Kansas Governor Mark Parkinson‘s State of the State address Monday proposed two new taxes, a comprehensive statewide smoking ban, and a cabinet team to promote green energy projects. He didn’t propose closing tax exemptions, and he made no mention of an available method that could help Kansas make it through a fiscal shortfall.
The complete text of the governor’s address, as prepared for delivery, is available at Protecting What We Have, Building for the Future.
What’s missing from the governor’s address is recognition that the state is sitting on hundreds of millions of unused cash that could be tapped to get the state through a tough spot. The Kansas Policy Institute has performed research and analysis that indicates that by spending down these fund balances, Kansas schools and agencies could continue delivering services without requiring a tax increase.
In his response to the governor, which was recorded before the governor spoke, Speaker of the House Mike O’Neil opposed tax increases. He didn’t mention the fund balances.
Instead of making use of an untapped resource, the governor proposed tax increases. In particular, the governor proposed taxes that fall hardest on poor and low income people.
His proposed cigarette tax falls hardest on low-income people, as they smoke proportionally more than high-income people, and spend proportionally more of their income on cigarettes.
The increase in sales tax again falls most harshly on low income people, as they spend nearly all their income. Wealthier people may save a lot of their income, and saving isn’t subject to sales taxes, at least not for now. Purchasers of stocks and bonds don’t pay sales tax.
Although the sales tax is proposed to last just three years (the bulk of it, anyway; two-tenths of a cent is proposed as a permanent tax to fund a highway plan), there is a definite risk that these taxes become permanent. The Intrust Bank Arena, which just opened in downtown Wichita, was funded by a temporary sales tax. That tax ended as scheduled, but there were those — including at least one officeholder — who wanted the tax to continue.
At the same time the governor proposes to raise money through increased taxation of cigarettes, he also proposes a comprehensive statewide smoking ban. This is at cross purposes. Does the governor want people to smoke or not?
It will also be interesting to see how comprehensive any proposed smoking ban legislation will be. The ban proposed last year exempted state-owned casinos like the one that recently opened in Dodge City.
The governor didn’t address eliminating the many tax exemptions, which the Secretary of Revenue is promoting as a way to raise perhaps $200 million per year in revenue.
The governor didn’t mention Schools for Fair Funding’s decision to sue the state for more school spending.
In his address, O’Neil said that Kansas families and businesses are struggling and making sacrifices.
While tax revenue to the state has fallen, demand for government spending has continued. Raising taxes now near the end of a recession, he said, is short-sighted and counterproductive. It is not prudent to raise taxes. “Raising taxes now in the middle of a severe recession would mean losing tax-paying businesses that are already struggling to survive.” Loss of these businesses and their employees would make the fiscal situation worse, he said.
This applies to either new taxes or to the elimination of tax incentives. Either would harm growth and reduce capital that businesses need. “Simply put: Kansas businesses can’t pay more unless they make more.” While a tax hike may be attractive in the sort term, increasing taxes is harmful in the long run.
O’Neil said it’s a false choice to either allow business to keep its money or fund government’s obligations. Business must be strong if government is to be fiscally sound. If business grows and prospers, the state’s fiscal situation will improve.
O’Neil said the 2010 legislature will thoroughly examine all spending to make sure that government is operating efficiently, and is spending only on those things necessary to fulfill the legitimate role of government.
He supported a budget stabilization process — by constitutional amendment if necessary. He said we should work towards using zero-based budgeting. More audits are needed, and he reminded us that Kansas used to have a state auditor.
On education funding, O’Neil said that when all sources of funding are considered, schools have been cut less than 1.5% on average, and schools are receiving more funding than in fiscal year 2008. The school funding lawsuit is irresponsible, he said. K through 12 education cuts have not been as severe as cuts to other state agencies.