For years, the economic border war between Missouri and Kansas has been the topic of discussion in those states’ respective statehouses. In a January report titled The Job-Creation Shell Game, Good Jobs First writes, “There is no jobs border war more intense these days than the one raging in the Kansas City metropolitan area...Both states unabashedly poach businesses from each other, aided by similarly structured tax credits that allow footloose companies to retain large portions of their employees’ state personal income tax.”
Now, it appears, Missouri Governor Jay Nixon is finally determined to change that. Nixon recently told a business group that, “This so-called border war between our two states has gone on long enough” and described it as “bad for taxpayers … bad for our state budget, and it’s not good for our economy.” Since making these statements, Kansas Governor Sam Brownback has indicated that he’s open to the idea of a truce, and the Kansas City Star explained how discussions surrounding how to implement such an agreement have been underway for more than a year.
In testimony before the National Conference of State Legislatures’ tax policy task force, the Institute on Taxation and Economic Policy (ITEP) made a strong case against the use of tax incentives to lure businesses: they often reward companies for activities they would have undertaken anyway; it’s difficult to ensure that their benefits remain entirely in-state; they often result in simply “poaching” jobs from one jurisdiction to another; and their costs can balloon far beyond what lawmakers anticipated.
The Kansas City border war is a particularly egregious example of many of these problems. Cutting back on the wasteful use of incentives is the obvious first step that Missouri and Kansas lawmakers should take; the proposed truce would be immediately helpful to both Kansas and Missouri, and in the long run could help more states recognize that there are benefits to ending the tax incentive arms race.