Kansas City has long been a prime example of state tax incentives gone awry — the question now is if Kansas and Missouri can change the dynamic with a new agreement.
“Corporate welfare. It's a race to the bottom. It's wasteful spending. All of those really are true," says Angela Andreson Smart, vice president of the Hall Family Foundation in Kansas City.
Just after the 2008 recession, Kansas and Missouri began offering hefty new tax incentives. That meant that many business could keep almost all the state income tax they were collecting from their employees for years after moving across the state line. Then, after five or 10 years they could move back, and start all over again.
“Typically the moves are such short distances that employees don't move their homes or their schools are. We might go to a different Quick Trip, but that's about it,” Smart says.
A couple of years ago, the insurance company Swiss Re moved 400 jobs from Overland Park, Kansas, to downtown Kansas City, Missouri. The financial services company Waddell and Reed is expected to make the same move soon. Conversely, AMC Entertainment left Kansas City for Leawood, Kansas, a few years back.
Smart figures that since 2008 Kansas and Missouri have waived $335 million in taxes just getting businesses to cross the road.
That’s why Missouri lawmakers earlier this year voted to check the use of state income tax incentives in the Kansas City area and why Kansas Gov. Laura Kelly is on track to do the same.
Now, instead of being a national poster child for wasteful development incentives, greater Kansas City may prove a model for addressing the problem, says Greg LeRoy, executive director of Good Jobs First, a subsidy watchdog group based in Washington, D.C.
“The potential that Kansas and Missouri have now to strike this agreement is earth-shattering," says LeRoy. “If it were to happen, it would be would be the first time there was a legally binding concrete solution by two states.”
But it wouldn’t mean that competition development between Kansas and Missouri would stop. Far from it, according to Blake Schreck, president and economic development director of the Lenexa (Kansas) Chamber of Commerce.
State and local governments offer many types of incentives. Missouri, for instance, can offer property tax abatements for up to 25 years. In Kansas, they’re capped at 10 years. Schreck says drafting an equitable agreement limiting just one type incentive is difficult enough, compensating for all the others is daunting.
“It's a very complex issue,” says Schreck. “When you're talking about states and cities and political subdivisions and the way tax dollars flow, it's just a little tougher thing to pull off than people think.”
Just drafting the executive order that Kansas Gov. Laura Kelly needs to sign to place the limited moratorium on state income tax incentives is taking weeks, at least in part because of the complex web of state, county and city property tax, sales tax, and income tax incentives. “Stay tuned” is the word from the governor’s office.
And, Schreck says, any agreement will be largely symbolic because either state can walk away.
These interstate compacts have been tried elsewhere; they’ve just never held up long.
Frank Morris is a national NPR correspondent and senior editor at KCUR 89.3. You can reach him on Twitter @FrankNewsman
