Fact-checking the KMBC editorial in favor of the Jackson County research tax

KMBC Channel 9 came out with an editorial over the weekend that urged Jackson County voters to approve a half-cent sales-tax increase to fund translational research on November 5.

The television station’s general manager, Sarah Smith, took to the top of a parking lot at Children’s Mercy Hospital, suggesting that the structure could become the place where viewers’ loved ones could receive a newly discovered medical cure for some unspecified illness.

“Imagine this parking lot transforming into a new medical research facility in the heart of Hospital Hill,” Smith says in the editorial. “Next, imagine a cure for your loved one’s illness being discovered right here in Kansas City.”

That’s what pro-tax advocates are betting on: $40 million a year for the next 20 years funding medical research at Children’s Mercy, St. Luke’s and the University of Missouri-Kansas City that could result in some new treatment or medical cure.

Smith goes on: “The proposed new sales tax would fund a private-public partnership that would accelerate cures and create new jobs. And 20 percent of the revenue generated by the Institute (Jackson County Institute for Translational Research) would go back to Jackson County to provide indigent care.”

Two problems with this statement. First, the tax redirects 20 percent of net revenue generated by  commercialization of intellectual property from the Jackson County Institute for Translational Research, not simply revenue. Revenue is how much total money a business brings in from its activities, often from selling something on the market. Net revenue then subtracts things like discounts, commissions, taxes and certain other expenses related to the sale of a product. Often, it’s not the same thing as net profit, but it’s a smaller figure than overall revenue after it goes through the accounting sausage-grinder.

So for example, if a product made $1 billion in revenue, 20 percent of that is $200 million. If the net revenue of the same product is $400 million, 20 percent of that would be $80 million.

Oddly enough, the definition of net revenue as it applies to this tax is still being hammered out by lawyers with the November 5 election less than a month away.

Smith seems confident that the tax will “accelerate cures” and will generate money that would go back to Jackson County when neither is certain.

Secondly, saying that the 20 percent would go to indigent care sounds good, but isn’t a sure thing or the only place where that money, if it occurs, could go. The memorandum of understanding that Jackson County struck with the institutions that would benefit from the tax is full of squishy language. For example, it says that the 20 percent of the net revenue “could” go to a new nonprofit like a Jackson County Healthcare Foundation and that such an organization “could” use the money for things like “health care job creation, health care for indigent citizens, or re-investment in the Institute for years in to the future.” In other words, that 20 percent might go to indigent care, or it might not. 

Smith says the tax lasts for “only” 20 years but that the 20 percent return is indefinite. Again, it assumes that tax proponents won’t seek a renewal of the tax and it assumes that the 20 percent return will happen.

The Pitch called Smith on Monday morning to discuss her editorial but hadn’t heard back by midafternoon.

None of these issues amount to a fatal mistake for Smith’s editorial, but some of the statements present assumptions as certainties and overlook some of the complexities of the tax.