ARI SHAPIRO, HOST:
Some states offer billions of dollars in tax cuts to lure businesses across state lines. That competition often benefits shareholders more than residents. That's been especially true in Kansas City. It straddles Kansas and Missouri, and the two states have waged an economic border war for years. Now, as Frank Morris of member station KCUR reports, a truce may be on the horizon.
FRANK MORRIS, BYLINE: For almost a decade, Kansas City has been a prime example a state income tax incentives gone awry.
ANGELA SMART: Corporate welfare; it's a race to the bottom; it's wasteful spending - all of those really are true.
MORRIS: Angela Smart, vice president of the Hall Family Foundation, says a state border cutting right through the southern part of Kansas City is part of the issue.
SMART: Our state line is simply a road.
MORRIS: In fact, it's called State Line Road. I'm standing on the Missouri side now. There's an office building right here in back of me, more office buildings down the street on the Kansas side. Just after the recession, Kansas and Missouri began offering hefty new tax incentives to get companies to cross this road. Most businesses could keep almost all the state income tax they were collecting from their employees for a few years after they moved. Then five or six years later, they could move back and start all over again. It was a pretty sweet deal.
SMART: Because, typically, the moves are such short distances that employees don't move their homes or their schools.
MORRIS: Angela Smart figures the two states have waived $335 million in taxes largely to shift commuting patterns. Kansas Governor Laura Kelly says she's ready to stop it.
LAURA KELLY: Because both states, Kansas and Missouri, have been wasting millions - hundreds of millions of dollars, you know, dragging companies two blocks from one side of the state line to the other. It doesn't result in net new jobs, really, for the region.
MORRIS: In fact, it arguably hurts the region's schools, roads, quality of life. Kelly is drawing up an executive order barring the use of state income tax incentives to lure existing jobs from part of Kansas City, Mo. Missouri has already agreed to stop poaching two Kansas counties as long as Kansas goes along.
KELLY: I think it's imperative that we be good neighbors.
MORRIS: But neighborliness between states competing for companies is not normal anywhere in the U.S., according to Greg LeRoy, president of Good Jobs First, a subsidy watchdog group.
GREG LEROY: The potential that Kansas and Missouri have now to strike this agreement is earth-shattering. If it were to happen, it would be the first time in U.S. history there is a legally binding concrete solution by two states.
MORRIS: That's a big deal. LeRoy figures that state and local governments are abating $70 billion to keep and attract businesses. And most of those taxes are not addressed in the prospective agreement. And Blake Schreck, president of the Lenexa Chamber of Commerce in the Kansas City suburbs, says that agreement won't stop the economic warfare.
BLAKE SCHRECK: It's a very complex issue when you're talking about states and cities and political subdivisions and the way tax dollars flow. It's just a little tougher thing to pull off than people think.
MORRIS: And Schreck says that any agreement will be largely symbolic because either state can walk away. Greg LeRoy argues that the federal government should enforce such agreements. But that's unlikely. After all, President Trump encourages the kind of tax incentive battles that the pending truce aims to stop. For NPR News, I'm Frank Morris in Kansas City.
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