Last fall, there was much rejoicing about the effort by Missouri Governor Mike Parson and Kansas Governor Laura Kelly to end the economic development border war between the two states. I was skeptical and said so at the time. Specifically, I worried important terms of the truce had not been defined, and as a result there was a lot of wiggle room. What I hadn’t anticipated was the number of “grandfathered” deals.
First was the $100 million Waddell & Reed deal, supposedly under negotiation prior to the truce, in which the company captured corporate tax incentives for itself by exposing its employees to higher income taxes. Now we learn of another deal for BlueScope, which is seeking perhaps as much as $20 million worth of incentives from Kansas to hop across the state line. The company is playing the states against each other. According to The Kansas City Star, Kansas City and Missouri are taking the bait:
All told, the company could receive about $14 million from Missouri and Kansas City to remain in the West Bottoms and add 15 jobs per year. That also includes $5.6 million from the state and a sales tax exemption on construction materials for improvements to the building.
Supporters of such business subsidies argue that this round of incentives won’t affect the various taxing jurisdictions. But they are wrong. As a representative for the Kansas City Public School District noted, the existing incentives are set to expire in 2022, meaning BlueScope would finally be paying its full tax burden. This new deal extends a 75 percent tax exemption for over a decade, thus robbing schools of funds they would otherwise receive. This gives the lie to the claim by then–Mayor Sly James that incentives are good because “when the incentives roll off then the tax base rises.” What if they never fully roll off?
Such incentives don’t live up to their claims of creating jobs or spurring investment. Kansas City has no business extending tax breaks when the city is already looking to cut five percent of its budget due to the economic hit of COVID-19. If BlueScope wants to leave, the city ought to let them go.