December 13, 2016 Print

Missouri has had weak economic growth throughout the 21st century, lagging behind most other states both before and after the 2008 recession — 48th out of 50 states in GDP growth between 1997 and 2015. The Show-Me Institute, an Atlas Network partner based in St. Louis, recently published “2017 Blueprint: Moving Missouri Forward,” a collection of 15 policy proposals designed to reform education, taxation, health care, transportation, labor relations, and entitlement spending. Together, these reforms provide a detailed agenda for bringing renewed prosperity to the state.

Missouri has long had a corporate welfare problem, with loose standards for granting tax-increment financing (TIF) subsidies to nearly any private developers who apply. Similarly, Missouri’s expansive tax credit programs “subsidize the private projects of special interests,” ostensibly to promote economic growth.

“Excessive use of economic development subsidies has hollowed out municipal tax bases and diverted tax revenue to specific developers,” writes Patrick Tuohey, western Missouri field manager for SMI. “In the past 15 years, Saint Louis City alone has allocated $709 million away from municipal services through tax increment financing (TIF) and tax abatement. Studies from across the country indicate that these subsidies fail to generate promised jobs and growth.”

Instead of choosing politically connected businesses and industries to receive sweetheart deals, SMI recommends that policymakers reduce taxes categorically, including a proposal to eliminate the state income tax, thereby encouraging a wide range of economic activity and broad investment from Missouri residents and businesses of all types.

“Reducing the availability of development tax credits provides a practical pathway to pay for general tax cuts,” write Patrick Ishmael, SMI’s director of government accountability, and Michael Austin, an SMI policy analyst. “For example, drawing down tax credits could provide the space to eliminate the state’s corporate income tax entirely; alternatively, cutting these credits could be used to reduce, by a smaller increment, income taxes on all Missourians. Whatever the strategy, putting more money in the pockets of Missouri residents and businesses is a better development strategy than the state trying to pick winners and losers in the marketplace. Being able to cut taxes for everyone in an effectively budget-neutral manner makes this reform all the more attractive.”

Many students in Missouri are trapped in failing schools, especially in urban areas, with little hope of better educational prospects. Missouri is one of the few states that has no private school choice program, and its charter school system is functionally limited to Kansas City and St. Louis. SMI recommends expanding charter schools, establishing portable education savings accounts (ESAs) that can be used at private schools, and allowing public school students to take courses outside their traditional school offerings.

“Charter schools are growing,” write Michael Q. McShane, SMI’s director of education policy, and Emily Runge, an SMI research assistant. “Over 23,000 students enrolled in Missouri charter schools for the 2016–2017 school year—an 11% increase from the previous year. University Academy, one of the top-performing charter schools in the state, has a waiting list of 700 students. Obviously, the demand is there. Simply by getting government out of the way, we can offer students a way out of underperforming schools, and into the schools they want to attend.”

Additional SMI policy recommendations include eliminating certificate of need (CON) requirements for health care providers, reforming welfare expenditures through an earned income tax credit, reining in public pension shortfalls by switching to defined-contribution plans, implementing transportation user fees, and four separate proposals to reform public labor unions, collective bargaining, wage and labor agreements, and the right to work in Missouri.