Kansas & Missouri Work Towards Tax Subsidy Ceasefire

New Jersey's political and business leaders should take note.

Published on Aug 1, 2016

Last month New Jersey approved over $100 million in new tax breaks to lure New York City companies across the Hudson River to Hoboken and Jersey City – the latest in decades worth of border-war subsidy offers that have saved corporations plenty of cash but done little to boost the region’s overall economy.

While New Jersey’s border war has intensified in recent years and even spread to a second front (luring jobs across the Delaware River into Camden County), business and political leaders in the Midwest are showing that there’s a better way to grow a region’s economy.

Hallmark and 16 other employers in the Kansas City area have been pushing for five years for a “ceasefire” on intrastate subsidies luring companies between Kansas and Missouri. Now, thanks in large part to the leadership of these companies, the two states are closer than ever to entering a legally binding agreement to cut back on this short-sighted and damaging economic development practice.

The 17 companies issued a powerful statement in April 2011 calling upon the two states to stop allowing companies to jump the state line and be declared creators of “new jobs” for purposes of subsidy awards.

“At a time of severe fiscal constraint the effect to the states is that one state loses tax revenue, while the other forgives it,” the letter read. “The states are being pitted against each other and the only real winner is the business who is ‘incentive shopping’ to reduce costs. The losers are the taxpayers who must provide services to those who are not paying for them.”

In July 2014, Missouri officials offered a binding two-state deal to Kansas officials, who have had 24 months to review the proposal – a window that ends this month. Kansas officials submitted a somewhat feeble counteroffer in April, and the clock is ticking for Missouri to act.

While the Kansas version is certainly less stringent than the original ceasefire proposal – including a huge loophole that would allow Kansas to still offer its most generous subsidy for cross-border moves if the company commits to spending at least $10 million for the construction of a new building – it would still be unprecedented and a step in the right direction, as nine counties in the two states would no longer see active job-piracy recruitment and most state-hopping relocations would not qualify for tax-break subsidy deals.

Regardless of what happens in the Midwest this month, business and political leaders in New Jersey, New York and Pennsylvania should consider following suit and begin actively exploring similar arrangements for the good of the region’s overall economy.