It was the “Big Idea” that couldn’t — and didn’t — pass in the Missouri legislature. The defeat of a bill calling for the creation of a heavily subsidized “Midwest China Hub,” or “Aerotropolis,” in St. Louis represents a clear victory for common sense and limited government. Government should stay out of the business of using taxpayers’ money to try picking economic winners and losers.
In retrospect, the wonder is that so many legislators from across the state rushed to support the bill. As proposed, the China Hub legislation would, over a period of years, distribute some $360 million in tax credits and other subsidies to private developers in and around the Lambert–St. Louis International Airport. To what end?
Supporters of the legislation made wildly optimistic claims. They talked about how this was a can’t-miss proposition that would create “thousands of jobs” and “jump-start” economic activity.
But where was the credible evidence to support the giddy optimism? Short answer: There was none.
Legislators of both parties were prepared to overlook the absence of serious economic analysis. Still more, they were prepared to ignore the absence of any firm statement from the government of China or leading international carriers that they would send more flights to St. Louis if granted substantial tax credits.
An eight-page “study” by the St. Louis Regional Commerce and Growth Association was indicative of the slipshod thinking behind the so-called “Big Idea.” The association's paper did not attempt to show any real link between the tax credits and increased flights. It somehow assumed that those flights would magically appear.
In response to an information request, the Show-Me Institute obtained a review from the Midwest-China Hub Commission that revealed internal doubts and inconsistencies.
First, it showed that facilities around the airport were already on the receiving end of a surprisingly large and unreported amount of government incentives — $93 million had already been authorized or expended and another $192 million was available for future use. Second, the review conceded that “Many unknowns remain such as: catalysts for increased flights, cargo market share capture, background analysis, etc.” The commission also noted that the China Hub legislation “may incentivize facilities that have only a limited relationship to the Air Cargo facility.”
In a series of commentaries, policy analysts at the Show-Me Institute showed how the proposed legislation was likely to lead to an underwhelming result — supporting existing operations at Lambert and contributing to the growth of still more surplus or unneeded warehousing facilities in or around the airport.
In the end, Missouri lawmakers could not agree on a comprehensive set of changes that would both sunset tax credits in other development areas and still leave room for a fresh set of new tax credits for the China Hub in Saint Louis.
The Show-Me Institute instilled a badly needed sense of reality in the whole debate.
Tax credits are not free money. Our state government is already straining to meet its current commitments. Every dollar that is given away in tax credits is a dollar that the state government must replace with cuts in current programs, or — more likely — through increased taxation. There is a long and dismal history illustrating the multiple failures of heavily subsidized commercial enterprises.
Instead of awarding more tax credits to favored individuals and industries, legislators should do something truly innovative: They should lower taxes across the board for all Missourians. That way, economic growth can occur organically and in areas that legislators might not expect.
Any attempt to call a special session of the legislature for the purpose of resurrecting the China Hub idea should be rejected. If this idea really is a can’t-miss proposition, entrepreneurs in the private sector will find a way to make it happen. Our state lawmakers are not equipped to pick economic winners and losers.
Andrew B. Wilson is a fellow and Audrey Spalding is a policy analyst with the Show-Me Institute, an independent think tank promoting free-market solutions for Missouri public policy. Spalding is also a former Missourian reporter.