An open letter to Waddell & Reed Employees:
The Kansas City Star has reported that your employers at Waddell & Reed have agreed to move its corporate headquarters from Kansas into Missouri, in return for as-yet-unspecified economic incentives from the Missouri Department of Economic Development. This may mean a nicer corporate headquarters and maybe a slightly longer commute. (Tip: Avoid Wornall Road at all costs.)
There are tax implications, too. Although you will now pay your income taxes to Missouri instead of Kansas, the amount will be about the same. A household with a $157,000 annual income — about the average salary of the jobs moving to Missouri, if we treated this as total compensation — would have paid about $8,192 in state income tax to Kansas. Now that the headquarters is moving, that same household will pay $8,036 in state income tax to Missouri, a savings of $156.
But the 1% Kansas City earnings tax will add $1,570 to your tax liability. You won’t be able to vote against that tax unless you sell your house and move into the city limits, and we all know you aren’t going to do that.
The specifics of the deal are not yet public, but we know there are no new jobs being created anywhere. After laying off 158 employees, Waddell & Reed will move the surviving 1,039 positions a few miles from Johnson County, Kansas, into Jackson County, Missouri. To the bureaucrats in the Missouri Department of Economic Development, those are new jobs and help them look like they are growing Missouri’s economy, even though everyone knows it’s little more than sleight-of-hand accounting. (See also, H&R Block headquarters subsidies.)
Local and state policymakers have known for a long time that these types of incentive battles are foolish, but no one wanted to disarm unilaterally. When the governors of Missouri and Kansas agreed to end exactly this type of economic border war skirmish a few weeks ago, Missouri Gov. Mike Parson said, “Sometimes common sense does prevail.”
Sometimes, but not this time. Apparently, this deal is exempted from the truce because the negotiation started earlier.
Not only is Missouri leadership offering your bosses an incentive they know isn’t adding anything to the economy, but it also appears the Missouri Department of Economic Development doesn’t actually know where Overland Park is located in Kansas. An actual statement from the department’s spokeswoman — and I am not making this up — says of the deal with Waddell & Reed: “We want to make the Kansas City region an economic powerhouse … so we’re happy business is coming to the region. It supports both Missouri and Kansas, so it’s a positive thing for both states.”
Of course, Overland Park is already in the Kansas City region. One wonders if the department’s spokeswoman has ever visited Kansas City or looked at it on a map. Fortunately for her, state and local economic development agencies aren’t big sticklers for accuracy.
The incentive offered by Missouri may allow Waddell & Reed management to keep your state withholding taxes to offset the cost of whatever they build in Kansas City. In effect, your bosses are exposing you to higher taxes so they can reap the rewards. Don’t think of it as a tax increase; think of it as an elaborate pay cut.
As for your longer commute, gas is cheaper in Missouri. So there’s that.
Patrick Tuohey is director of municipal policy at the Show-Me Institute, a 501(c)(3) nonprofit dedicated to promoting free markets and individual liberty.