USDA building
Patrick Tuohey

The announcement that the USDA has chosen a location in Kansas City, Missouri was met with satisfaction by political leaders in Missouri. Port KC, the Kansas City port authority, also seems satisfied—and it stands to make a killing.

The USDA office is moving into 805 Pennsylvania, a piece of land designated an Advanced Industrial Manufacturing (AIM) Zone by Port KC. According to state statute, this designation allows 50 percent of the state withholding tax collected from the new jobs to be redirected to the USDA, totaling just over $26 million dollars, per The Kansas City Star. To offset the cost of developing the site for a new employer, Port KC is allowed to charge an administrative fee of 20%, which comes to $6 million dollars in this case.

But wait, there is another subsidy for the project, this time coming from Kansas City taxpayers. From the Star:

On top of that, Kansas City could offer up to $6 million through the redirection of 75% of city taxes, according to a document outlining the local and Port KC incentives obtained by The Star. The Kansas City Council would have to vote to approve the redirection of local taxes for the USDA relocation; an ordinance is expected within weeks.

“City taxes” and “local taxes” are euphemisms for the earnings tax, as there will be precious little other tax generated at the USDA site. Kansas City leaders, who argue breathlessly that the earnings tax is such a vital source of income for things like public safety, are willing to forgo $6 million of earnings tax revenue for the USDA.

There is a better way. If city leadership wanted to protect Kansas City taxpayers from losing vital tax dollars, council members would demand—and Port KC would agree—to waive its administrative fee, which is coincidentally the same amount that city taxpayers are being asked to give up. Without such a demand by the city council, however, this deal includes a transfer of millions of dollars from Kansas City taxpayers into Port KC’s pocket.

 

About the Author

Patrick Tuohey
Patrick Tuohey
Senior Fellow of Municipal Policy

Patrick Tuohey works with taxpayers, media, and policymakers to foster understanding of the conse