Thursday, August 25, 2016

Building a Successful Center on a Shoestring Budget

Back in April I gave a presentation at the annual APEE conference in Las Vegas. The session was one of several on the program which had directors of centers like mine (The Hammond Institute at Lindenwood University) exchanging best practices. I had found these sessions at previous APEE conferences to be very useful, so I was very happy to be a presenter this time around. 

The Hammond Institute happens to be one of many academic centers that receives support from the Charles Koch Foundation. Anti-Koch paranoia is the chemtrails of the loopy left, so a group called UnKoch My Campus decided to use hidden microphones to record the proceedings of my session, and of two other sessions. You can find the recordings and transcripts here. Despite the fevered rambling of UnKoch guys, the actual sessions were pretty innocuous, just what you would expect from academics discussing administrative practices in a forum open to the public. 

For my part, I thanked the UnKoch people for providing the recordings. There were some people who couldn't make my session to receive my sage advice. I also sent them a better photo to include on their web page, which is called KochiLeaks, of course:

I also made sure that they had a copy of the last slide of my presentation. There was a lot of laughing at that stage of my talk, so I didn't want them to be left out of the joke:

I'd like to thank the UnKoch people once more for providing the recordings, which I have synced up with my PowerPoint slides and made into a movie. I thought I gave some great advice, so now Koch-funded centers around the world can operate at least a bit better now because they can watch my presentation. Enjoy


Tuesday, March 29, 2016

Economics Research Rankings for Missouri

Here's an update on my quasi-regular economics research rankings for Missouri. The good news is that my own department, the Center for Economics and the Environment, which is part of the Hammond Institute for Free Enterprise at Lindenwood University, remains among the top five academic departments.  Here's the ranking, which is taken from this page at RePEc and excludes the states' two Federal Reserve banks because of their idiosyncratic methods for counting people.

Institution Score
Department of Economics, Washington University in St. Louis 3.34
Olin School of Business, Washington University in St. Louis 3.96
Economics Department, University of Missouri 5.05
Department of Economics, University of Missouri-St. Louis 8.56
Center for Econ and the Environment, Lindenwood University 9.29
John Cook School of Business, Saint Louis University 13.66

The ranking of individual economists is taken from RePEc's Wu-index for those Missouri economists in the top 5% of the world research ranking. The Wu-index is the is the best method that RePEc produces for combining the quality and quantity of an individual's research.

Name Institution Wu-index
David Knudsen Levine Dept of Econ, Washington U. in St. Louis 9
William A. Brock Econ Dept, U. of Missouri 9
Anjan V. Thakor Olin School, Washington U. in St. Louis 9
Bruce Clayton Petersen Dept of Econ, Washington U. in St. Louis 8
Robert A. Pollak Olin School, Washington U. in St. Louis 8
Michele Boldrin Dept of Econ, Washington U. in St. Louis 7
Steven Mark Fazzari Dept of Econ, Washington U. in St. Louis 6
Rodolfo E. Manuelli Dept of Econ, Washington U. in St. Louis 6
Christopher Otrok Econ Dept, U. of Missouri 6
Costas Azariadis Dept of Econ, Washington U. in St. Louis 5
Werner Ploberger Dept of Econ, Washington U. in St. Louis 5
Christopher J. Neely Research Division, FRB of St. Louis 5
Stephen D. Williamson Research Division, FRB of St. Louis 5
Michael McCracken Research Division, FRB of St. Louis 5
Howard J. Wall CEE,  Lindenwood University 4
Ping Wang Dept of Econ, Washington U. in St. Louis 4
Jordan Rappaport Economic Research, FRB of Kansas City 4
Craig S. Hakkio Economic Research, FRB of Kansas City 4
Ronald M. Harstad Econ Dept, U. of Missouri 4
Troy Davig Economic Research, FRB of Kansas City 4
Philip H. Dybvig Olin School, Washington U. in St. Louis 4
Guofu Zhou Olin School, Washington U. in St. Louis 4
James Bullard Research Division, FRB of St. Louis 4
Daniel L Thornton Research Division, FRB of St. Louis 4
Christopher Waller Research Division, FRB of St. Louis 4
Bill Dupor Research Division, FRB of St. Louis 4
Robert H. Rasche Research Division, FRB of St. Louis 4
B Ravikumar Research Division, FRB of St. Louis 4

Saturday, March 26, 2016

Dispelling some myths about the earnings taxes in St Louis and Kansas City

The cities of St. Louis and Kansas City are alone among their neighboring cities in levying a 1 percent tax on earnings. Given the ease with which people can change where they live and/or work within a metro area, it’s not difficult to see how the taxes put St. Louis and Kansas City at a disadvantage relative to their neighbors. Specifically, in some empirical research that I did a couple of years ago, I estimated that St. Louis lost 14,700 residents between 2000 and 2010 because the city levied an earnings tax when its neighbors did not. For Kansas City my estimates indicated that population growth over the period was 18,700 lower than it would have been in the absence of the tax.

More accurately, what the study found that these were the effects of not having the same tax structure as the average city in the United States. Because of the relative harmfulness of earnings taxes, most cities are relatively reliant on property taxes. In 2011, on average, property taxes accounted for 17 times the amount collected in earnings taxes. But in St. Louis and Kansas City, earnings taxes accounted for 2.5 and 1.6 times the revenue collected from property taxes. In short, my implicit policy proposal is that St. Louis and Kansas City would not have lost these thousands of residents if they had been like most cities and not taxed earnings.

These findings are very similar to those from an earlier paper of mine, as well as from a paper by Joe Haslag at Mizzou. All three papers offer detailed descriptions of our research methods and data, so I think I speak for Joe in saying that it would have been great if our research had resulted in an intelligent debate about the relative merits of various tax systems. Despite the fact that our research was laid open for all to see, no one has refuted our findings. It’s possible that some researchers have tried and failed, but such research would never see the light of day. It’s also likely that professional economists simply have little to gain from engaging in local policy debates instead of scrambling for journal publications.

At any rate, I think it’s fair to say that there has been no serious attempts at addressing the question of whether or not St. Louis and Kansas City should keep their earnings taxes despite the significant population losses they cause.  Instead, the counter-arguments, which have most often been made by editorialists and politicians, have tended to be equal parts hysteria, ignorance, and hatred. Given that residents of the two cities will vote on April 4th on whether or not to keep their earnings taxes, the hysteria, ignorance, and hatred have been appearing with increasing frequency in the editorials and news stories of local media outlets.

It should be noted that there are some perfectly respectable and intelligent arguments for keeping earnings taxes: They are more-stable sources of revenue, the two cities have too many non-profits (hospitals, churches, universities, etc.) who are typically exempt from property taxes, and the taxes are more fair and equitable. Although some have made these arguments, including the city of St. Louis itself and at least one St. Louis alderman, I haven’t found them to have been at the forefront. I don’t happen to buy these arguments, but that’s not the standard for respectability and intelligence.

An editorial in the St. Louis Post-Dispatch provides a handy compendium of the state of the public debate against the repeal of the earnings tax. Because it’s an almost perfect representation of the hysteria, ignorance, and hate surrounding the issue, I’ll use it to address the most common myths and misrepresentations that have been made. The lines from the editorial are in italics, followed by my responses.

1. (Q)uirky beliefs of one very wealthy man.
The belief that it is harmful for a city to impose an earnings tax when its neighbors do not ought to be a fairly standard belief for anyone with any competence at economics or math.
Along these same lines is the claim that it is perfectly normal for earnings taxes to be levied by cities. For example, the city of St. Louis has claimed that 1,000s of jurisdictions have earnings taxes. Even if we ignore the sleight of hand in using the word “jurisdictions” rather than “cities”, this claim completely misses the point. The vast majority of these jurisdictions are in one state, Pennsylvania. And, while technically true, the fact is not relevant because the question is not whether or not a city has an earnings tax, but whether it has a tax that is higher than what is levied by surrounding areas.
I should note the stupidity of attaching relevance to the wealth of someone putting forth an idea. But such is the vitriol routinely spat out by the Post-Dispatch editors at those who disagree with their progressive mission. Hate is not a substitute for reason.

2. In St. Louis, the $162 million in e-taxes is 33 percent of the general revenue budget. Plus, (y)ou want to see a real exodus, fix it so there won’t be enough money for cops or firefighters.
Technically, the 33% number is accurate, but it’s just not particularly relevant. As is usual, the number is accompanied by a list of the good things that are paid for with money from the general fund, with the implication that these things will somehow disappear if the e-tax were to be repealed. All of this is a bunch of hooey, for several reasons:
  • The idea is for the city to replace the e-tax with other revenue sources that are much less deleterious to the city’s health.
  • The percentage of general revenue funded by the e-tax is simply not that important. It might be important to know the percentage of the city’s total spending that is paid for with the earnings tax, which is a a not-so-scary 15 percent. At any rate, the distinction between the general fund and the other 52 percent of the city’s revenue is largely artificial. About $143 million dollars of the city’s revenue from outside the general fund was used to help finance spending on departments also financed by money from the general fund. 
  • Similarly, despite claims to the contrary, it is simply untrue that money outside the general fund is not discretionary from the city’s standpoint. Receiving money that has strings attached, such as federal grants to purchase fire equipment, frees up money to pay for anything else. In other words, the city’s budget is fungible. So-called “tied” money simply pays for one thing you want, allowing you to pay for another thing you also want.

3. About 55 percent of the e-tax revenue in St. Louis comes from nonresidents. If it goes away, the whole load of replacing it would fall on residents.
This statement belies a complete misunderstanding of how tax burdens are distributed, which has little to do with who physically pays a tax. Once taxes are levied, the prices of the taxed items change and the distribution of the effects depend on a variety of factors. Take, for example, a tax on the value of an office building. Although he physically pays the tax, the owner of the building does not bear the entire burden of the tax. Rents will be adjusted to pass on all or some of the tax to renters. The companies renting the space will not bear all of the taxes either because they might pay their workers less and/or charge their customers more. Unless all of the owners, workers, and customers are city residents, some or all of the burden of the tax will be shifted onto nonresidents.
It should be noted that the advantage of property taxes over earnings taxes is that the latter is a direct tax on those who live or work in the city. It is because of this directness that earnings taxes have larger negative effects on population and employment than do other taxes.

4. Who knew it was the earnings tax and not white flight that emptied out the city?
This sentence is simply an especially stupid non sequitor. No one has said that the earnings tax is the sole cause the decline of St. Louis City. What has been said is that it is one of the contributors, to the tune of 1000s per year. In fact, my own research says clearly that 1/2 of the decline between 2000 and 2010 is due to the tax. Given that there there should have been natural population growth as has occurred elsewhere, I suspect that other factors are responsible for several times the effect of the earnings tax. The existence of even worse things does not preclude fixing this one thing.

5. It would be one thing if Sinquefield had a reasonable plan for replacing the e-tax revenue. He doesn’t. It would be phased out over 10 years and replaced by … well, he’s vague on that.
It’s not clear why a private citizen should do the job of the mayor, who is supposed to be the one who prepares the city for eventualities. Even so, it is simply false that Sinquefield, or the Show-Me Institute, has not put forward alternatives. In fact, Patrick Ishmael recently wrote a piece called How Would You Pivot From the Earnings Tax? Let Me Count the Ways. See also Joe Haslag’s two very detailed pieces How to Replace the Earnings Tax in Saint Louis and How to Replace the Earnings Tax in Kansas City. Given the obviousness of these titles, any 10 year old with access to Google could have found these pieces.

6. The mayor acknowledges that earnings taxes might be a disincentive to living and working in the city, but he says studies show higher sales and property taxes are bigger disincentives.
There are simply no such studies. They do not exist. Because there are few cities dumb enough to levy earnings taxes when their surrounding areas do not, little effort has been expended estimating their effects. The studies cited above are the only ones that actually do this and, as already stated, my 2014 study estimates the effects of having an earnings tax relative to the average tax structure of other cities. Thus, what research there is finds that earnings taxes are more harmful than the average mix of taxes.

Monday, July 27, 2015

Should Missouri Raise Its Minimum Wage?

Should Missouri Raise The Minimum Wage? from Missouri Viewpoints on Vimeo.

My bit starts at about the 15:30 part. There's so much ill-informed nonsense in the pro- camp, which is on display in the first half of the video, as well as in a radio debate I participated in last year. There are intellectually sound arguments to be made, but they aren't being made. Instead we get flat-eathers who believe that the law of demand can be repealed just because a bunch of progressive no-nothings can feel good about themselves. Also see this earlier post, with my letter to the editor.

Saturday, January 24, 2015

Good policy, properly argued, can win

Scott Walker, Republican governor of Wisconsin, has been touted by some as presidential timber. Back in November, Rich Cromwell argued that Walker is what the country needs in 2016. The argument included this assessment of Walker's electoral chances:
Does Walker sizzle? Not exactly. Is he a particularly charismatic speaker? No, he isn’t. But does he sit upon a throne made of the skulls of his enemies? Yes, yes he does.
The line has stuck in my head ever since, and reminds me that there is more to successful governing than shallow phrases, a fiction-filled origin story, and class and race warfare. Instead, it's possible for good policies, if properly argued and presented, to defeat divisiveness, lies, and hate.

Sunday, January 11, 2015

Have some dignity St. Louis

Kevin Horrigan has an excellent rundown of the history of the St. Louis Saps, the collective of regional residents who are being asked yet again to lay down millions of dollars at the altar of the NFL. The article is behind some sort of paywall, but be sure to read it if you can. It includes this 1988 quote about the NFL from then-mayor Vincent Schoemehl following the departure of the football Cardinals:
The fact of the matter is, these are not reputable people, and I don't think it's becoming of a city to extend themselves to postures that allow them to kiss the backsides of such people.

St. Louis resigned to losing the Rams

Tim Logan, formerly of the Post-Dispatch, wrote an interesting article for the LA Times describing the mood in St. Louis about the Rams: In St. Louis, Rams fans seem resigned to losing football team.

Yours truly was quoted in the article:
The Rams do bring value to the St. Louis region, said Howard Wall, an economics professor at Lindenwood University in suburban St. Charles. But in a cash-strapped state with many needs — from roads to schools to the aftermath of this summer's unrest in Ferguson — shelling out for a football team doesn't seem so essential. 
With such pressing priorities, Wall said, many are asking: "Should we spend a half-billion dollars on a football stadium for a billionaire?"
Also see my post from yesterday on the economics of publicly financing of stadiums.

Saturday, January 10, 2015

Rams' stadium plan is corporate welfare at its worst

I was going to write a post about the how study after study shows that the economic impact of pouring public money into sports stadiums is effectively zero.  I was also going to describe how whatever economic benefit there is from having an NFL team was in the amenity value, not the economic development effect. It turns out that I don't have to write that post because Dave Nicklaus has already written an excellent piece making those arguments. Read the whole thing, but here's his conclusion:
St. Louis is being asked to pay dearly for the prestige of remaining an NFL city, so I think Peacock described his stadium plan accurately when he called it a “crown jewel.” A jewel can sparkle and make its owner feel good, but it’s hardly a productive use of half a billion dollars.
I'll add two things for now:
  1. We will no doubt be hearing from those who support the stadium plan that the economic impact of the project will easily exceed the investment. We'll even be given a number for economic effects that is in excess of double the amount of public funding. This study will come from economic consultants, not from independent economists. The study will sound convincing but will be complete bunk. Here is something I wrote recently that provides a list of the deceptions to look for when hearing about the supposed economic impact of the stadium plan.
  2. We've already been hearing how the plan doesn't involve any new taxes, which is true, but irrelevant. In Missouri, tax increases require a popular vote, and this proposal would go down in flames if it were put to the voters of the state. So instead, the state government would rely on the refinancing of existing bonds from the stadium we're still paying off, and on tax credits. Tax credits are functionally equivalent to a bag of cash from taxpayers. If I have a $100 tax credit, my tax bill is lowered by $100. If I don't owe taxes, I can wait until a year in which I do, or I can sell my credit to someone else at a price very close to its face value. So, the tax credits in the stadium plan are nothing short of a cash giveaway that reduces the amount that is available for the state to spend on other things. Thus, either the state will have to raise taxes to make up for the tax credits, or some possibly worthwhile government spending will not be done because the state decided instead to give away hundreds of millions of dollars to a billionaire NFL owner.

Friday, January 9, 2015

No, the minimum wage is NOT good for businesses

The Post-Dispatch had an op-ed the other day arguing that the minimum wage is actually good for business. The author of the op-ed, Chris Sommers, is a successful businessman in St. Louis who I debated with on this issue a few months back. You can listen to the debate here.

The crux of his argument then and now is that he raised the wages in his businesses, which worked out for him, so the Federal government should force every business in the United States to do the same. There were two good letters published today that tore apart this logic (here and here).
It's pretty tiring having to keep arguing against such a demonstrably horrible policy, but I submitted this letter to the editor anyway:
In his op-ed arguing for an increase in the Federal minimum wage (Boost business by raising the minimum wage), Chris Sommers thinks that he has hit upon a magic formula by which increases in the minimum wage do not decrease employment but, instead, are actually good for businesses. He dismisses the reams of empirical evidence to the contrary with the story that his own restaurant chains benefited when they unilaterally raised their internal minimum wage. 
In a nutshell, his argument has four parts:
  1. Because his businesses benefited from voluntarily increasing the wages it paid, every one of the millions of businesses in the United States would benefit by increasing their wages. 
  2. The owners and managers of these millions of businesses spread across millions of square miles are too ignorant to know how to run their own businesses. 
  3. Because of (1) and (2), the Federal government should step in and force a uniform minimum wage for every business of any size in every industry no matter where it is located. 
  4. The result is higher wages with no effect on the number of people employed.  
You can accept this fanciful logic if you like, but I would like to offer an alternative, which is backed up by actual empirical evidence.
  1. Wages tend to be related to the productivity of workers. 
  2. If a law forces a business to pay a wage that is not justified by the productivity of some of the firm’s workers, the firm will not continue to employ those workers. 
  3. The minimum wage leads to job loss and poverty for the lowest-skilled workers, who might never gain the experience they need to get a job that pays above the minimum wage.

Sunday, June 1, 2014

The road to pathetic weeniness

Elementary School Field Day Notice: ‘The competitive urge to win will be kept to a minimum’
The purpose of the day is for our school to get together for an enjoyable two hours of activities and provide an opportunity for students, teachers and parents to interact cooperatively. Since we believe that all of our children are winners, the need for athletic ability and the competitive “urge to win” will be kept to a minimum. The real reward will be the enjoyment and good feelings of participation.
HT: Jonah Goldberg