Dear Speaker Tilley:

It appears that Missouri legislators are about to place a huge and ill-advised bet on the so-called “Midwest China Hub,” or “Aerotropolis.” In its present form, the pending legislation would give private developers $300 million in tax credits for the construction of warehouses around the Lambert–St. Louis International Airport, and $60 million in tax credits for international flights. The hope is to gain the support of the Chinese government, international airlines, and cargo carriers to develop an international cargo hub at Saint Louis.

The Show-Me Institute has published numerous articles pointing out the folly of handing out tax credits and other subsidies for favored industries. Our policy analysts have also appeared on radio programs around the state alerting Missourians to some of the pertinent facts regarding the China Hub:

• Private developers would qualify for tax credits for building warehouses that process only a small amount of air cargo. According to the latest version of the bill, a warehouse would be eligible for state subsidy if as little as 10 percent of its operations consisted of sending cargo to international destinations.
• The state government is already short on funds, and with spending cuts looming, Missouri cannot afford to give away hundreds of millions of dollars. Tax credits are not free money. Every dollar that the state gives away in tax credits is a dollar that won’t be received in the state coffers and that the state won’t be able to spend on elementary and higher education, health care, public safety, and other state programs.
• Missouri has to balance its budget every year, so every dollar that is given away in tax credits is a dollar that our state government must replace by further increasing taxes on other Missourians or making additional cuts in current programs.
• As the bill stands now, legislators are poised to take $57 million in tax credits from the low-income elderly all across our state who rent their residences, to pay instead for warehouse construction in Saint Louis.
• The government should stop trying to pick winners and losers in the economy. The China Hub would be the latest in a long line of unfortunate state-supported enterprises that began with the aim of “stimulating” or “jump-starting” growth by offering guaranteed returns to private developers while shifting real risk and hundreds of millions of dollars of expense, to the backs of our taxpayers.

For all of these reasons, the legislation is deeply flawed and goes against the best interests of the overwhelming majority of Missourians. It is also difficult to understand why there is not even a minimal amount of accountability in the process of applying for and receiving the tax credits. The program is established as an “entitlement,” and similar tax credit programs over the last few years, such as the historic tax credit program, have been severely criticized for being established in such a fashion.

The best way for Missouri to grow the economy is to create a business climate that does not award special handouts to favored industries, and that relies instead on reducing taxes and regulatory constraints on businesses and individuals alike. Entrepreneurs in Missouri will seize upon the opportunities around them as soon as the government gets out of their way.

I urge you to withdraw the “China Hub” or “Aerotropolis” bill from the current legislative agenda.

Most respectfully,

Brenda Talent
Executive Director, Show-Me Institute