Voice For Liberty

Tag: Economic freedom

Economic freedom means property rights are protected under an impartial rule of law, people are free to trade with others, both within and outside the country, there is a sound national currency, so that peoples’ money keeps its value, and government stays small, relative to the size of the economy.

  • Developer welfare expanded in Kansas

    Money Grabber

    This week the Kansas House of Representatives considered a bill that would expand the application of tax increment financing (TIF) and community improvement district taxes. The bill, HB 2086, is not a major expansion, but is still harmful.

    On Monday the bill failed to pass, with 61 members voting in favor, and 60 against. (63 votes are needed to pass a bill.)

    On the following day, Rep. Scott Schwab made a motion to reconsider. If agreed to, Schwab’s motion would force another vote on the passage of the bill. The motion passed, and when the vote on the bill was tallied, it had passed with 81 votes.

    Democrats who changed their votes from No to Yes are Barbara Ballard, Brandon Whipple, Ed Trimmer, Jerry Henry, Julie Menghini, Nancy Lusk, Patricia Sloop, Paul Davis, Stan Frownfelter, Tom Burroughs and Valdenia Winn.

    Republicans who changed their votes from No to Yes are Dennis Hedke, James Todd, Kelly Meigs, Kevin Jones, Marty Read, Ramon Gonzalez, Scott Schwab, and Vern Swanson.

    One Republican, Marc Rhoades, changed his vote from Yes to No.

    The original coalition of votes that defeated the bill on Monday was a mix of free-market Republicans and Democrats. The free-market members vote against this bill because it is contrary to the principals of capitalism. Many Democrats vote against bills like this because they see it as welfare for greedy developers or other business interests. An example of the latter is Rep. Ed Trimmer, who on the Kansas Economic Freedom Index for last year scored very near the bottom in terms of voting for economic freedom.

    But somehow, he and the other Democrats listed above were persuaded to change their votes.

    (Click here to open spreadsheet in new window.)

  • As lawmakers, Kansas judges should be selected democratically

    Kansas Judicial Center in snowWhile many believe that judges should not “legislate from the bench,” that is, make law themselves, the reality is that lawmaking is a judicial function. In a democracy, lawmakers should be elected under the principle of “one person, one vote.” But Kansas, which uses the Missouri Plan for judicial selection to its two highest courts, violates this principle.

    A recent paper by Kansas University School of Law Professor Stephen J. Ware explains the problem with the process used in Kansas. The paper is titled Originalism, Balanced Legal Realism and Judicial Selection: A Case Study and may be downloaded at no charge. The Kansas courts that use the judicial selection described in the paper are the Kansas Court of Appeals and the Kansas Supreme Court.

    At issue is whether judges are simply arbitrators of the law, or do they actually participate in the lawmaking process. Ware explains: “This realist view that statutory interpretation often involves ‘substantial judicial discretion’ and therefore constitutes ‘judicial lawmaking, not lawfinding,’ had by the 1950s, ‘become deeply rooted.’”

    A “‘balanced realism,’ to use Brian Tamanaha’s appealing label, recognizes both that judges’ policy preferences have little or no influence on many judicial decisions and that judges’ policy preferences have a significant influence on other judicial decisions. Empirical studies tend to support this balanced view.” In other words, there is some role for ideology in making judicial decisions. Politics, therefore, is involved. Ware quotes Charles Gardner Geyh: “In a post-realist age, the ideological orientation of judicial aspirants matters.” And the higher the court, the more this matters.

    Since judges function as lawmakers, they ought to be selected by a democratic process. In the Kansas version of the Missouri Plan, a nominating commission dominated by lawyers selects three candidates to fill an opening on the Kansas Court of Appeals or Kansas Supreme Court. The governor then selects one of the three, and the process is over. A new judge is selected. This process gives members of the state’s bar tremendous power in selecting judges.

    Ware presents eleven examples of judges on the two highest Kansas courts engaging in lawmaking. In one, a workers’ compensation case, the employee would lose his appeal if the “clear” precedent was followed. Justice Carol A. Beier wrote the opinion. Ware explains:

    But this is not, in fact, what Justice Beier and her colleagues on the Kansas Supreme Court did. Rather they did what Kansas Judges Greene and Russell say never happens. Justice Beier and her colleagues engaged in lawmaking. They changed the legal rule from one contrary to their ideologies to one consistent with their ideologies.

    Justice Beier’s opinion doing this started by criticizing the old rule, while acknowledging that it was, in fact, the rule prior to her opinion by which the Supreme Court made new law. Here again is the above quote from Coleman, but now with the formerly omitted words restored and italicized: “The rule is clear, if a bit decrepit and unpopular: An injury from horseplay does not arise out of employment and is not compensable unless the employer was aware of the activity or it had become a habit at the workplace.”

    Who decided that this rule is “decrepit and unpopular” and so should be changed? Was it the Kansas Legislature? No, it was the Kansas Supreme Court. It was judges, not legislators, who decided that this legal rule was bad policy. It was judges, not legislators, who changed the law to bring it in line with what the lawmaking judges thought was good policy.

    Beier wrote in her opinion: “We are clearly convinced here that our old rule should be abandoned. Although appropriate for the time in which it arose, we are persuaded by the overwhelming weight of contrary authority in our sister states and current legal commentary.”

    The result: New Kansas law, made by people selected through an undemocratic process.

    In conclusion, Ware writes:

    Non-lawyers who believe in the principle that lawmakers should be selected democratically need to know that judicial selection is lawmaker selection to be troubled by the Missouri Plan’s violation of this principle. Non-lawyers who do not know that judges inevitably make law may believe that the role of a judge consists only of its professional/technical side and, therefore, believe that judges should be selected entirely on their professional competence and ethics and that assessments of these factors are best left to lawyers. In short, a lawyer who omits lawmaking from a published statement about the judicial role is furthering a misimpression that helps empower lawyers at the expense of non-lawyers, in violation of basic democratic equality, the principle of one-person, one-vote.

    Prospects for Kansas

    In Kansas, the process for selecting judges to the Kansas Court of Appeals is governed by statute, and can be changed by the legislature and governor. Last year the House of Representatives passed a bill to reform the process, but it was blocked by Senate Judiciary Chair Tim Owens. He said “I think this is the first time I did not hear a bill because I thought it was so bad. This is a terrible, terrible bill that’s hated by the courts; it’s an attempt to take over control of the courts.”

    Owens, who ranked as the least friendly senator to economic freedom in the 2012 edition of the Kansas Economic Freedom Index, lost his bid for re-election in the August primary election. Many of the other moderate Republicans who voted against reform also lost their primary election contest.

    Owens, it should be noted, is an attorney, and is therefore a member of the privileged class that has outsize power in selecting judges.

    Sometimes legislators are simply uninformed or misinformed on judicial selection. An example is Jean Schodorf, who lost a re-election bid in August. In an interview, she was quoted as saying “We thwarted changes to judicial selection that would have allowed the governor to have the final say in all judicial selections.”

    The bill that the senate voted on, and the one that Owens killed the year before, called for Court of Appeals judges to be appointed by the governor, with the consent of the senate. It’s actually the senate that has the final say.

    Newspaper editorial writers across Kansas are mostly opposed to judicial selection reform. An example is Rhonda Holman of the Wichita Eagle, who in 2010 wrote: “Some critics may have a beef with past court decisions, perhaps even a legitimate one — which is no surprise, given that judicial decisions pick winners and losers. But they also may be motivated by politics — which is a problem, given that the judiciary is supposed to be fair, impartial and independent. In the absence of a strong case for change, Kansas should stick with what works.”

    With the change in composition of the Kansas Senate, the climate is more favorable for reform for the way judges are selected for the Kansas Court of Appeals. The law governing how judges for the Kansas Supreme Court are selected is in the Kansas Constitution, and would require an amendment to alter the process. Such an amendment requires a two-thirds vote in both chambers of the Kansas Legislature, and then a simple majority vote of the people.

    By the way: For those who criticize the support for judicial selection reform as pure power politics, since Kansas has a conservative governor, remember this: When Professor Ware sounded the need for reform and convinced me of the need, our governor was the liberal Kathleen Sebelius. There was also a liberal senate at that time, one which would undoubtedly have rubberstamped any nominee Sebelius might have sent for confirmation.

    Originalism, Balanced Legal Realism and Judicial Selection: A Case Study
    By Stephen J. Ware

    Abstract: The “balanced realist” view that judging inevitably involves lawmaking is widely accepted, even among originalists, such as Justice Scalia, Randy Barnett and Steven Calabresi. Yet many lawyers are still reluctant to acknowledge publicly the inevitability of judicial lawmaking. This reluctance is especially common in debates over the Missouri Plan, a method of judicial selection that divides the power to appoint judges between the governor and the bar.

    The Missouri Plan is one of three widely-used methods of selecting state court judges. The other two are: (1) direct election of judges by the citizenry, and (2) appointment of judges by democratically elected officials, typically the governor and legislature, with little or no role for the bar. Each of these two methods of judicial selection respects a democratic society’s basic equality among citizens — the principle of one-person, one-vote. In contrast, the Missouri Plan violates this principle by making a lawyer’s vote worth more than another citizen’s vote.

    This Article provides a case study of the clash between the inevitability of judicial lawmaking and the reluctance of lawyers to acknowledge this inevitability while defending their disproportionate power under the Missouri Plan. The Article documents efforts by lawyers in one state, Kansas, to defend their version of the Missouri Plan by attempting to conceal from the public the fact that Kansas judges, like judges in the other 49 states, inevitably make law. The case study then shows examples of Kansas judges making law. The Article concludes that honesty requires lawyers participating in the debate over judicial selection in the United States to forthrightly acknowledge that judges make law. Lawyers who seek to defend the power advantage the Missouri Plan gives them over other citizens can honestly acknowledge that this is a power advantage in the selection of lawmakers and then explain why they believe a departure from the principle of one-person, one-vote is justified in the selection of these particular lawmakers.

    The complete paper may be downloaded at no charge here.

  • Downtown Wichita issues not appreciated

    Once again, the Wichita Eagle editorial board misses the point regarding downtown Wichita development.

    There may be some that are opposed to downtown simply because it’s downtown, or for other silly reasons. That seems to be the focus of Rhonda Holman’s editorial today.

    But speaking from a perspective of economic freedom and individual liberty, it’s government interventionism in downtown that I object to. This is what harms Wichita, not the fact that people are living and working downtown or anywhere else, for that matter.

    The political cronyism involved in many projects in downtown Wichita is what harms our city. When government takes from one and gives to another, everyone is worse off — other than the recipients. I understand that it’s easy to look at a subsidized project — be it downtown or elsewhere — and see people working at jobs. It’s much more difficult, however, to see the harm that the government intervention causes: Prosperity and jobs are lost due to inefficient government allocation of capital through political, not market, mechanisms. In the whole, we are worse off, not better.

    If you don’t believe this — if you insist that the city government can create jobs and prosperity through its interventions, and that these have no net cost — then you have to ask why the city is not involved in more development.

    It is the principled objection to government involvement that many do not understand, including, I think, the Wichita Eagle editorial board. An example: In September 2011, after I and others started a campaign to overturn a city council decision to award a tax subsidy to the Ambassador Hotel, the hotel’s lead developer asked to meet with me. In the meeting I explained that I would oppose the city’s action if applied to any hotel, located anywhere in Wichita, owned by anyone. He said that he sensed my opposition was based on principle, and I agreed.

    The curious thing is that this seemed to puzzle him — that people would actually apply principles to politics.

    The political allocation of investment capital in Wichita leads to problems of the appearance of impropriety, if not actual impropriety. There is a small group of people that repeatedly receive large amounts of taxpayer subsidy. These people and others associated with their companies regularly contribute to the campaign funds of city council members and candidates. These council members then vote to grant these people taxpayer-funded subsidy, year after year.

    City council members also vote to award them with no-bid contracts. That’s terrible government policy. Especially when one recent contract was later put to competitive bid, and turned out to cost much less than the no-bid price. City council members, all except one, were willing to award their significant campaign contributors with an overpriced no-bid contract at taxpayer expense.

    The company that won the no-bid contract was Key Construction. Its owners and executives were the sole contributors to the campaign fund of Lavonta Williams (district 1, northeast Wichita) in 2012 as she prepared to run for reelection this spring.

    James Clendenin (district 3, southeast and south Wichita), also running for reelection this spring, and also having voted for the no-bid contract for Key, also received many contributions from Key and its executives in 2012. That company, along with person associated with one other company, were the sole source of Clendenin’s campaign funding that year.

    Doesn’t the Wichita Eagle editorial board see a problem here? Doesn’t the newsroom?

    There was a time when newspaper opinion editors crusaded against this type of behavior.

    Newspaper editorial writers ought also to be concerned about how taxpayer funds are spent. The City of Wichita, however, has established non-profit organizations to spend taxpayer funds. The Wichita Downtown Development Corporation, for example, is funded almost exclusively through taxes. Yet, it claims that it is not a public agency as defined in the Kansas Open Records Act, and therefore need not fulfill records requests seeking to bring transparency as to how the agency spends its taxpayer funds. The city, inexplicably, backs WDDC in this interpretation of law that is contrary to the interests of citizens.

    Secrecy of this type regarding taxpayer funds is not good public policy. There was a time when newspaper editors railed against government secrecy like this.

    We need a newspaper editorial board that understands principle vs. political expediency. As a first step, let’s ask for an editorial board that recognizes these abuses of citizens and is willing to talk about them.

  • Carl Brewer: The state of Wichita, 2013

    Wichita Mayor Carl Brewer, State of the City Address, January 29, 2013Much like President Barack Obama in his recent inaugural address, Wichita Mayor Carl Brewer displayed his collectivist instincts in his “State of the City” address for 2013. His speech, as prepared, may be read here.

    Opening, the mayor said “Wichita has overcome great challenges in the past and will overcome these as well, but we’ll need to work together.”

    Near the close, the mayor said “THE TIME FOR ACTION IS NOW! We have reached a point where we MUST come together as a community, and create a plan that defines our priorities and the City we are to become.” And then: “For all of our differences, I have never doubted this community’s ability to come together and protect what matters most.” (The capitalization is in the mayor’s prepared text.)

    But what’s really important to Wichita is economic development. Regarding that, Brewer said this:

    As we struggle to compete for new businesses and new jobs, especially in light of job losses in aviation, we must face the reality that we are competing with other cities that offer economic incentives for business development and expansion. If we want to be IN the game, we need to PLAY the game, but we have no dedicated funding source for economic development. If we’re serious about finding new jobs for our people — and I am — we must change this scenario as soon as possible. Where will those incentive dollars come from? (Capitalization, again, is from the original.)

    The idea of a dedicated funding source for economic development is something that many in Wichita would support. Many would oppose it, too. But instead of just lobbing rhetorical questions (Where will those incentive dollars come from?), the mayor should give us some answers. Or, at least make a specific proposal. Does the mayor recommend a sales tax increase? Or allocating specific levels of property tax to economic development? (The city is doing this on a temporary basis.) Or asking the state legislature to fund Wichita’s economic development, as we insist the legislature fund our airline subsidy program?

    Whatever it is, Mayor Brewer, give us some specific ideas as to how you want to raise this money, and how you would spend it.

    It’s that spending, I think, that people in Wichita have concern over. The cumulative record of Brewer, the city council, and city bureaucratic staff hasn’t inspired trust and confidence. Giving the city additional dollars to spend on economic development is not a wise investment.

    For example, the mayor says that subsidizing downtown development is good economic development strategy. But we see the mayor and nearly all council members voting to give an overpriced no-bid contract to their significant campaign contributors. This happened despite the company’s large cost overruns on previous no-bid contracts awarded by the city. Is that good economic development practice?

    We see the city council sitting in a quasi-judicial role, adjudicating the award of an airport construction contract when one of the parties is a significant campaign contributor. In fact, Key Construction — the company that prevailed in that decision — through its principals and executives, was the sole source of campaign funds raised by Lavonta Williams (district 1, northeast Wichita) in 2012 as she prepared to run for reelection this spring.

    Key’s executives also contributed heavily to James Clendenin (district 3, southeast and south Wichita) last year. He’s running this spring, too.

    At the time this airport contract was being handled, Council Member Jeff Longwell (district 5, west and northwest Wichita) was campaigning for the Sedgwick County Commission. Campaign finance reports revealed contributions from parties associated with Walbridge, a Michigan construction company. Why would those in Michigan have an interest in helping a Wichita City Council member fund his campaign for a county office? Would the fact that Walbridge is a partner with Key Construction on the new airport terminal, and that Longwell would be voting on that contract, provide a clue?

    Or: A movie theater owner and business partners contribute to the mayor’s (and other) campaigns. Mayor and council vote to give a no-interest and low-interest loan and tax breaks to theater owner and his partners. Mayor goes into barbeque sauce business. Mayor’s barbeque sauce is now sold at movie theater.

    Doesn’t Carl Brewer see anything wrong with this? Don’t his advisors tell him that this creates the appearance of impropriety? Does the mayor consider whether these actions make a positive impression on those who might want to invest in Wichita?

    We see the city awarding economic development incentives that were not necessary for the project to proceed. It took a special election to teach the mayor and council that lesson. By the way, that unneeded and rejected incentive was awarded to the significant campaign contributors of Mayor Brewer and most council members.

    We see the city taking credit for building up the tax base, yet giving away tax revenue in the form of property tax abatements, IRBs, tax increment financing, and STAR bonds.

    The bureaucratic missteps: The Southfork TIF district is just the latest example.

    The lack of respect for citizens’ right to know how taxpayer funds are spent is another troubling aspect of Brewer’s tenure as mayor. None of the words “accountability,” “transparency,” or “open government” were mentioned in the mayor’s address this year, as they have been in the past. No sense in calling attention to an area where the city has failed, I suppose.

    All this is done in the name of economic development and jobs. But Wichita is underperforming Kansas and the nation in these areas. Under Brewer’s leadership, however, we are overachieving in the advancement of cronyism and its ills.

    The record indicates that our officeholders, and those who advise them, are not worthy of our trust, and certainly not more taxes for economic development.

    After last year’s State of the City speech, I noted “Wichita’s mayor is openly dismissive of economic freedom, free markets, and limited government, calling these principles of freedom and liberty ‘simplistic.’ Instead, his government prefers crony capitalism and corporate welfare.”

    I also wrote: “Relying on economic freedom, free markets, and limited government for jobs and prosperity means trusting in free people, the energy of decentralized innovation, and spontaneous order. A government plan for economic development is the opposite of these principles.”

    This year, the outlook for economic freedom and limited government in Wichita is gloomier than ever before. The door for those who wish to profit through cronyism is wide open. We’ll have to hope that, somehow, Wichita can learn to thrive under this regime.

  • Economic development incentives questioned

    When the New York Times is concerned about the cost of government spending programs, it’s a safe bet that things are really out of control. Its recent feature As Companies Seek Tax Deals, Governments Pay High Price reports on economic development incentive programs that are costly and produce questionable benefits.

    Do we know the cost of economic development incentives? No, reports the Times: “A full accounting, The Times discovered, is not possible because the incentives are granted by thousands of government agencies and officials, and many do not know the value of all their awards. Nor do they know if the money was worth it because they rarely track how many jobs are created. Even where officials do track incentives, they acknowledge that it is impossible to know whether the jobs would have been created without the aid.”

    Kansas Governor Sam Brownback appears in a video that accompanies the story.

    A concern of the newspaper is that the money spent on incentives could be spent on other government programs, primarily schools. My concern is that government spending on incentives is harmful to the economy. It redirects capital from productive to unproductive uses. Charles Koch recently explained:

    Today, many governments give special treatment to a favored few businesses that eagerly accept those favors. This is the essence of cronyism.

    Many businesses with unpopular products or inefficient production find it much easier to curry the favor of a few influential politicians or a government agency than to compete in the open market.

    After all, the government can literally guarantee customers and profitability by mandating the use of certain products, subsidizing production or providing protection from more efficient competitors.

    Cronyism enables favored companies to reap huge financial rewards, leaving the rest of us — customers and competitors alike — worse off.

    In another article Koch wrote: “Instead of protecting our liberty and property, government officials are determining where to send resources based on the political influence of their cronies. In the process, government gains even more power and the ranks of bureaucrats continue to swell.”

    We must distinguish between business and capitalism and hold business groups accountable when they fail to promote economic freedom and capitalism. An example is the Wichita Metro Chamber of Commerce. Its legislative platform reads “The Wichita Metro Chamber believes the State should practice fiscal discipline.”

    But the Chamber recommends retaining several business welfare programs that are harmful to capitalism and economic freedom.

    Next week the agenda for the meeting of the Wichita City Council contains six items that dish out business welfare and promote cronyism. Another item recommends approval of the city’s legislative agenda, which contains this:

    ISSUE: Existing economic development tools are essential for the continued growth and prosperity of our community.

    RECOMMEND: The Wichita City Council supports continuation of its 2012 legislative agenda item, calling for protection of existing economic development tools for local public-private partnerships. Among those are Tax Increment Financing (TIF) districts, Community Improvement Districts (CIDs), Industrial Revenue Bonds (IRBs) and Sales Tax Revenue (STAR) bonds.

    The premise is false twice: These economic development tools are not “essential,” and Wichita is not growing and prospering, compared to other cities: “The inflation-adjusted gross domestic product for the Wichita metro area declined 0.4 percent in 2010, according to initial estimates from the federal Bureau of Economic Analysis. The decline slowed from the year before, when this measure of economic growth plummeted by 7.7 percent. … Wichita’s decline came even as GDP grew by 2.5 percent nationwide in 2010. GDP increased in 304 of 366 metro areas nationwide.” (Wichita Business Journal, Wichita’s real GDP declined in 2010 amid national recovery, database shows.)

  • Charles Koch profiled in Forbes

    The new issue of Forbes features a cover story on Charles and David Koch. It is very interesting and seems a balanced and fair article, but there are a few things that stand out. (Inside The Koch Empire: How The Brothers Plan To Reshape America.)

    An example: “Both Kochs innately understand that — unlike the populist appeal of their fellow midwestern billionaire Warren Buffett and his tax-the-rich advocacy — their message of pure, raw capitalism is a much tougher sell, even among capitalists.”

    I think the author should have written “even among business executives” rather than capitalists. That’s because Charles Koch has been outspoken about business cronyism, in September writing in The Wall Street Journal: “Far too many businesses have been all too eager to lobby for maintaining and increasing subsidies and mandates paid by taxpayers and consumers. This growing partnership between business and government is a destructive force, undermining not just our economy and our political system, but the very foundations of our culture.”

    I would imagine that most of the business leaders seeking government subsidies and mandates consider themselves capitalists. That’s a problem.

    Then: the description of “pure” capitalism as raw. I think we’re starting to realize just how raw politics and government have become. Capitalism, however, is a system based on respect for property and peaceful, beneficial exchange. Tom G. Palmer in the introduction to The Morality of Capitalism explains: “Far from being an amoral arena for the clash of interests, as capitalism is often portrayed by those who seek to undermine or destroy it, capitalist interaction is highly structured by ethical norms and rules. Indeed, capitalism rests on a rejection of the ethics of loot and grab, the means by which most wealth enjoyed by the wealthy has been acquired in other economic and political systems. … It’s only under conditions of capitalism that people commonly become wealthy without being criminals.”

    Often corporations are criticized by liberals as being too focused on short-term gains, that corporate raiders buy firms, gut them, chop them up, sell off assets, lay off employees, pile on debt — you know the story as used against Mitt Romney. But look at how Koch Industries operates:

    Charles spent $6 billion upfront to buy Georgia-Pacific, and rather than satisfy quarterly earnings estimates or dividend-hungry investors, he immediately directed the new division’s cash flow toward paying down the $15 billion in liabilities that it inherited. …

    The Koch long-game strategy is absolute: If it makes sense to them, the Kochs stay with the plan, no matter how burdensome or how long it takes. “We buy something not to milk it but to build it, to take its capabilities and add to them, and build new businesses,” [Charles] Koch says.

    That sounds like a business strategy the left should embrace, not vilify.

    Another curious statement by the author: “Given their strict adherence to the principals of transparent free markets, the Kochs’ secrecy seems hypocritical.” This is curious because transparency is an attribute not often associated with advocacy for free markets. Transparency is more associated with government as a desirable goal. Charles and David Koch are private citizens, not agents of government.

    There’s good news near the end of the article:

    The brothers’ new political emphasis in the coming year? Fighting corporate welfare.

    While Obama talks about getting rid of lobbyists, Charles says, the “only way he can achieve that stated objective is to get government out of the business of giving goodies. That’s like flies to honey,” he adds. “The first thing we’ve got to get rid of is business welfare and entitlements.”

    There’s much more in the article, available at Inside The Koch Empire: How The Brothers Plan To Reshape America.

  • Tax increment financing district (TIF) resources

    Resources on tax increment financing (TIF) districts. An updated version of this article is here.

    Wichita should reject Bowllagio TIF district. Wichita should reject the formation of a harmful tax increment financing (TIF) district.

    Wichita TIF: Taxpayer-funded benefits to political players. It is now confirmed: In Wichita, tax increment financing (TIF) leads to taxpayer-funded waste that benefits those with political connections at city hall.

    Tax increment financing (TIF) and economic growth. There is clear and consistent evidence that municipalities that adopt tax increment financing, or TIF, grow more slowly after adoption than those that do not.

    Does tax increment financing (TIF) deliver on its promise of jobs? When looking at the entire picture, the effect on employment of tax increment financing, or TIF districts, used for retail development is negative.

    Crony Capitalism and Social Engineering: The Case against Tax-Increment Financing. Randal O’Toole, Cato Institute. While cities often claim that TIF is “free money” because it represents the taxes collected from developments that might not have taken place without the subsidy, there is plenty of evidence that this is not true. First, several studies have found that the developments subsidized by TIF would have happened anyway in the same urban area, though not necessarily the same location. Second, new developments impose costs on schools, fire departments, and other urban services, so other taxpayers must either pay more to cover those costs or accept a lower level of services as services are spread to developments that are not paying for them. Moreover, rather than promoting economic development, many if not most TIF subsidies are used for entirely different purposes. First, many states give cities enormous discretion for how they use TIF funds, turning TIF into a way for cities to capture taxes that would otherwise go to rival tax entities such as school or library districts. Second, no matter how well-intentioned, city officials will always be tempted to use TIF as a vehicle for crony capitalism, providing subsidies to developers who in turn provide campaign funds to politicians.

    Tax Increment Financing: A Tool for Local Economic Development. Richard F. Dye and David F. Merriman. Tax increment financing (TIF) is an alluring tool that allows municipalities to promote economic development by earmarking property tax revenue from increases in assessed values within a designated TIF district. Proponents point to evidence that assessed property value within TIF districts generally grows much faster than in the rest of the municipality and infer that TIF benefits the entire municipality. Our own empirical analysis, using data from Illinois, suggests to the contrary that the non-TIF areas of municipalities that use TIF grow no more rapidly, and perhaps more slowly, than similar municipalities that do not use TIF.

    The effects of tax increment financing on economic development. Richard F. Dye and David F. Merriman. Local governments attempt to influence business location decisions and economic development through use of the property tax. Tax increment financing (TIF) sequesters property tax revenues that result from growth in assessed valuation. The TIF revenues are to be used for economic development projects but may also be diverted for other purposes. We have constructed an extensive data set for the Chicago metropolitan area that includes information on property value growth before and after TIF adoption. In contrast to the conventional wisdom, we find evidence that cities that adopt TIF grow more slowly than those that do not. We test for and reject sample selection bias as an explanation of this finding. We argue that our empirical finding is plausible and present a theoretical argument explaining why TIF might reduce municipal growth.

    TIF is not Free Money. Randal O’Toole. Originally created with good intentions, tax-increment financing (TIF) has become a way for city officials to enhance their power by taking money from schools and other essential urban services and giving it to politically connected developers. It is also often used to promote the social engineering goals of urban planners. … Legislators should recognize that TIF no longer has a reason to exist, and it didn’t even work when it did. They should repeal the laws allowing cities to use TIF and encourage cities to instead rely on developers who build things that people want, not things that planners think they should have.

    Does Tax Increment Financing Deliver on Its Promise of Jobs? The Impact of Tax Increment Financing on Municipal Employment Growth. Paul F. Byrne. Increasingly, municipal leaders justify their use of tax increment financing (TIF) by touting its role in improving municipal employment. However, empirical studies on TIF have primarily examined TIF’s impact on property values, ignoring the claim that serves as the primary justification for its use. This article addresses the claim by examining the impact of TIF adoption on municipal employment growth in Illinois, looking for both general impact and impact specific to the type of development supported. Results find no general impact of TIF use on employment. However, findings suggest that TIF districts supporting industrial development may have a positive effect on municipal employment, whereas TIF districts supporting retail development have a negative effect on municipal employment. These results are consistent with industrial TIF districts capturing employment that would have otherwise occurred outside of the adopting municipality and retail TIF districts shifting employment within the municipality to more labor-efficient retailers within the TIF district.

    Tax Increment Financing and Missouri: An Overview Of How TIF Impacts Local Jurisdictions. Paul F. Byrne. Tax Increment Financing (TIF) has become a common economic development tool throughout the United States. TIF takes the new taxes that a development generates and directs a portion of them to repay the costs of the project itself. … Supporters of TIF argue that it is a necessary tool for redevelopment in older communities. Detractors contend that it is used to simply subsidize development, and that variances in tax systems allow some governments to implement and benefit from TIF even if its use harms other levels of government. This study provides an overview of the history and basic structure of TIF. It then analyzes the basic tax components of a TIF plan and compares how various aspects, such as tax capture and tax competition, play out in the standard system of TIF. The study then reviews the economic literature on TIF, and ends with a direct application of how TIF operates within Missouri.

    The Right Tool for the Job? An analysis of Tax Increment Financing. Heartland Institute. Tax Increment Financing (TIF) is an economic development tool that uses the expected growth (or increment) in property tax revenues from a designated geographic area of a municipality to finance bonds used to pay for goods and services calculated to spur growth in the TIF district. The analysis performed for this study found TIF does not tend to produce a net increase in economic activity; favors large businesses over small businesses; often excludes local businesses and residents from the planning process; and operates in a manner that contradicts conventional notions of justice and fairness. We recommend seeking alternatives to TIF and reforms to TIF that make the process more democratic and the distribution of benefits more fair to residents of TIF districts.

    Giving Away the Store to Get a Store. Daniel McGraw, Reason. Largely because it promises something for nothing — an economic stimulus in exchange for tax revenue that otherwise would not materialize — this tool is becoming increasingly popular across the country. Originally used to help revive blighted or depressed areas, TIFs now appear in affluent neighborhoods, subsidizing high-end housing developments, big-box retailers, and shopping malls. And since most cities are using TIFs, businesses such as Cabela’s can play them off against each other to boost the handouts they receive simply to operate profit-making enterprises. … At a time when local governments’ efforts to foster development, from direct subsidies to the use of eminent domain to seize property for private development, are already out of control, TIFs only add to the problem: Although politicians portray TIFs as a great way to boost the local economy, there are hidden costs they don’t want taxpayers to know about. Cities generally assume they are not really giving anything up because the forgone tax revenue would not have been available in the absence of the development generated by the TIF. That assumption is often wrong.

    Do Tax Increment Finance Districts in Iowa Spur Regional Economic and Demographic Growth? David Swenson and Liesl Eathington. We found virtually no statistically meaningful economic, fiscal, and social correlates with this practice in our assessment; consequently, the evidence that we analyzed suggests that net positions are not being enhanced — that the overall expected benefits do not exceed the public’s costs.

  • Refuting the attacks on Koch

    From KochFactsTV:

    What do big government politicians mean when they say, “Koch?”

    Nancy Pfotenhauer of Koch Industries explains that when big government politicians say “Koch,” they’re not talking about the successful American company that employs more than 50,000 people nationwide. They’re really attacking the principles of economic freedom that Koch has advocated for more than 50 years regardless of what political party holds power.

    Economic freedom means property rights protected by an impartial rule of law, the freedom to trade and exchange goods and services, sound money, and a government that promotes prosperity rather than undermine it. Economic freedom also empowers individuals not governments. That’s why entrenched politicians will rarely say the words “economic freedom.” They’d rather say, “Koch.”

    But with all the pressing issues challenging our nation, shouldn’t the big government advocates in Washington be talking about something else besides us?

  • Obama II, from New York Times

    The New York Times lays out the agenda for the second term of President Barack Obama. It could be “invigorated,” the newspaper writes.

    The Times editorialists write that now the president “can make real progress on issues neglected in the first.” I wonder: Why did he neglect these issues?

    Then: Obama intends to “build on and improve the significant accomplishments of the last four years.” The problem is that these accomplishments are harmful to our country. They harm our economy, they extinguish liberty and freedom, they will lead to less prosperity for everyone.

    Here’s what a second Obama term might attempt, according to the Times

    “Address climate change with more vigor, going beyond auto-mileage standards and renewable-energy jobs to possibly advocating tougher carbon emissions standards.” I’d like to think that the Obama Administration learned from debacles like Solyndra, but there’s no evidence it has.

    “Working with Republicans to fix the immigration system.” We’re long overdue for this, and I think I can support what the president is likely to propose. We’ll see.

    “He also hinted that combating poverty might move higher on his priority list.” But Obama’s vision of fighting poverty is likely more of the same: direct payments, government job training, more spending on public schools, etc. None of this supports what is really needed: a vibrant economy.

    “In coming months, after he persuades Congress to keep taxes from rising on the middle class, he should push to restore a fair estate tax and raise the low capital gains rate to the level of ordinary income.” A pro-growth policy, one that would create prosperity for everyone, would be to eliminate taxes on capital. Raising this tax means that there will be less investment in the United States as investors seek to find more attractive grounds for investment. This is so important. Ask yourself this: Who earns the higher wage — the man digging a ditch with a shovel, or the worker operating a power backhoe? The backhoe is capital. Someone had to defer current consumption in order to save to buy the backhoe. As taxes on capital rise, people have less incentive to save and invest.

    The Times says Obama’s victory was decisive. At least they didn’t say it was a mandate, as some have said. We’ve suffered through a campaign, won by a man who showed that he would do anything to hold on to power.

    We’ve heard President Obama tell Russia that he can be more “flexible” after the election. Some might interpret this — considering domestic policy — as meaning that Obama will govern more to the left, seeking to expand government spending even more than he did in his first term.

    But there’s a possibility — small, I’m sad to reckon — that flexibility might mean that the president disregards the radical left and embraces principles of economic freedom and personal liberty. This is the way Barack Obama could rescue our economy and build a legacy that he and the country could be proud of.