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What's the Matter With Kansas City?
A deal to end one of America's most absurd subsidy wars is finally in place.
One of the dumbest subsidy wars in America has, at least for now, come to an end.
On Tuesday, Missouri Gov. Mike Parson and Kansas Gov. Laura Kelly got together to formally call a truce in what’s known as the “Border War,” an economic conflict in which Kansas and Missouri would give tax breaks and other subsidies to companies that moved back and forth across the Kansas City metro area, which straddles the line between the two states.
“Sometimes common sense does prevail,” Parson said. “Because you don’t have to be a scientist to figure out this was a bad deal for both states.”
Indeed, it’s hard to overstate the absurdity of this situation. As I detailed in my book, companies such as AMC, Applebee’s, and Velociti claimed subsides for hopping the state line without creating anything new other than stationary and business cards with an updated address. One company, the insurance firm CBIZ, even went from Missouri to Kansas and then back to Missouri again, claiming subsidies every time, without leaving the Kansas City metro area.
According to the latest figures from the Hall Family Foundation, which has been tracking Border War fallout for years, the two states over the last decade spent $335 million on border-hopping corporations, with Kansas coming out just 1,200 jobs ahead.
This is an extreme example of something that’s endemic to corporate subsidy deals: Economic activity gets shuffled from jurisdiction to jurisdiction, so it gets registered as a boost to one local economy, but that boost is offset by a loss in the other community. One city’s gain is another city’s round of layoffs or forced uprootings. Nothing new gets created at all. It’s economic development via accounting gimmick.
Employees in Kansas City wouldn’t even move or change school districts when these deals went down; they’d just have a slightly different commute through the city. Progress!
Despite the obvious ridiculousness of the situation, it still took the two states years to knock it off, and they did so only after sustained pressure from local activists and businesses. Why? The simple reasons so many subsidy deals remain on the books even though just about every analysis shows they don’t do what they’re supposed to: Politics and fear. Each side was afraid of disarming and thus allowing the other state to steal away all its jobs and reap the political benefits.
Now, I have my quibbles with the agreement. For one, it doesn’t stop all corporate-poaching, merely those that don’t result in “net new jobs,” per the executive order Kelly signed. That seems like an opening for some chicanery, depending on how those jobs get counted and who is doing the counting. It also doesn’t apply to local incentives; localities have reason to toe the line set out by their states, but they don’t have to.
Finally, listening to the two governors, it’s clear they aren’t doing a major rethink of corporate incentives writ large, but are merely trying to take care of this one clearly goofy situation. They’re not fundamentally questioning the wisdom of bribing companies to bring jobs into their states, and whether the money spent could be used on other things that promote real economic growth and equality. Heck, Missouri recently announced a deal to bring a Bayer facility in from North Carolina, at a cost of more than $40 million to taxpayers.
But don’t get me wrong: The agreement is a very big deal. As political scientist Ken Thomas wrote, this is the first legally binding subsidy agreement between two states. Previously, there have only been voluntary agreements that states simply broke when doing so became politically convenient. In theory, Kansas City could provide a model for other metro areas, such as Charlotte or Memphis, where the same issue exists.
The truce also shows that who is in political office matters. When a similar ceasefire was proposed a few years ago, nothing came of it because then-Kansas Gov. Sam Brownback wouldn’t play ball, instead offering up a weak sauce alternative. But Kelly stepped up.
One other thing worth mentioning is that there’s still this mess, wherein Kansas and Missouri are fighting over the jobs that will result from the U.S. Department of Agriculture’s plan to shift a bunch of operations from Washington, D.C., to Kansas City for no good reason whatsoever. USDA has said state and local tax breaks are involved, without disclosing where they are coming from.
This gets to my point about how ingrained corporate subsidy competitions are. Their very existence should be questioned across the board, not just in the most absurd of instances.
But for now, at least, a truce in The Border War is worth celebrating and perhaps even emulating. Here’s hoping it holds.
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