By Dave Trabert, Kansas Policy Institute.
If President Reagan had attended Kansas Governor Mark Parkinson’s press conference last Friday, he likely would have said, “There you go again…” in response to Parkinson’s claim that $9 billion in tax cuts and exemptions over the last decade are to blame for the budget crisis. South Carolina Congressman Joe Wilson (R) might have put it less delicately, but both would have been justified in challenging the governor’s claims.
The $9 billion dollar figure comes from a Department of Revenue (DOR) estimate of the effect of selective tax changes enacted between 1995 and 2009. I say “selective” because DOR only included changes that reduced taxes but conveniently ignored changes that increased taxes; they also made no allowance for taxes generated from economic activity as a result of any changes. Further, the $9 billion total is artificially inflated. The largest item on the list is a property tax “reduction” of $4.4 billion that doesn’t belong on the list. The amount represents the difference between collecting 35 mills for school funding versus the current 20 mills. The change was made in the mid-90s following property revaluation; when property values were adjusted upward to market value, the mill rate was supposed to be lowered so that the higher property values generated the same amount of property tax. By the way, property taxes increased 96% between 1995 and 2008.
The governor also claims that big business and wealthy people have benefited the most from those changes, with “ordinary Kansans” receiving virtually nothing. Well, there he goes again. The second largest amount on the DOR list is car tax reductions at $1.4 billion. A lot of ordinary Kansans benefited from that one. Other large tax reductions that Parkinson seems to be overlooking include:
- $616.6 million to reduce the single income rate
- $446.5 million to increase the earned income tax credit
- $368.7 million to increase the personal exemption
- $356.6 million to increase the food sales tax rebate
- $174.2 million to increase the standard deduction
There’s also $825.9 million attributed to reductions in the inheritance, or “death” tax. The two primary reasons for making that change are to avoid double taxation (the income was already taxed once when it was earned) and to encourage people to stay in Kansas and continue paying income, sales and property taxes. Those with high-value estates can easily (and do) move to other states where they can avoid double taxation and leave their estates to their families.
It’s also important to understand that most of the changes on that misleading $9 billion list were implemented in the 1990s following 75% revenue growth from 1990 to 1998, much faster than necessary to sustain spending. Government could easily afford to reduce the tax burden and the vast majority of that relief was directed to “ordinary Kansans.”
So what about the governor’s claim that tax reductions are to blame for the budget crisis? Once again, cue President Reagan. Revenue grew another 41% over the next ten years, well beyond inflation (28% according to the Midwest Urban Consumer Price Index). At the same time, however, general fund spending grew 61%. That is the reason we’re in this mess. In fact, if spending had been held to 4.5% growth over just the last five years, we would have finished last year with a $3 billion surplus and could have easily weathered the recession.
Then there’s the claim that the state has already reduced spending by more than a billion dollars. There he goes again! Prior to changes announced last week, the governor’s own estimate put FY 2010 spending at $5,451 billion; last year’s actual spending was $6.064 billion. That’s a reduction of $613 million; a big number to be sure, but not even close to a billion dollars.
There were some tax reductions over the years that were not good policy; sound tax policy says reductions should be broad-based and not favor one group over another. But the facts clearly demonstrate that the vast majority of our budget problems stem from spending well beyond our means. President Reagan once explained it as only he could: “Government is like a baby. An alimentary canal with a big appetite at one end and no sense of responsibility at the other.”
Speaking of no responsibility, Governor Parkinson failed to mention that he not only voted for, but actually led the charge for some of the sales tax exemptions for which he now castigates the legislature for passing.
It’s bad enough having to work our way out of a budget situation that is largely self-inflicted. Distorting or ignoring the facts to justify a tax increase is a disservice to “ordinary Kansans.”