Voice For Liberty

Category: Kansas state government

  • State budget ‘gap’ is all about perspective

    By Dave Trabert, Kansas Policy Institute

    When businesses or individuals talk about cutting their expenses, it means they are going to spend less money that they did in the past. But when governments talk about budget cuts they often have a different perspective: they are spending less than they had hoped to but not necessarily less than the year before. For example, we often heard how Kansas schools had to cut their budgets last year but they still spent $12,660 per pupil, or 3.9% more than the previous year.

    “Gap” is another example of how the meaning of words differs depending upon one’s perspective. When it’s said that a tax increase is needed to close a $400 million budget “gap” in the 2011 state budget, one might reasonably assume that that means recession-driven revenue declines have created a “gap” that needs to be filled to maintain the same level of spending.

    But that is not the case. The Consensus Revenue Estimate calls for general fund revenues to decline by $122.2 million. Governor Parkinson’s budget proposal calls for spending to increase $380 million; that’s 7% more than we’ll spend this year and $1.1 billion more than we spent in FY 2005. From a revenue, or taxpayer, perspective, the gap is $122.2 million — not $400 million.

    It really does come down to perspective. Most of the proposed expenditure increase is to replace declines in federal stimulus money, so from the government’s perspective there is less money to spend unless taxes are increased. (Another way to replace those federal tax dollars is to become more efficient and reduce spending without cutting services, but the bureaucracy doesn’t seem interested in that option.)

    Governor Parkinson is proposing a significant spending increase but he deserves no blame for redefining the meaning of “gap;” his budget proposal was very forthright in explaining his rationale for spending more money. (OK, maybe he could have corrected those who are overstating the amount of the “gap” but at least he didn’t start it.)

    Whether we should raise taxes to increase spending as the governor and others are proposing is a legitimate topic of debate that needs to be held out in the open, but taxpayers need to know the truth about the details in order to make informed decisions.

    You can download more commentaries, news and publications at www.kansaspolicy.org.

  • Goal of Kansas tax reform is economic growth

    Dr. Art Hall, who is Director of the Center for Applied Economics at the University of Kansas has proposed a radical change and simplification to the Kansas tax system. Besides simplification of the way the state collects taxes, the major goal of the proposal is to encourage economic growth in Kansas.

    The goal of tax policy should be to raise the funds necessary to run government, and to do so in a way that provides the most incentive for economic growth. The accumulation of capital, which comes from savings, is the best way to promote future economic growth. Capital allows companies to expand productive capacity through making investments in machinery and technology. This leads to more jobs and higher-paying jobs. As the economist Walter E. Williams has discussed: “Ask yourself this question: who earns the higher wage: a man digging a ditch with a shovel, or a man digging a ditch using a power backhoe? The difference between the two is that the man with the backhoe is more productive. That productivity is provided by capital — the savings that someone accumulated (instead of spending on immediate consumption) and invested in a piece of equipment that helped workers to increase their output.”

    It’s important, then, that tax policy in Kansas generates revenue for the state in a way that doesn’t harm the accumulation of capital. As Hall writes: “Taxation of the resources used for future production may well lead to less future production.”

    The solution Hall proposes is a consumption tax — a comprehensive statewide sales tax — that would replace all state-level taxes in Kansas, including the personal and corporate income tax: “Because saving and investment are key elements of the growth process, consumption taxes can better promote economic growth, all else equal.”

    He explains in more depth:

    A well-crafted retail sales tax has positive attributes from the perspective of economic growth. It represents one form of a consumption tax, a form familiar to most people. Generally, consumption taxes represent a class of taxes that do not tax money used for saving and investment, regardless of the source of that money. This feature of consumption taxation differs from traditional types of income taxation. Income taxes effectively double tax the money used for saving and investment (but tax only once the money used for consumption), thereby producing a tax bias against saving and investment, which generates a disincentive to dedicate money toward future production.

    Hall writes that “A well-crafted retail sales tax would also tax all goods and services uniformly.” His proposal even includes taxing the consumption of rented and owner-occupied housing. While true to the goal of uniformity, Hall recognizes the “novelty (and probable unpopularity) of applying the retails sales tax to rented and owner-occupied housing.”

    Hall’s paper is comprehensive and includes discussion of technical issues such as “tax cascading,” where taxes on the inputs used by businesses are taxed again as intermediate goods and services make their way through production processes. There is also discussion of what Kansas could do to make the consumption tax progressive, if that is desired. Border considerations are discussed, too.

    Currently the statewide sales tax in Kansas is 5.3%. (Counties and cities may impose additional sales tax on top of that. In Wichita the combined rate is 6.3%, for example.) Depending on the details of the consumption tax that Kansas might implement, the rate could range from 6.77% to 9.99% (those figures calibrated to produce the same revenue that the state collected in 2008).

    What would be the impact on economic growth in Kansas? Simulations conducted by Hall indicate that growth in private-sector employment could be in the neighborhood of seven to eight percent per year, depending on the type of plan and phase-in period. This is tremendous growth, especially in light of the fact that private-sector job growth in Kansas has been stagnant or declining for many years. Private-sector investment and take-home pay would rise less rapidly, but at a strong rate.

    Currently there is no bill in the Kansas Legislature that would implement a plan like this. It’s thought that an amendment to the Kansas Constitution would be necessary to soundly implement this policy. The amendment, ideally, would prohibit any income tax. Without this constitutional protection, lawmakers could reimpose either personal or corporate income taxes at any time.

    Dr. Hall’s paper may be read at A Comprehensive Retail Sales Tax as a Single Tax for the State of Kansas.

  • Kansas model budget released

    The Kansas Chapter of Americans for Prosperity has released its model Kansas budget for fiscal year 2011. Titled Commonsense Budget Proposal, it contains “a roadmap for legislators seeking to make Kansas government more efficient — and less costly — without turning to Kansas taxpayers,” according to AFP Kansas state director Derrick Sontag.

  • Kansas bill would forbid taxpayer-funded pleas for tax increases

    A bill just introduced in the Kansas Legislature by Representative Joe Patton, a Topeka Republican, would bar taxpayer-funded lobbying for tax increases. The bill is House Bill 2622, captioned “an act concerning the use of public funds for lobbying.”

    The bill is very short, the important part being: “No taxpayer funds shall be used for the purpose of employing or contracting for the services of any person whose duty and responsibility includes lobbying for a tax increase.”

    Taxpayer-funded lobbying is a problem. In 2008 Alan Cobb — at that time Americans For Prosperity Kansas State Director — wrote an op-ed explaining the harm of taxpayer-funded lobbying. In it he wrote: “It’s proper for private citizens and groups to petition their government, but should one government be ‘petitioning’ another? Do you agree with the things they are lobbying for? Do you even know?”

    I’d guess that most citizens don’t know about this, and that many would not agree with what their tax dollars are being used to push on the legislature.

    While the bill uses the word “person,” many organizations that are funded by taxpayers lobby for tax increases. An example would be the Kansas Association of School Boards (KASB), which is funded primarily by dues paid by member school boards. Those payments come from tax dollars. This bill would block those lobbying activities by those organizations, because it is people that do the actual lobbying, and the bill forbids that.

    Other articles about this topic include Testimony against taxpayer-funded lobbying, Wichita school bond issue not the only proposed tax increase, and Tax funded lobbyists spending revealed.

  • Kansas sales tax increase would cost jobs

    The Goldwater Institute has issued a report on the lost jobs that an increase in the Arizona sales tax would cause. According to projections by the Beacon Hill group, the one cent increase in the sales tax would bring in $1 billion annually to Arizona state government. But the cost of this sales tax would be 14,400 private sector jobs.

    Arizona has about 2.3 times the population of Kansas, so a similar analysis would probably show fewer jobs lost in Kansas. But the number would still be high, we can be sure.

    Taxes on transactions — that’s what a sales tax is — drive a wedge between buyer and seller. The result is that fewer transactions occur. That leads to a loss of jobs.

    Additionally, more money in the hands of government means less in the hands of the private sector. Wealth is lost as inefficient and ineffective government spending replaces private spending and investment.

    We should also be accurate in reporting the magnitude of the proposed sales tax increase in Kansas. Proponents often say it’s just one percent. In reality, it’s an increase of one cent on every dollar spent. As the current Kansas statewide sales tax is 5.3 cents on each dollar spent, increasing that by one cent to 6.3 cents is a tax increase of 18.9%.

  • Kansas scores poorly in initiative and referendum rights

    Citizens in Charge Foundation — a transpartisan national voter rights group focused on the ballot initiative and referendum process — has released its 2010 Report Card on Statewide Voter Initiative Rights. Those familiar with Kansas will not be surprised to learn that our state scores poorly, as do many other states.

    Why are initiative and referendum rights important? The report’s introduction tell us:

    As governments have grown at local, metropolitan, state, and federal levels, the power of entrenched factions has also grown, vis-à-vis the citizenry. Traditional representative government has proven unreliable in restraining itself constitutionally, often to the point of uniting all branches of America’s distributed powers against the very people it was meant to serve. Institutions of direct democracy have evolved to help restore this balance of power, in effect fulfilling a basic promise of republican governance: The right to petition government. Initiative and referendum thus serve as an expansion and perfection of one of the most basic principles of a limited republic.

    About Kansas, the report says: “Kansas citizens do not have any statewide initiative and referendum rights. A majority of state citizens do enjoy local initiative and referendum rights.”

    The local rights referred to are limited. The bar for local I&R in Kansas is set pretty high, and it’s difficult to exercise these rights.

    The reports says that Kansas should do these things:

    • Allow citizens to propose state constitutional amendments.
    • Allow citizens to propose state laws.
    • Allow citizens to put acts passed by the legislature to a referendum vote.

    Kansas Governor Joan Finney pushed for initiative and referendum in 1991, but the measures, which require amending the Kansas Constitution, failed to get the required two-thirds vote in the Kansas House of Representatives.

  • Kansas taxes have impact

    Do Kansas taxes have an impact on business location decisions? Are Kansas taxes lower than surrounding states, as claimed by supporters of raising Kansas taxes?

    Here’s an answer: “A QuickTrip store near the Kansas-Missouri line was rebuilt so the store and gasoline storage tanks were in Missouri to avoid higher taxes and more regulations in Kansas. One estimate is the store will save about $1.4 million a year from this short move.”

    From Kansas Watchdog TV.

  • Kansas tax alert system launched

    The Kansas chapter of Americans for Prosperity has created an information system to help keep Kansans notified when legislators propose to increase taxes.

    According to AFP: “AFP’s Kansas Tax Alert will notify you when a state representative or state senator sponsors legislation that will increase taxes. You will be just a few clicks away from letting that legislator know how you feel about the proposal to increase your tax burden.”

    To register for the system, click on Kansas tax alerts.

  • Cause of Kansas budget gap is spending

    Kansas Governor Mark Parkinson says Kansas has a $400 million budget gap, and he’s proposed increasing sales and cigarette taxes to close it.

    The source of nearly all this gap is the governor’s proposal for increased spending in the fiscal year 2011 budget. State general fund spending for FY 2010 — that’s the current budget year we’re a little more than halfway through — is estimated to be $5,451.1 billion, according to the governor’s budget report release a few weeks ago.

    For FY 2011, the governor proposes to spend $5,831.1 billion, which is $380 million more than spending this year.

    There’s nearly all the $400 million gap right there.

    Revenue is projected to fall next year by $122 million, according to the budget report.

    If we could hold spending steady for next year — and remember that inflation is running at very low levels — we could get by without a tax increase. If the governor and the legislature would consider tapping some of the available Kansas fund balances, we could even increase spending without tax increases.