This paper examines and estimates how the taxes levied on individual earnings in St. Louis and Kansas City affect population and employment growth in the cities, their respective metro areas, and the state of Missouri. These 1-percent earnings taxes are levied on those who live or work in the cities and have been shown to have had significant negative effects on the allocation of income and population. The purpose of this paper is to update and consolidate the examination of earnings taxes so that policymakers and the general public have the most-recent and most-comprehensive picture that is possible with available data.

This paper examines whether growth in outstate Missouri (all areas not included in the two metro areas) can be predicted by the levels of growth in the metro areas. Because predictability would be consistent with a causal link between the economies of the metro areas and outstate Missouri, economic events in the metro areas might be of greater interest to the rest of the state than is usually thought. In terms of policy, causality would, among other things, strengthen arguments that the state as a whole (and thus state government) has an interest in local-level economic policymaking within the Saint Louis and Kansas City metro areas.

This report summarizes the Heartland’s recent economic performance relative to the rest of the United States. I focus on two key economic indicators: total population change since 1969 and net domestic migration measured using earning capacity instead of population. I find that the Heartland’s metropolitan areas are significantly lagging the entire rest of the nation in working-age population and working-age earning capacity growth. I also find that the Heartland’s nonmetropolitan areas are in absolute decline when viewed through the lens of working-age population and earning capacity. Unlike the metropolitan performance, however, there is nothing exceptional about the non-metropolitan decline. My analysis indicates that Missouri’s rural areas are performing slightly better than the region and most neighboring states.

The purpose of this paper to examine the data on economic growth across cities in the United States to see if the data supports the notion that cities are major contributors to their state’s economic growth. We find that even though cities account for a disproportionate amount of economic growth in a majority of states, merely having a metropolitan area (or two) in your state does not guarantee economic success for the state. As we narrow the focus to Missouri, we find that over the past two decades not one metropolitan area in Missouri ranks higher in growth rates than 197th out of the 385 metro areas across the United States. In addition, we look at some policy decisions that might account for why some metropolitan areas grow at a lower rate than others do. We look into a specific policy, the imposition of an earnings tax. Since Kansas City and St. Louis city both levy such an earnings tax, such an analysis is not without immediate importance.

This paper uses publicly available datasets from federal government agencies to explore differences in income inequality across rural and urban Missouri in the aftermath of the Great Recession to better understand how these factors are associated with relative job loss and job recovery. Previous work has explored various explanations for Missouri’s weak economic performance; could income inequality be a contributing factor? I find that Missouri has lower income inequality than the nation, largely from a lack of high-wage jobs. Missouri, and especially rural Missouri, obtains lower income inequality primarily through a lack of high-income households. Across the nation, rising income inequality is concentrating wealth and constraining consumption. Examining the state across multiple measures, Missouri’s residents have limited abilities to consume and invest, which inhibits economic growth. Low median household incomes and a lack of highly paid jobs are all contributing to slow population growth and slow or negative employment change during the past two national recessions. These challenges are present in both rural and urban areas of the state.

This paper identifies the trends and differences in entrepreneurship between Missouri’s metropolitan and nonmetropolitan (rural) areas to better inform policy intended to promote economic development through entrepreneurship. We examine three different entrepreneurship proxies across time, with a focus on how to best encourage rural entrepreneurship and its resilience going into the next business cycle. We also examine the geography of entrepreneurship in Missouri and highlight areas where greater entrepreneurship may offer a sustainable path to greater economic development. This is important for policymakers to consider, because the “entrepreneurial” businesses in rural Missouri offer communities the goods and services often associated with increases in rural qualityof-life (e.g., café, grocery store, farmers’ market) and help maintain a vibrant sense of place in rural communities. It is this sense of place that is essential to retain other businesses in rural communities, a phenomenon known as place-making.

The cities of St. Louis and Kansas City, Missouri, impose a 1 percent tax on residents’ earnings and non-residents’ earnings within the cities. This paper provides estimates of the effects of these taxes on the parts of Missouri outside the two metro areas. I estimate that over the decade from 2000 to 2010 the earnings taxes in Kansas City and St. Louis reduced household employment in the taxing cities by about 14,500, and by about 34,700 in the Missouri portions of their surrounding metro areas. When the link between the St. Louis metro area and outstate Missouri is considered, the statewide employment loss from the cities’ earnings taxes rises to 60,500, or about two-thirds of the state’s total employment loss over the decade. In all, about three quarters of the employment losses from the two cities’ earnings taxes were felt outside of the cities themselves, and nearly one fifth was felt in outstate Missouri.

This report provides an analysis and evaluation of the proposed city-county consolidation in St. Louis. The report draws upon theoretical research considering the impact of local government consolidations on efficiency, equity, spillovers, and development. Where possible, we connect the ideas from the academic literature to arguments made regarding the situation in St. Louis. After exploring both the theoretical reasons for and against consolidation, we consider the real-world empirical evidence. Although city-county consolidations sometimes lead to positive outcomes, often they do not. Importantly, the context of consolidation matters. By understanding the importance of context with consolidations, we conclude with five lessons for citizens and policymakers in St. Louis drawn from our understanding of the relevant research. Although there are local government problems in St. Louis, city-county consolidation is not necessarily the only or best way forward.

Because the Saint Louis and Kansas City metro areas together account for well over half of Missouri’s economy, the overall performance of the state is largely determined by the two metro areas. In this study, I see whether the metro areas are important to the state beyond their relative sizes. That is, I test whether employment growth in the rest of Missouri tends to follow (or be caused by) employment growth in the metro areas. According to my results, growth in outstate Missouri tends to be caused by growth in the Saint Louis metro area. More precisely, if an event leads to 1,000 more people being employed in Saint Louis, there should be about 270 more people employed in outstate Missouri in the following year. Put another way, if for a given year Saint Louis employment grew at the same rate as the average U.S. metro area, it would see an employment increase of 19,000 instead of its usual average of 4,500. The extra employment in St. Louis should generate additional employment of about 4,200 for outstate Missouri.

This study provides estimates of the effect of earnings taxes in Saint Louis and Kansas City on population growth in the two cities and their surrounding metro areas. The results of this analysis are consistent with the proposition that the earnings taxes had negative effects on population growth in the City of Saint Louis and Kansas City, and positive effects on the rest of their metro areas. In net, the estimates indicate that the metro areas lost population because of their central cities’ earnings taxes. Given the significant negative relationship between earnings taxes and population growth in Saint Louis City and Kansas City, and the need to raise revenue to finance essential services, it is natural to ask what the cities should do instead. The answer to this question may lie in looking to the policies of other cities who have successfully raised raised revenue in less deleterious ways than the earnings tax employed by Saint Louis City and Kansas City.