An ongoing study reports that property taxes on commercial and industrial property in Wichita are high. In particular, taxes on commercial property in Wichita are among the highest in the nation.
Click for larger.
The study is produced by Lincoln Institute of Land Policy and Minnesota Center for Fiscal Excellence. It’s titled “50 State Property Tax Comparison Study” and may be read here. It uses a variety of residential, apartment, commercial, and industrial property scenarios to analyze the nature of property taxation across the country. I’ve gathered data from selected tables for Wichita.
In Kansas, residential property is assessed at 11.5 percent of its appraised value. Commercial property is assessed at 25 percent of appraised value, and public utility property at 33 percent. (Appraised value is the market value as determined by the assessor. Assessed value is multiplied by the mill levy rates of taxing jurisdictions to compute tax.)
This means that commercial property faces 2.104 times the property tax rate as residential property, according to this study. (1)The ratio of 25 to 11.5 is 2.174, so some small factors have a role. The U.S. average is 1.713. Whether higher assessment ratios on commercial property as compared to residential property is desirable public policy is a subject for debate. But because Wichita’s ratio is high, it leads to high property taxes on commercial property.
For residential property taxes, Wichita ranks below the national average. For a property valued at $150,000, the effective property tax rate in Wichita is 1.19 percent, while the national average is 1.34 percent. The results for a $300,000 property were similar.
Of note is the property taxes on a median-valued home. In this case, Wichita is a bargain, due to our lower housing prices. A home at the median value in Wichita pays $1,655 in taxes, while the nationwide average is $4,562. (The median home value in Wichita is $139,800 and for the nation, $326,392, according to this report.)
Looking at commercial property, Wichita taxes are high. For example, for a $100,000 valued property, the study found that the national average for property tax is $2,206 or 1.84 percent of the property value. For Wichita the corresponding values are $3,229 or 2.69 percent, ranking seventh-highest among the 50 largest cities. Wichita property taxes are 46 percent higher than the national average, for this scenario.
For industrial property taxes, the situation in Wichita is better, with Wichita ranking near the middle of the 50 largest cities. For an industrial property worth $1,000,000, taxes in Wichita are $29,372. The national average is $30,498.
An ongoing study reports that property taxes on commercial and industrial property in Wichita are high. In particular, taxes on commercial property in Wichita are among the highest in the nation.
Click for larger.The study is produced by Lincoln Institute of Land Policy and Minnesota Center for Fiscal Excellence. It’s titled “50 State Property Tax Comparison Study, June 2017” and may be read here. It uses a variety of residential, apartment, commercial, and industrial property scenarios to analyze the nature of property taxation across the country. I’ve gathered data from selected tables for Wichita.
In Kansas, residential property is assessed at 11.5 percent of its appraised value. Commercial property is assessed at 25 percent of appraised value, and public utility property at 33 percent. (Appraised value is the market value as determined by the assessor. Assessed value is multiplied by the mill levy rates of taxing jurisdictions to compute tax.)
This means that commercial property faces 2.18 times the property tax rate as residential property. The U.S. average is 1.67. Whether higher assessment ratios on commercial property as compared to residential property is desirable public policy is a subject for debate. But because Wichita’s ratio is high, it leads to high property taxes on commercial property.
For residential property taxes, Wichita ranks below the national average. For a property valued at $150,000, the effective property tax rate in Wichita is 1.22 percent, while the national average is 1.39 percent. The results for a $300,000 property were similar.
Of note is the property taxes on a median-valued home. In this case Wichita is a bargain, due to our lower housing prices. A home at the median value in Wichita pays $1,513 in taxes, while the nationwide average is $3,343. (The median home value in Wichita is $124,400, and for the nation, $262,772, according to this report.)
Looking at commercial property, Wichita taxes are high. For example, for a $100,000 valued property, the study found that the national average for property tax is $2,319 or 1.93 percent of the property value. For Wichita the corresponding values are $3,261 or 2.72 percent, ranking ninth highest among the 50 largest cities. Wichita property taxes are 41 percent higher than the national average, for this scenario.
For industrial property taxes, the situation in Wichita is better, with Wichita ranking near the middle of the 50 largest cities. For an industrial property worth $1,000,000, taxes in Wichita are $29,681. The national average is $32,264.
An interactive visualization of tax collections by state governments.
Each year the United States Census Bureau collects data from the states regarding tax collections in various categories. I present this data in an interactive visualization.
The values are for tax collections by the state only, not local governmental entities like cities, counties, townships, improvement districts, cemetery districts, library districts, drainage districts, watershed districts, and school districts.
Of particular interest is the “Total by State” tab. Here you can select a number of states and compare their tax burdens. (Probably three or four states at a time is the practical limit.) This data is presented on a per-person basis.
From this data we can see a number of valuable comparisons. For example, it is often said in Kansas that we can’t eliminate our income tax as has Texas, because we don’t have as much oil severance tax revenue. From the data we see that Texas collected $84 per person in severance tax, while Kansas collected $17 per person. This difference is much smaller than the difference in total tax collections between these states.
Similarly, when comparing Kansas to Florida — which like Texas has no income tax — the large amount of tourism in Florida is said to generate enough revenue to allow zero income tax. But, in 2016 Florida collected $1,081 per person in sales tax, while Kansas collected $1,115 per person. Florida does not collect sales tax on groceries, so it may be that visitors pay more of the sales tax burden. But, Kansas still collects more sales tax on a per-capita basis, and Kansas collects much more tax in total than Florida, again on a per-capita basis.
Effective July 1, 2015, the tax on cigarettes in Kansas rose by $0.50 per pack, going from $0.79 to $1.29 per pack. For the three years prior to that date cigarette tax collections averaged about $7.5 million per month. Since then collections has averaged about $11.1 million per month. But, as the chart shows, the trend is down. For February 2017 collections were $8.7 million, almost exactly the same as the month before the tax hike took effect.
An interactive visualization of tax collections by state governments.
Note: this visualization has been updated. Click here for the most recent version.
Each year the United States Census Bureau collects data from the states regarding tax collections in various categories. I present this data in an interactive visualization.
The values are for tax collections by the state only, not local governmental entities like cities, counties, townships, improvement districts, cemetery districts, library districts, drainage districts, watershed districts, and school districts.
Of particular interest is the “State Total” tab. Here you can select a number of states and compare their tax burdens. (Probably three or four states at a time is the practical limit.) This data is presented on a per-person basis.
The example shown below compares Kansas and Colorado. Many might be surprised to know that tax collections in Kansas are higher than in Colorado, on a per-person basis.
Is there a relationship between marginal tax rates and tax dollars collected?
The top marginal tax rate — that’s the rate that applies to high income earners on most of their income — was above 90 percent during most of the 1950s. From 2003 to 2012 it was 35 percent, and is now 39.6 percent. Some see that as a lost opportunity. If we could return to the tax rates of the 1950s, they say, we could generate much more revenue for government.
The top marginal tax rate is the rate that applies to income. It’s not the same as what is actually paid. This fact is unknown or ignored by those who clamor for higher taxes on the rich.
Top marginal tax rates and tax paid. Click for larger.A nearby charts illustrates the lack of relationship between the top marginal income tax rate and the income taxes actually paid. (Click chart for larger version.)
The top marginal tax rate has varied widely. But since World War II, the taxes actually collected, expressed as a percentage of gross domestic product, has been fairly constant. In 1952 the top tax rate was 92.0 percent, and income taxes paid as a percent of GDP was 18.5 percent. In 2007, for example, the top rate was 35.0 percent, and income taxes paid as a percent of GDP was 17.9 percent.
Try as we might, raising tax rates won’t generate higher revenues (as a percentage of gross domestic product), due to Hauser’s law.
W. Kurt Hauser explains in The Wall Street Journal: “Even amoebas learn by trial and error, but some economists and politicians do not. The Obama administration’s budget projections claim that raising taxes on the top 2% of taxpayers, those individuals earning more than $200,000 and couples earning $250,000 or more, will increase revenues to the U.S. Treasury. The empirical evidence suggests otherwise. None of the personal income tax or capital gains tax increases enacted in the post-World War II period has raised the projected tax revenues. Over the past six decades, tax revenues as a percentage of GDP have averaged just under 19% regardless of the top marginal personal income tax rate. The top marginal rate has been as high as 92% (1952-53) and as low as 28% (1988-90). This observation was first reported in an op-ed I wrote for this newspaper in March 1993. A wit later dubbed this ‘Hauser’s Law.’”
For many people, there is a direct relationship between tax rates and the amount of tax paid. For workers who earn a paycheck, there’s not much they can do to change the timing of their income, find tax shelters, or shift income to capital gains. When income tax rates rise, they have to pay more.
But people with high incomes can use these and other strategies to reduce the taxes they pay. In fact, there is an entire industry of accountants and lawyers to help people reduce their tax. Often — particularly in the past when top marginal rates were very high — investments and transactions were made solely for the purpose of avoiding taxes, not for productive economic benefit.
People react to changes in tax law. As tax rates rise, people seek to reduce their taxable income, and make investments in unproductive tax shelters. There is less incentive to work and invest. These are some of the reasons why tax hikes usually don’t generate the promised revenue.
But: High tax rates make the middle class feel better about paying their own taxes. With top tax rates of 90 percent, they may believe that the rich are paying a lot of tax. The middle class may take comfort in the fact that someone else is worse off. But that is based on the misconception that high tax rates mean rich people actually pay correspondingly higher tax.
This means that commercial property faces 2.18 times the property tax rate as residential property. The U.S. average is 1.67. Whether higher assessment ratios on commercial property as compared to residential property is desirable public policy is a subject for debate. But because Wichita’s ratio is high, it leads to high property taxes on commercial property.
Looking at commercial property, Wichita taxes are high. For example, for a $100,000 valued property, the study found that the national average for property tax is $2,319 or 1.93 percent of the property value. For Wichita the corresponding values are $3,261 or 2.72 percent, ranking ninth highest among the 50 largest cities. Wichita property taxes are 41 percent higher than the national average, for this scenario.
This means that commercial property faces 2.18 times the property tax rate as residential property. The U.S. average is 1.67. Whether higher assessment ratios on commercial property as compared to residential property is desirable public policy is a subject for debate. But because Wichita’s ratio is high, it leads to high property taxes on commercial property.
Looking at commercial property, Wichita taxes are high. For example, for a $100,000 valued property, the study found that the national average for property tax is $2,319 or 1.93 percent of the property value. For Wichita the corresponding values are $3,261 or 2.72 percent, ranking ninth highest among the 50 largest cities. Wichita property taxes are 41 percent higher than the national average, for this scenario.
