John Todd makes an appearance on The Voice of Reason with Andy Hooser to talk about proposed legislation in Kansas that would be harmful to private property rights. View below, or click here to view on YouTube. Recorded on March 16, 2017.
For more information on this important issue, see In Kansas, the war on blight continues: Kansas governments are trying — again — to expand their powers to take property to the detriment of one of the fundamental rights of citizens: private property rights.
Kansas tax receipts by category, presented in an interactive visualization.
The Kansas Division of the Budget publishes monthly statistics regarding tax collections. I’ve gathered these and present them in an interactive visualization.
Click here to learn more and access the visualization.
Source of data is Kansas Division of the Budget.
What can the rest of the nation learn from our experience in Kansas? Come to think of it, why haven’t we learned much?
Economists from American Legislative Exchange Council have looked at Kansas and derived some lessons from our state’s struggle with tax reform. The document is titled Lessons from Kansas: A Behind the Scenes Look at America’s Most Discussed Tax Reform Effort. A few remarks and quotations:
It may be difficult for us in Kansas to see how the rest of the country views our state. But it’s all about the struggle between those who want more government, and those who want more private sector activity: “… it is clear to most observers of state policy at this point Kansas was, and continues to be, a flashpoint in debates about state tax policy. That flashpoint has served as something of a proxy war between big government advocates and those who would prefer to shrink the size and scope of state government.”
While taxes were cut, the state failed to make the other needed reform: “Spending reductions necessary to implement the plan were eschewed in favor of other tax increases, making any honest judgement of the original plan’s success or failure impossible.”
On the 2012 plan, was it all for business pass-throughs, or for everyone? “Enacted an estimated $4.5 billion in tax relief over five years, about 80 percent of which was for individuals and 20 percent for business pass-through income.”
We have to remember the failure of the legislative process in 2012 and the next year: “It is important to note at this point that the revenue increasing offsets included in the 2013 tax plan were nowhere near as comprehensive as the revenue raising offsets in Governor Brownback’s original 2012 tax reform proposal. It was this discrepancy in revenue raising offsets and the failure to rein in state spending that would ultimately lead to revenue problems for Kansas down the road.”
Credit downgrades are a sign of a mismatch between revenues and expenses. Those who want more spending say the downgrades are caused by a lack of revenue, but we could have cured the mismatch by reforming spending, too: “Contrary to this popularly reported narrative, Moody’s cited much more than just recent tax cuts as the rationale for a downgrade, specifically failure to reduce spending to offset tax cuts, pension liabilities and state debt.
The purpose of tax cuts? Let us keep more resources in the productive private sector: “It is certainly true that in the years following the tax reductions, Kansas did experience lower revenue collections, even lower than what had been projected. But, part of the goal of the Kansas tax reform was to reduce the amount of money taken in by state government and enhance the resources available to the private sector. Importantly, however, was the resistance to any meaningful spending reductions. Even as the 2012 tax reductions were projected to let Kansans keep $4.5 billion more of their own money, the state increased spending in 2012 by $432 million.”
Would more taxes help the Kansas economy? “In a late 2012 literature review on this topic, William McBride, former Chief Economist for the Tax Foundation, found that of 26 peer-reviewed academic studies since 1983, only three fail to find a negative effect on economic growth from taxes.”
The 2015 legislative session: “A block of legislators held out for reductions in the cost of government rather than tax increases but they were unable to get a majority. … The final plan that passed both houses and was signed by Governor Brownback included two main tax increases. The state raised the cigarette tax by 50 cents per pack and increased the sales tax rate from 6.15 percent to 6.5 percent. The two tax increase proposals added up to $384 million in new state revenue and were bolstered by $50 million in spending cuts, although there was still a net increase in spending.”
Our legislature failed the people of Kansas: “The first lesson to glean from the Kansas experience is that politics affects policy. The final reforms that passed in 2012 were not the reforms that anybody wanted. Specific tax reform ideas are easily diluted and changed, and without the political will to fix imperfect reforms, unintended consequences can be difficult to avoid.”
Then, politicians should be so boastful. Don’t overpromise. (Ask Barack Obama about that. He said if we don’t pass the ARRA stimulus bill, the unemployment rate would rise above a certain level. Well, the stimulus passed, the unemployment rate went above that level, and it was several years before it fell below. In other words, unemployment was worse with the stimulus than Obama said it would be without the stimulus.) “The second important lesson that can be learned from the Kansas experience is economic growth resulting from bold tax reductions takes time. Governor Brownback’s previous comments about the Kansas tax reforms being ‘a shot of adrenaline’ to the state’s economy continued to hound him throughout the ups and downs of revenue and economic reports. Setting expectations too high or too early can make pushing forward with future reforms nearly impossible, while setting unrealistic expectations can lead to the unwinding of sound economic reforms.”
Finally: “Even though the tax reductions improved economic growth, the lack of commensurate spending reductions led to trouble for the state’s budget. Budget shortfalls and tough negotiations about possible tax increases mean uncertainty for businesses and families, which can hamper some of the positive economic effects of decreasing taxes.”
An interactive visualization of Kansas employment by industry.
The Bureau of Labor Statistics is an agency of the United States Department of Labor. It describes its mission as: “The Bureau of Labor Statistics of the U.S. Department of Labor is the principal Federal agency responsible for measuring labor market activity, working conditions, and price changes in the economy. Its mission is to collect, analyze, and disseminate essential economic information to support public and private decision-making. As an independent statistical agency, BLS serves its diverse user communities by providing products and services that are objective, timely, accurate, and relevant.”1
BLS provides monthly employment statistics. It has just updated revised numbers for 2016. I’ve gathered these for Kansas and present them in an interactive visualization.
This data comes from the Current Employment Statistics, which is a monthly survey of employers.2
The tabs along the top of the visualization hold different views of the data. Employment figures are in thousands. You may view seasonally adjusted or unadjusted data. Some views display the number of jobs, while others display the change in jobs by industry since the first year or month that is selected. When using the charts that display annual averages, be aware that using a time selection with a partial year will not provide accurate results.
Two “industries” that are closely followed are “Total Nonfarm” and “Total Private.” These, obviously, are not industries in themselves, but are sums of other industries. There are other examples like this.
Click here to access the visualization. The visualization was created by myself using Tableau Public.
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Notes
An ongoing study reveals that generally, 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.
In Kansas, residential property is assessed at 11.5 percent of its appraised value. (Appraised value is the market value as determined by the assessor. Assessed value is multiplied by the mill levy rates of taxing jurisdictions in order to compute tax.) Commercial property is assessed at 25 percent of appraised value, and public utility property at 33 percent.
This means that commercial property faces 2.180 times the property tax rate as residential property. The U.S. average is 1.683. 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 1.29 percent, while the national average is 1.43 percent. The results for a $300,000 property were similar. Of note, however, 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 $1,552 in taxes, while the nationwide average is $3,097.
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 $2,351 or 1.96 percent of the property value. For Wichita the corresponding values are $3,398 or 2.83 percent, ranking sixth from the top. Wichita property taxes for this scenario are 45 percent higher than the national average.
For industrial property taxes, the situation in Wichita is better, with Wichita ranking near the middle. For an industrial property worth $1,000,000, taxes in Wichita are $30,980. The national average is $32,445.
In this episode of WichitaLiberty.TV: Kansas Director of Budget Shawn Sullivan joins Karl Peterjohn and Bob Weeks to explain issues related to the Kansas budget. View below, or click here to view at YouTube. Episode 142, broadcast March 12, 2017.
Despite years of purported budget cuts, the Wichita public school district has been able to improve or maintain student/teacher ratios.
When discussing school funding, there is controversy over how spending should be measured. What funds are included? Is KPERS included? Should we adjust for enrollment and inflation? What about bond and interest funds and capital outlay?
The largest expenditures of schools — some 80 percent nationwide — is personnel costs. In Kansas, and Wichita in particular, we’re told that budget cuts are causing school class sizes to increase.
When we look at numbers, we see that the Wichita school district has — over the long term — been able to maintain or reduce its student/teacher ratios. (Student/teacher ratio is not the same statistic as class size.) There have been a few ups and downs along the way, but for all three school levels, the ratios are lower or nearly the same than they were ten years ago. (Click charts for larger versions.)
This means that Wichita schools have been able to increase employment of teachers at a faster rate than enrollment has risen.
So however spending is categorized in funds, whether KPERS contributions are included or not, whether the funding comes from state or local sources, whether spending is adjusted for inflation, the Wichita school district has been able to improve or maintain its student/teacher ratios.
Data is from USD 259 Comprehensive Annual Financial Report for 2016, Miscellaneous Statistics, page 118, and CAFR from other years.
The City of Wichita says it hasn’t raised its property tax mill levy in many years. For this year, the city is correct.
In 2015 the mill levy was 32.686, so the mill levy dropped by .001 for 2016. That’s a refreshing change. While the city says the mill levy hasn’t increased, the nearby table and summary above indicate otherwise.
It is true that the Wichita City Council did not take explicit action to raise this rate. Instead, the rate is set by the county based on the city’s budgeted spending and the assessed value of taxable property subject to Wichita taxation.
The total amount of property tax levied is the mill levy rate multiplied by the assessed value of taxable property. This amount has risen, due to these factors:
In 2005 the mill levy dedicated to debt service was 10.022. In 2016 it was 8.508. That’s a reduction of 1.514 mills (15.1 percent) of property tax revenue dedicated for paying off debt. Another interpretation of this is that in 2005, 31.4 percent of Wichita property tax revenue was dedicated to debt service. In 2016 it was 26.0 percent.
This shift has not caused the city to delay paying off debt. This city is making its scheduled payments. But we should recognize that property tax revenue that could have been used to retire debt has instead been shifted to support current spending. Instead of spending this money on current consumption — including economic development spending that has produced little result — we could have, for example, used that money to purchase some of our outstanding bonds.
Despite the data that is readily available in the city’s comprehensive annual financial reports, some choose to remain misinformed or uninformed. The following video from 2012 provides insight into the level of knowledge of some former elected officials and city staff. Based on recent discussions with city officials, things have not improved regarding present staff.
A letter in the Wichita Eagle illustrates harmful attitudes and beliefs of the public school establishment.
The letter is titled “Wrong direction.” It was submitted by John H. Wilson, was published on February 26, 2017, and may be read here.
What’s wrong in this letter? Here’s one thing: “First, the ill-founded assertion is that parents are well equipped to identify the best school for their children. Wrong.”
This is an incredibly bigoted assertion. This is one of the standard arguments against school choice, that parents — particularly minority and low-income families — don’t have the ability to make wise choices in schools for their children. Instead, an educated elite, of Wilson is a member, must make these decisions, they say.
There is a whif of plausibility in Wilson’s claim. In Wichita, where there is no school choice except for a small tax credit scholarship program, parents don’t have much experience making decisions regarding schools for their children. Across the country, however, where parents are given choices, we see parents becoming involved. With school choice programs, parents have a chance to make a difference.
Here’s something else that is rich in irony. With school choice, Wilson says, “Public schools organization and management would become a nightmare.” The private sector, however, manages situations like this every day. The irony is that the fleet of public school administrators hold many advanced degrees in public school administration. But school choice, evidently, is too complicated to manage.
Finally, Wilson references “a highly successful and proud institution, our public schools.” I’d like to call his attention to the nearby chart of results from the Kansas school assessments for the Wichita school district. According to the Kansas State Department of education, “Level 2 indicates that the student is doing grade-level work as defined by the standards but not at the depth or level of rigor to be considered on-track for college success. Level 3 indicates that the student is performing at academic expectations for that grade and is on track to being college ready.”
Looking at fourth grade reading — a very important benchmark — we see that considering college-level readiness, 35.5 percent of students are at that standard. But only 17.6 of African-American students are at that level, and 29.7 percent of Hispanic students. The performance is worse for math, and worse again at eighth grade for both subjects.
I don’t think this is “highly successful,” and I don’t see how Wilson is proud of this legacy. Except: He’s part of the public school establishment, which vigorously protects itself from any meaningful competition.
