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Archive for Monday, November 18, 2013

Editorial: KC competition

Money spent to lure Kansas City companies across the state line may not be a good investment for the metropolitan area.

November 18, 2013

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Kansas-Missouri athletic rivalries are at least temporarily on hold, but enforcing a moratorium on business competition may be a taller order.

Missouri Gov. Jay Nixon issued a strong message last week in a speech to the Greater Kansas City Chamber of Commerce asking Kansas Gov. Sam Brownback to join him in pushing for legislation that would formalize a moratorium on using tax incentives to lure companies across the state line inside the Kansas City metropolitan area.

Nixon and Kansas City civic leaders, who also are supporting the moratorium, have a point. Metropolitan communities give up tax revenue by offering tax incentives and bonds to attract new businesses, but when businesses take advantage of those incentives to simply move across the state line, the economic benefit to the area is largely a wash.

A major factor in this debate, according to Kansas City news reports, are incentive programs that allow companies that move to retain their employees’ state income tax for set periods. The Kansas PEAK program allows firms to keep 95 percent of withholding taxes for up to seven years. The Missouri Quality Jobs program allows firms to keep up to 100 percent of those taxes for a set period.

According to statistics cited a year ago by Bill Hall, president of the Hall Family Foundation in Kansas City, Kansas and Missouri had forgiven $191 million in income taxes since 2009. During that time, Hall estimated, Kansas attracted 3,030 jobs across the state line and Missouri attracted 2,514. So for their $191 million investment, Kansas has a net gain and Missouri had a net loss of 516 jobs.

It doesn’t seem like a good use of taxpayer money. Ideally, officials on both sides of the state line should be directing most of their efforts and incentives toward attracting new businesses from outside the metropolitan area, thereby enhancing the whole area’s economy. In the highly competitive world of economic development, it’s difficult to know where to draw the line on this cross-state battle, but a moratorium narrowly targeted on Kansas City to curb the use of discretionary tax incentives to simply shuffle businesses across the state line could make sense.

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