Voice For Liberty

Category: Taxation

  • Affording Tax Cuts, or Whose Money Is It, Anyway?

    The logic of paygo for taxes is backward, in that it starts from the assumption that all tax revenue is Washington’s in the first place and thus any tax cuts must be “offset” so Congress can be made whole. But of course the money belongs to the taxpayers who earned it, and the burden ought to be on the politicians to spend less so Americans can keep more. Republicans claim to believe this. (“Budget Irresolution,” The Wall Street Journal, March 14, 2005)

    “Paygo” refers to the “pay-as-you-go” budget rules, which require that any tax cuts be offset by other tax increases. Alternatively, we often hear politicians at all levels claim that we can’t afford tax cuts.

    If we stop and think for a moment, we should easily be able to recognize the absurdity of politicians claiming we can’t afford tax cuts. The mindset behind this is that the tax money belongs to the government in the first place, and if we are lucky enough, the politicians might cut our taxes a little, if they decide they can afford it.

    As the Wall Street Journal editorial rightly says, the money is ours to begin with! How have we descended to the level where politicians don’t understand this, that is the taxpayer that can’t afford to pay taxes, that taxes are a drain on the growth of our economy?

    Part of the answer may be found in the small book “The Law” by Frederic Bastiat. A link to an online version of it may be found on the “Other websites, resources” section of this website.

  • Testimony in Opposition to Senate Bill 58

    From John Todd.

    Members
    House Taxation Committee
    State Capitol
    Topeka, Kansas 66612

    Subject:
    Testimony in OPPOSITION TO SENATE BILL #58 (Sales Tax Increase For The Proposed Downtown Wichita Arena).

    My name is John Todd. I am a self-employed real estate broker from Wichita, and I come before you in opposition to the enabling legislation that would allow Sedgwick County to raise the local sales tax 1% to fund a new Downtown Arena in violation of current state law.

    Under current state law, Counties in Kansas are not authorized to raise county sales taxes for projects like the proposed Downtown Wichita Arena without first obtaining the required legislative approval prior to any vote of the public. A public vote advertised as non-binding was held in Sedgwick County on November 2, 2004 without the legislative approval as required by law, and now Sedgwick County officials are asking you to approve this illegal vote retroactively to the November General Election.

    Before you consider the favorable passage of Senate Bill #58 into law that would make an illegal vote legal, ex post facto, after the fact, and retroactively, you really ought to consider what was the original legislative intent of the current state law in the first place, and whether it is good precedence to allow counties to decide which laws to obey and which to ignore. Does anyone suppose that the intent of the current law was a desire on the part of prior legislators to exercise some modest control over a counties ability to “approve” massive sales tax hikes on it’s citizens, particularly for non-essential entertainment venues like arenas? Do you, as legislators not have a fiduciary responsibility to your constituents and the people of Kansas by demanding that local governmental units follow the rule of law in the same manner as you expect citizens to follow the law? If the current statute is flawed, perhaps you should be working to correct those flaws before you allow Sedgwick County to break the law?

    The solution to this problem is for you to reject Senate Bill #58 or at a bare minimum, I would suggest that you amend the Bill by approving the 1% sales tax subject to new vote of the people, as current state law requires. Local governmental units should not be allowed to selectively ignore the state law(s) they chooses not to follow by essentially placing themselves above the law. This sets bad legislative precedence, and you should not allow it to happen.

    Sincerely,

    John R. Todd

  • Testimony regarding House Bill No. 2132

    Written testimony of Bob Weeks regarding House Bill No. 2132. A pdf version is available here: http://wichitaliberty.org/files/House_Bill_2132_Testimony_by_Bob_Weeks_2005-03-10.pdf

    March 10, 2005

    Thank you for allowing me to present this written testimony. I realize that the voters in Sedgwick County voted for the arena sales tax increase. I believe, however, there is ample reason why you should vote against the tax. The idea of the taxpayer-funded arena came about so fast in the summer of 2004 that there was little thought given to the underlying issues. I wish to present what my research has uncovered.

    WSU Study Not Complete

    On of the main arguments advanced for having all the residents of Sedgwick County pay to build the arena was a study prepared by the Center for Economic Development and Business Research at Wichita State University. The study claimed a large economic benefit from the arena. It is because of this economic benefit that arena supporters say the entire community should pay to build the arena. This study, however, is incomplete in two important areas: its lack of depreciation accounting, and it ignores the substitution effect.

    No Depreciation Accounting

    Government Accounting Standards Board Statement 34 requires governments to account for the cost of their assets, usually by stating depreciation expense each year. Through a series of email exchanges with Mr. Ed Wolverton, President of the Wichita Downtown Development Corporation, I have learned that the WSU Center for Economic Development and Business Research was not aware of this requirement when they prepared their study. Mr. Wolverton admitted this after checking with the study authors. Furthermore, Mr. Chris Chronis, Chief Financial Officer of Sedgwick County, in an email conversation told me that the county will take depreciation expense for the downtown arena. I do not know what a figure for depreciation expense would be, but it would likely be several million dollars per year, and it would materially and substantially change the arena’s financial footing.

    No Substitution Effect Allowed For

    In a television new story reported by Mr. Erik Runge of KWCH Television on October 25, 2004, I was interviewed, and I mentioned the substitution effect. This is the term used to describe what research has found: that much of the new economic activity such as bars and restaurants that might appear around a downtown arena would be bars and restaurants that have moved from other parts of the city. There is little or no new economic activity, just movement of existing activity. Mr. Runge interviewed Mr. Ed Wolverton, President of the Wichita Downtown Development Corporation, who said “In WSU’s report they felt like there definitely could be some substitution effect.” The reporter explained “But how much was never studied. Downtown development backer Ed Wolverton says mostly due to time restraints.”

    These two glaring omissions of materially important facts by the WSU study should lead us to question its other findings. Other than the report on KWCH, I saw no reporting of these two matters.

    Claimed Economic Benefit is Not Realized

    Arena supporters say that everyone should pay to build and operate the arena because it will generate economic impact that everyone will benefit from. The economic benefit claimed by arena supporters, however, has not been found to materialize in other cities. In the March 2001 issue of “FedGazette,” published by the Federal Reserve Bank of Minneapolis, an article titled “Stadiums and convention centers as community loss leaders” contains this quote:

    “Current research indicates that stadiums and arenas have a particularly bad track record when it comes to delivering on promises of community economic windfalls. University researchers Mark Rosentraub and Mark Swindell found that three decades worth of studies ‘lead to the inescapable conclusion that the direct and indirect economic impacts of sports teams and the facilities are quite small’ and do not create much in the way of new jobs or economic development.”

    In a paper titled “Professional Sports Facilities, Franchises and Urban Economic Development” (UMBC Economics Department Working Paper 03-103) by Dennis Coates and Brad R. Humphreys of the University of Maryland, Baltimore County we find this quote:

    “Siegfried and Zimbalist (2000) recently surveyed the growing literature on retrospective studies of the economic impact of sports facilities and franchises on local economies. The literature published in peer-reviewed academic journals differs strikingly from the predictions in ‘economic impact studies.’ No retrospective econometric study found any evidence of positive economic impact from professional sports facilities or franchises on urban economies.”

    Arena Tax Requires Everyone to Subsidize the Interests of a Few

    Since, as current research has found, arenas do not generate the positive economic impact that their supporters claim, the arena tax instead becomes the public as a whole subsidizing the leisure activities of a relatively small number of people. The people who do use the arena, moreover, are quite easy to identify: they purchase tickets to events, or they pay to rent the arena. It is these people who should pay the full cost of the arena construction and operation.

    Local Officials Not Truthful

    Sedgwick County Commissioners stated that if the downtown arena sales tax did not pass, they would borrow money to renovate the Kansas Coliseum. If we do the math on the figures they quoted, that is to borrow $55 million and pay it back at $6.1 million a year for 20 years, we find that the interest rate is 9.17%, which is a terribly high interest rate for a government to pay. The county commissioners told us they were ready to pay this much if the arena tax didn’t pass.

    I wrote to Sedgwick County Commissioner Tom Winters, asking him for an explanation. He replied that the interest rate is really 7.5% for this reason: To the $55.3 million cost of the renovations, we must add $6.5 million for capitalized interest during the construction period, and $.9 million for debt issuance costs. So yes, Commissioner Winters is correct about the 7.5% rate, but this also means that the cost of the Coliseum renovations should be stated as $62.7 million instead of $55 million. But even 7.5% interest is too high to pay.

    What is troubling is that local government officials are not being truthful with the public.

  • GOP and ex-GOP Legislators Promoting Higher Kansas Taxes

    From Karl Peterjohn, Executive Director Kansas Taxpayers Network

    In a March 4 report on Democrat Washington Day events in Topeka, Hawver News Editor Martin Hawver told about two well known Republicans involved in this statewide Democratic Party event. First is former state representative and former house majority leader Joe Hoagland, ex-Rino Johnson County, who told Democrats that, “I’m never going back,” to the KS GOP. Hoagland also claimed that there were a number of fellow GOP “moderates” aka as liberals who would be joining him on becoming Democrats. None were named in this article. Hoagland briefly flirted last year with challenging Sam Brownback in the 2004 GOP primary but decided not to do so.

    Also attending this event was, as Hawver described him, “trial lawyer,” state Senator John Vratil, R-Johnson County. Vratil could have also been described as a school district attorney as well as Vice President of the Kansas senate or vice chairman of the senate’s education committee or chairman of the judiciary committee.

    Hawver reported that Vratil wanted to see fellow trial attorney John Edwards speak to the Democrat gathering and was attending as a guest of the senate minority leader Tony Hensley. Hawver explicitly said that Vratil was definitely not following Joe Hoagland’s departure from the ranks of the northeast Kansas Rino’s for the Kansas Democratic Party. Regardless of how liberal Vratil can be (he has one of the lowest fiscal scores on KTN’s vote rating) I cannot see Sen. Vratil leaving the GOP while there are 30 Republicans out of 40 Kansas senate seats.

    This is information that Kansas conservatives and folks interested in the Repubican Party in Kansas should know about concerning these efforts at “bipartisanship,” as well as a better understanding of the domination by tax ‘n spend, socially liberal Republicans in the Kansas senate’s current leadership. Soon, that leadership is expected to provide a “revenue enhancement” to help fund the second and third year school spending hike proposals coming out of the senate education committee and its liberal Republican leadership.

    Last week the senate GOP majority passed a school spending bill that would increase state spending by almost $150 million a year above the current $2.7 billion for less than 445,000 FTE students in the FY 2006 budget. This bill would also require additional increases in local property taxes above this amount because of the state’s spending growth can automatically trigger higher school district spending within the state’s quite complicated school finance formula. Currently, if all state, local, and federal funds in the current budget year are spent, the average per pupil expenditures are budgeted at $10,162 in the 2004-05 school year.

    Governor Sebelius, legislative Democrats, school district lobbyists and adminstrators as well as their attornies who are promoting the school finance litigation are all claiming that higher taxes must occur to meet the Kansas Supreme Court’s January 3, 2005 school finance edict. The court’s decision, that cited several areas where public school funding should be increased, is not final but is subject to court revision on or after April 12, 2005.

    The legislature is scheduled for an April 1, 2005 first adjournment but will return to Topeka for a three day “veto” or wrap up session on April 27. In 2002, then Governor Graves was successful in getting over $350 million in higher sales, gasoline, cigarette, business franchise, and other taxes enacted during this “veto” session. Since there is not a daily newspaper in this state with a daily circulation exceeding 5,000 a day that has opposed any of the numerous tax, fee, or other “revenue enhancements” that have become annual events in this state since 1999, the final outcome from this year’s legislature is quite uncertain.

    Last week the Kansas senate rejected two separate proposals to raise state taxes. A proposal to add a 7.5% surcharge and give Kansas the highest personal income tax rate in our five state region was defeated with only nine votes cast in favor (6 Democrats and 3 Rino’s) proposed by Sen. Pete Brungardt, Rino-Salina. Manhattan Rino Senator Roger Reitz’s proposal to raise the state’s sales tax by 1/2 cent or almost 10 percent (current rate is 5.3%) received only five votes from tax ‘n spend liberal Republicans, but most of the senate Democrats passed on this vote.

    The trial attorney heading up the plaintiffs in the Kansas Supreme Court lawsuit, Alan Rupe, is quote in today’s newspapers that both the senate and house passed school finance spending increase proposals are not adequate and in violation of the Kansas Supreme Court’s decision. KTN has not been successful in convincing the legislature to add a provision to the school finance formula that would do three things critical for improving the deeply flawed and expensive school finance system in Kansas. The three changes are: 1) Require that all federal school funds be included in local school district budgets–currently, most Kansas school districts exclude federal title funds from their official budgets; 2) require voter approval for any local or state tax hikes for; and 3) cut state funding for any local school district that either challenges the constitutionality of school finance in Kansas or the adequacy of state funding. If the school district’s lost $5 in state funding for every $1 spent the previous year for school lawsuits, I think this litigation’s funding would dry up quickly. However, if I’m wrong, let’s cut the funding by $10.

  • KNEA Tax Plan Would Hurt Kansas

    From our friends at the Kansas Taxpayers Network.

    KANSAS TAXPAYERS NETWORK
    P.O. Box 20050
    Wichita, KS 67208
    316-684-0082
    FAX 316-684-7527
    www.kansastaxpayers.com

    March 1, 2005
    Editorial For Immediate Release

    KNEA TAX PLAN WOULD HURT KANSAS

    By Karl Peterjohn

    The powerful and left-wing National Education Association’s Kansas affiliate is working hard to raise your taxes. In a February Olathe News article Terry Forsyth, one of the Kansas National Education Association’s (KNEA) lobbyists, is quoted claiming that there is no correlation between taxes and job growth.

    Obviously Mr. Forsyth seems unfamiliar with high tax and high spending states like New York that have lost jobs and population as people have repeatedly voted with their feet and moved to states with lower taxes and limits on tax growth. Colorado has enjoyed massive economic and population growth since their lid on higher state and local taxes was enacted roughly 15 years ago. The Colorado Taxpayer Bill Of Rights (TABOR) has been a critical factor in helping that state succeed economically and allowed income to grow faster than taxes there.

    This KNEA lobbyist claims that job losses in the private sector would be more than offset by roughly doubling the number of jobs working for government. That’s a paradigm for inefficiency and another excuse for government “make work” programs. That didn’t work in the 1930’s during the Great Depression in this country and it didn’t work as an engine for economic growth in the old Soviet Union either.

    The Wichita based Flint Hills Center for Public Policy’s econometric model estimated that income and sales tax hikes proposed in 2004 by Governor Sebelius would cost this state at least 4,500 private sector jobs. Sadly, this model could not factor in the additional job losses proposed by the governor’s plan to raise the state’s property tax by 10 percent. Governor Sebelius continues to push for higher Kansas taxes at the statehouse.

    Governor Sebelius’ proposed hike in state property taxes is occurring at a time of soaring appraisals as well as millage increases. Property tax hike proponents are hurting this state’s economy daily, and this problem is getting worse with the automatic property tax hikes caused every spring. In addition, Kansans’ average income already lags well below the national average but our per pupil school spending is well above both the national and the amounts spent in neighboring states. In the 2004-05 school year, the average public school student will cost taxpayers $10,162 according to the most recent Kansas Department of Education budget figures. This is a large increase over the 2003-04 spending of $9,235 and the first time the statewide average went into five figures.

    The KNEA lobbyist took the position that all taxes should be raised to meet the Kansas Supreme Court’s mandate on school finance. This is a blatant attempt to mislead Kansans since the court did not issue any such requirement to raise taxes. It’s not there. The court’s decision is less than five pages long and can be found at: www.kscourts.org/ kscases/supct/2005/20050103/92032.htm. You should go on line and make up your own mind by reading this court’s edict.

    Governor Sebelius wants to raise Kansas taxes to help the various spending lobbies in Kansas. Kansas government is too large today. Any tax increase to expand Kansas government is like taking your 400 pound friend out to your local donut shop. Kansas cannot tax itself wealthy or spend ourselves rich.

    ######

    Karl Peterjohn is a former journalist, California state budget analyst, and executive director of the Kansas Taxpayers Network.

  • Increase our awareness of taxes

    As the annual tax season is upon us, we should take a moment to examine our level of awareness of the taxes we pay.

    First, very many families don’t pay any federal income tax. According to a study by the Tax Foundation (link: http://www.taxfoundation.org/ff/zerotaxfilers.html) 58 million households, representing some 122 million people or 44 percent of the U.S. population, pay no federal income tax.

    For those who do pay taxes, they often aren’t aware, on a continual basis, of just how much tax they pay. That’s because our taxes are conveniently withheld for us on our paychecks. Many people, I suspect, look at the bottom line — the amount they receive as a check or automatic bank deposit — and don’t really take notice of the taxes that were withheld. This makes paying taxes almost painless.

    An alternative would be to eliminate the withholding of taxes from paychecks, and from monthly mortgage payments, too. Instead, each month or year the various taxing governments would send a bill to each taxpayer, and they would pay it just like the rest of their periodic bills. In this way, we would all be acutely aware of just how much tax we pay. I’m aware there is an obvious collection problem.

    A further perversion is that many people are happy during tax season, because they get a refund. And they’re delighted to get that refund, so much so that many will pay high interest rates on a refund anticipation loan just to get the money a little earlier. The irony is that by adjusting their withholding, they could take possession of much of that money during the year as they earn it.

    The other people happy during tax season are tax preparers. As a country we spend an enormous effort on tax recordkeeping and compliance. Another study by the Tax Foundation estimates that in 2002 we spent, as a nation, 5.8 billion hours and $194 billion complying with the federal tax code. (5.8 billion hours is equivalent to about 2,800,000 people working 40 hours per week, 52 weeks per year.) By simplifying our tax code, we could eliminate much of this effort, and return that effort to productive use.

    Since tax withholding from paychecks and mortgages reduces our awareness of just how much tax we pay, it’s unlikely that governments will stop withholding and submit a bill to taxpayers. It’s left to ourselves to remain aware of how much we are paying.

  • Abuse Of Tax Funds Must Stop

    The following is from the Kansas Taxpayers Network. It shows how government-funded organizations participated in the campaign to increase Sedgwick County taxes.

    Taxpayers’ funds are being used to promote higher taxes in Kansas. Tax funds are also being used to lobby for higher taxes (see VI. and 1. above). This is an egregious mess that the legislature should stop. Tax funds are also used for “informational” campaigns by taxpayer funded groups. This includes a variety of local units like school boards but is not limited to any local units.

    How bad is this problem? Public campaign donation and expense records show that $45,907.85 was contributed to the “Vote Yea” committee from organizations that are partially or fully funded by tax funds. Here’s how the money is broken down in this advisory election:

    1) Greater Wichita Convention and Visitors Bureau contributed $10,000. The Greater Wichita Convention and Visitors Bureau is almost entirely funded by the City of Wichita through its hotel/motel bed tax. In 2004 budgeted expenditures were $1,122,510.

    2) Greater Wichita Sport Commission contributed $25,000. The Sports Commission operates out of the Convention and Visitors Bureau offices. City, county, and state tax funds in the form of $5,000 a year memberships finance this office. The state funds pay for Wichita State University’s membership.

    3) Wichita Downtown Development Corporation contributed $2,324. This city sponsored organization for helping downtown is primarily funded with a four mill city property tax within its downtown area boundaries.

    4) Kansas Turnpike Authority contributed $3,583.85. This contribution by a state organization listed an “Inkind” contribution of a “loaned executive,” for the “vote yea” campaign.

    5) The Hyatt Regency Wichita contributed $5,000. The Hyatt Regency operates this city owned and money losing hotel adjacent to the Wichita Century II complex. Since this corporation has a contract to operate this hotel this is another city related and funded contribution, albeit through this back door donation.

    These five contributions were more than twice the entire amount of the vote no campaign that spent just over $21,000 in their unsuccessful effort to defeat this advisory proposal. This spending does not include $5,000 more in 5016 funds for the tax hike campaign. Similar charitable donations in tax elections have also been reported in northeast Kansas. All these tax and 5016 expenditures should cease. However, these contributions and expenditures were probably a good deal less than the money spent by tax funded organizations to lobby the legislature. Some of these local units register as lobbyists (see lobbyist list for cities, counties, schools, and other entities) and some do not, like lobbyists for Regents Institutions.

    Tax funds are being misused to litigate for higher taxes. School districts that spend tax funds to sue the state over school finance are biting the hand that feeds them and already provides the bulk of their entire budgets. The state school finance formula should have an adjustment to penalize school districts that are suing the state over school finance. The perpetual school litigation machinery needs to be turned off at the statehouse.