included in the study.

According to Nicklaus’ write-up, the main reason we ranked so poorly was our “relatively high property tax costs.” Some people might question that, as Missouri is not really known for high property taxes, even for businesses. In fact, this study by the Tax Foundation ranked Missouri as seventh best from the business property tax perspective.

How do these discrepancies come about?

First, it appears they are compiling their rankings with different methodologies. The Tax Foundation (which gives a better explanation of its methods) gives a lot of weight to certain property taxes (intangibles, inventory, franchise) that Missouri no longer has. So we rank very highly because we do not have those. KPMG appears to be going simply on total property tax bills and rates.

But I think the main reason Saint Louis ranks poorly while Missouri is ranked highly is that the main corporate property tax is the commercial surcharge, and that tax varies wildly by county within Missouri.

The commercial surcharge is a property tax rate applied on top of general charges for just commercial property, as its name implies. It ranges from 1 cent per $100 of assessed valuation in Reynolds County to $1.70 per $100 in Saint Louis County (followed right behind by $1.64 in Saint Louis City). That is a difference of $5,408 on a $1 million commercial property (not a high valuation for a commercial property). For comparison, 16 of Missouri’s 115 counties have a rate of more than $1, and 68 have a rate below 50 cents per $100 of assessed valuation. That is how Missouri can rank well, but Saint Louis poorly, on business property taxes.

Missouri needs to change our commercial surcharge system to allow the rates to decline as assessments increase, like all other property taxes. For that and other needed changes to the system, please check out this testimony.

Good News For Hadley Township And Property Rights

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Pace Properties has pulled out of the Hadley Township redevelopment plan because it could not reach agreement with all of the homeowners. That is not what I am happy about. I would be very happy to see a redevelopment in the area if it is a result of voluntary property sales and done without tax subsidies.

What I AM happy about, to say the least, is that Pace will not be exercising eminent domain to take the property of people who did not want to sell. They could have done so. They had the legal authority to use eminent domain. They chose not to. Pace Properties officials deserve praise for their restraint.

I am holding off on praising Richmond Heights officials until we see how the Menard’s project next door (also within Hadley Township) goes through.

Private property rights are more important than another commercial development. Forcing people out of their homes would have been immoral. I am very happy for the Bailey, Parker, Tompkins, and Abrams families, who will be able to stay in their homes. Please check out the video of the Show-Me Institute’s interviews with these families here.

However, let’s not deny the great damage done to the neighborhood through the entire process because of previous potential developers and the city. Government involvement caused the recent history of deteriorating property, vacant homes, and more. Residents of Hadley Township are now in a difficult situation that the government caused because it involved itself in real estate development. It was completely avoidable if the city had not become involved.

Columbia’s Historic Preservation Study Should Be Understood As PR, Not Policy

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Last week, a study presented to the Columbia City Council explored the impact of Missouri’s historic preservation tax credit on the city. The report, funded by the Historic Preservation Commission, found that “historic preservation” had accounted for almost 5,000 Columbia jobs and more than $1 billion of “economic activity” over the last decade, with almost $100 million attributable to the historic preservation tax credit. Like any report of this kind, it paid the requisite homage to the dark art of “economic multipliers,” which we have criticized in the past.

In stark contrast to the study’s claims, official state figures actually show that historic preservation credits return 23 cents for each dollar the state spends. These tax dollars are often used on dubious projects of little or no public use, such as private mansions and at least one country club.

The main point I would like to highlight, however, is that the Columbia study was written explicitly to pump an agenda, a point that may not be immediately evident if casual newspaper readers just saw the headlines. The study’s authors were (refreshingly) transparent about this in the text of the study itself. Goal one on the study’s first page explicitly says that the report “will promote the economic development benefits of historic preservation to an expanded audience.” Goal two makes the study’s goals even clearer (emphasis mine): “This report will encourage tax credit eligible projects to homeowners and developers by promoting visible local examples.” And the “Vision Impact” outlined at the bottom of that page is clear that the objective sought is to preserve “historic areas” through “education, enforcement, and incentives” (emphasis mine) — namely, the HPTC. This is more about marketing than good policy, and should be understood as such.

We at the Show-Me Institute have seen this sort of report before, of course. Back when Aerotropolis was still a thing, I wrote about the National Center for Beef Excellence’s “report” on whether it was “feasible” to “ship meat to China.” One would think that a state-funded group with “beef” in the name would make it clear that American beef was actually, er, banned in China. Alas, the NCBE attempted to pass off the study as objective when its only goal was to pump Aerotropolis.

That is, in the end, what is going on in Columbia, albeit with laudable transparency. There should be a vigorous debate about the merits of tax credits generally and particularly the historic preservation tax credit, but this report is only one especially biased side of that conversation. There should be no misconceptions about that fact.

We Need A Moratorium On Municipal Development Moratoriums

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The city of Frontenac, in Saint Louis County, has enacted a moratorium on new developments within a commercial area of the city. Officials in Ellisville, also in Saint Louis County, are considering enacting a similar moratorium for a prime area of land near the controversial (to say the least) proposed Tax Increment Financing (TIF). Is this an appropriate use of municipal powers? No, it is not.

In Frontenac’s case, it is my understanding that one business is now being prevented from going forward with a move and expansion even though the area has always been zoned commercial. I do not believe it is proper for a government to tell a commercial enterprise that it cannot develop its own property — which is entirely within a commercial area.

In Ellisville, it seems strange that they are trying to block development of a parcel when, according to their pro-TIF arguments, economic development is so important to the city. I have no idea why they are proposing this. My guess is that someone has had the temerity to try to develop the land in a manner that does not fit with the grand TIF plan. Oh, the horror!

The enemy in these cases, as usual, is municipal planning. The rights of property owners to develop their property (especially when it complies with existing zoning regulation) should far outweigh the desire for a municipal plan put together by planners and lawyers who have no idea how to grow an economy. The history of government planning is not a good one.

Kansas City Makes Streetcar Tax Proposal Another Mail-In Affair

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While Clay Chastain’s light rail proposal likely will not be on the ballot in November, voters in Kansas City will have a rail plan to consider before winter officially arrives. Early last week, the city’s newly created streetcar development district board decided to hold a vote by mail in the next few months to determine whether a tax will be levied in the district to fund the trolley. That the vote is being conducted by mail-in ballot almost certainly assures the passage of the tax; the vote that created the district was conducted by mail as well, and passed with almost 70 percent of the vote with an effective turnout of less than 8 percent. (To be precise, 460 voters out of 5,900.)

That the city will re-use the means of voting most favorable to moving the proposal ahead is no surprise. The city has been foursquare behind the trolley proposal even after losing its bid for federal funding for the project. (Not that federal funding would have been a good reason to go forward with it.) And despite the funding gap for the starter line, there have already been discussions about adding southern and eastern extensions to this hitherto non-existent trolley. To be sure, business owners in the newly created trolley district will not be the last ox gored in the city’s quest for streetcars. This looks like a vanity project that will raise taxes in a city that is well above average in municipal taxation already. And the project will probably grow even larger from here.

The trolley voting period will likely conclude Dec. 11. Whether the result will be a Christmas surprise or a lump of coal depends on your perspective.

Kansas City Adds Single Measure To November Ballot

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It has been a busy week for public officials in Kansas City. Yesterday, the Kansas City Council added one new item to this November’s ballot —a proposal that would raise the mandatory retirement age for municipal judges — but nixed three proposals that were of a more ambitious nature. The proposals that were axed?

  • A proposed $100 annual tax on billboards to help the city “deal with billboard blight.” Similar to an earlier idea that would have enacted a 2 percent tax on the revenues companies collected for outdoor signs, the $100 iteration was ultimately scuttled over concerns that the revenue generated would not actually fix the problem of billboards that, among other things, were blank “too long,” which could be as little as three months. Pretty sure “blank billboards” do not exactly rise to the level of pressing municipal issues in Kansas City. Apparently, given the functional and funding problems presented to the council in the proposal, city officials seemed to agree.
  • A proposal from a group called the “Peace Planters” which would have blocked any financial involvement by the city with manufacturers that produce nuclear weapons components. Curtailing municipal handouts is certainly good policy — after all, Tax Increment Financing (TIF) and other tax incentives are long-overdue for reform — but to prevent only one type of business on ideological grounds from going to the trough seems like just another way of picking winners and losers. Better to reform how all incentives are meted out than selectively change one minor aspect of a fundamentally bad policy.
  • Yet another proposal from eternal light rail advocate Clay Chastain to build a light rail system in Kansas City. Although Chastain’s promise to “go away” after years of activism if the council put his proposal on the ballot certainly had its allure, the council declined to take him up on the offer.

Shenanigans In Ellisville!!!

At tonight’s Ellisville City Council meeting, a charter amendment is being introduced to amend the rules for recalling elected officials in Ellisville. Then, because of the looming deadline to get things on the November ballot, they have scheduled a special meeting for the next night (Thursday) to pass the charter amendment because they likely will not have unanimous support to pass it in one night.

“They,” of course, are the “Walmart 5,” the members of the city council who supported the Tax Increment Financing (TIF) for Walmart despite substantial community opposition. There is a recall effort underway in Ellisville against some of the “Walmart 5″ (not all are eligible for recall for technical reasons). The TIF was a terrible idea, but this recall charter change idea is so awful that it makes the TIF idea look like the invention of the wheel.

The attempt to alter the rules of the charter after citizens have instituted a recall effort is one of the most atrocious abuses of power I have seen in Missouri in the 20 years I have been following politics and government. Thankfully, even the Walmart 5 cannot find a way around the rule that voters must approve charter changes. Hopefully, this naked attempt to silence widespread opposition to the TIF will fail, either at the polls or through a successful blocking of it in the next few nights.

Tom Pendergast is not dead. He just moved to West County.

Stadium Subsidy Surprise

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There is a controversy brewing in Kansas City over the Royals, and for once it does not have anything to do with yet another disappointing season on the field. According to one report, the Royals collected close to $13 million in taxpayer money and spent close to $5 million of that money on employee salaries and payroll taxes. In effect, the Royals are accused of using taxpayer money to pay their own taxes. The taxpayer money comes from a fund (named the RMMO account, which stands for repairs, maintenance, management, and operations) that originally was sold to taxpayers as a fund focused on repairs and maintenance at Kauffman Stadium. I am not going to pass judgment on whether the Royals are guilty of doing anything improper nor am I going to accuse anybody of malfeasance. I will let the facts come out and be what they are.

That said, why do government officials put taxpayers in this position of their money possibly being misspent? Well, cities usually put up taxpayer monies in order to prevent their local sports teams from leaving town. The justifications for doing so can range from a city striving to create an economic boom or just for a sense of civic pride. Kansas City got an All-Star Game after it helped fund renovations to Kauffman Stadium. Yet combined with the fact that public financing of sports stadiums cannot be justified economically, taxpayers have to go through headaches like the one mentioned here.

Sports stadiums should not be subsidized with public money. If a sports franchise wants a new stadium, it should pay for the stadium with its own money. Not only would it prevent public money from being spent on activities that would not benefit the local economy, it would avoid creating such issues in the first place.

Kansas City Should Expand, Not Remove, Land Taxes

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The Missouri Record just carried an op-ed on land taxes by Prof. Joe Haslag and me regarding the choice next Tuesday in Kansas City. It is not our place to tell people how to vote — that is your decision, not ours. But it is important for people to know that this is not a revenue-neutral switch. The proposed elimination of the land tax and increase in sales tax will result in more total tax collections — at least in the short-term. Also, economists almost unanimously endorse land taxes as a way to raise public funds while limiting the economic harms that taxation creates. Anyway, we say it better in the op-ed. From the piece:

Almost every economist sees the advantage of land taxes. The general welfare calls for taxes that do the least harm in the form of affecting the quantities of goods or services that people ultimately care about. Nearly all economists agree that a land tax is one of those policies in which taxing land affects the value of the parcel, but does not affect the quantity of land. Henry George, Milton Friedman, Paul Samuelson, and Joseph Stiglitz all recognize the desirable properties associated with land taxation.

Those four famous economists come from very different angles, if labeled politically (which they would probably object to, but I digress). The Show-Me Institute has conducted analysis on the benefits of land taxation. (Please see pages 5-11 of Haslag’s study on how Kansas City can replace the E-tax.) It is poor public policy to get rid of an effective tax in favor of expanding other taxes. Why doesn’t Kansas City heed the lessons of the past and reduce more harmful taxes, like the earnings tax, in favor of increased land taxes? There is a wide body of economic research supporting that position.