Our Opinion: A truce in the tax incentive ‘border war’
Monday, February 10, 2014
Neither Missouri nor Kansas is winning the so-called “border war” — a battle of tax incentives to attract economic development to the Kansas City area.
Officials from both states, thankfully, are coming to the realization that the conflict — also dubbed “a race to the bottom” — is mutually detrimental.
An executive with Hallmark Cards Inc. in Kansas City characterized the clash as “a wasteful economic border war.” In testimony at a Missouri legislative hearing, Bill Hall added: “Neither state benefits. In fact, both are losing.”
Senate sponsor Ryan Silvey, R-Kansas City, said the fight has taken “millions of dollars out of the states’ economic development ability and trapped it in what’s basically a washing machine, churning the same jobs back and forth across the state line.”
The numbers support Silvey’s assessment. In the most recent analysis, collective border war incentives waived $217 million in tax revenues and produced a net gain for Kansas of 414 jobs.
Finally, officials from both Kansas and Missouri are poised to stop perpetuating this folly.
At Missouri House and Senate hearings last week, no opposition was voiced and some lawmakers quipped the moratorium could be labeled “a consent bill,” which would expedite approval.
Missouri’s moratorium is limited. It would apply to businesses moving between specified Missouri and Kansas counties, and would become effective only if Kansas approves similar restrictions.
Tax incentives have become standard offerings among governments, which can be counter-productive because they deplete revenues.
In the high-stakes competition for economic development, however, governments are attracted to tax incentives to gain an advantage.
Missouri is fortunate to enjoy a number of competitive advantages in luring businesses to locate here. Among them are its central location, comparatively low taxes and strong work ethic.
Getting sucked into a tax-incentive war with neighboring states is almost always mutually detrimental, with Missouri likely to be the bigger loser.
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