Voice For Liberty

Tag: Sam Brownback

  • Energy subsidies exposed

    On the campaign trail, President Barack Obama calls for an end to energy subsidies for the fossil fuel industry. It turns out, however, that this industry receives relatively little subsidy, while the president’s favored forms of energy investment — wind and solar — receive much more. Additionally, coal, oil, and gas industries paid billions in taxes to the federal government, while electricity produced by solar and wind are a cost to taxpayers.

    Saturday’s Wall Street Journal piece The Energy Subsidy Tally: Wind and solar get the most taxpayer help for the least production gathers the facts: “The nearby chart shows the assistance that each form of energy for electricity production received in 2010. The natural gas and oil industry received $2.8 billion in total subsidies, not the $4 billion Mr. Obama claims on the campaign trail, and $654 million for electric power. The biggest winner was wind, with $5 billion. Between 2007 and 2010, total energy subsidies rose 108%, but solar’s subsidies increased six-fold and wind’s were up 10-fold.”

    When looking at subsidy received per unit of power produced, the Journal found that oil, gas, and coal received $0.64 per megawatt hour, hydropower $0.82, nuclear $3.14, wind $56.39, and solar $775.64. Commented the Journal: “So for every tax dollar that goes to coal, oil and natural gas, wind gets $88 and solar $1,212. After all the hype and dollars, in 2010 wind and solar combined for 2.3% of electric generation — 2.3% for wind and 0% and a rounding error for solar. Renewables contributed 10.3% overall, though 6.2% is hydro. Some ‘investment.’”

    In Kansas, there is disagreement among elected officials over wind power. Kansas Governor Sam Brownback and U.S. Senator Jerry Moran favor the production tax credit that makes wind feasible. Together they penned an op-ed that tortures logic to defend the tax credits. Each has spoken out on his own on the national stage. See Brownback on wind, again and Wind energy split in Kansas.

    Brownback has also supported, at both federal and state levels, renewable portfolio standards. These in effect mandate the production of wind power. Recently Kansas Policy Institute produced a report that details the harmful effect of this law: “Renewable energy is more expensive than conventional energy, so government mandates are necessary to ensure that more renewable energy is purchased. However, the unseen consequences of well-intended efforts to increase energy independence are rarely considered. The authors estimate that by 2020, the average household’s electricity bill will increase by $660, approximately 12,000 fewer jobs will have been created, and business investment in the state will be $191 million less than without the mandate.” See The Economic Impact of the Kansas Renewable Portfolio Standard.

    In Wichita, Mayor Carl Brewer is recruiting wind power companies to come to Wichita. If he is successful, you can be sure it will be at great cost to Kansas and Wichita taxpayers.

    Contrast with the position taken by U.S. Representative Mike Pompeo, a Republican who represents the Kansas fourth district, which includes the Wichita metropolitan area. Recently he wrote: “Supporters of Big Wind, like President Obama, defend these enormous, multi-decade subsidies by saying they are fighting for jobs, but the facts tell a different story. Can you say ‘stimulus’? The PTC’s logic is almost identical to the President’s failed stimulus spending of $750 billion — redistribute wealth from hard-working taxpayers to politically favored industries and then visit the site and tell the employees that ‘without me as your elected leader funneling taxpayer dollars to your company, you’d be out of work.’ I call this ‘photo-op economics.’ We know better. If the industry is viable, those jobs would likely be there even without the handout. Moreover, what about the jobs lost because everyone else’s taxes went up to pay for the subsidy and to pay for the high utility bills from wind-powered energy? There will be no ribbon-cuttings for those out-of-work families.”

    Pompeo has introduced legislation in Congress that would end tax credits for all forms of energy production. See H.R. 3308: Energy Freedom and Economic Prosperity Act.

    The Energy Subsidy Tally
    Wind and solar get the most taxpayer help for the least production.

    President Obama traveled to Iowa Tuesday and touted wind energy subsidies as the path to economic recovery. Then he attacked Mitt Romney as a tool of the oil and gas industry. “So my attitude is let’s stop giving taxpayer subsidies to oil companies that don’t need them, and let’s invest in clean energy that will put people back to work right here in Iowa,” he said. “That’s a choice in this election.”

    There certainly is a subsidy choice in the election, but the facts are a lot different than Mr. Obama portrays them. What he isn’t telling voters is how many tax dollars his Administration has already steered to wind and solar power, and how much more subsidized they are than other forms of electricity generation.

    Continue reading at the Wall Street Journal (subscription required)

  • Kansas traditional: the platform

    Will “traditional,” “reasonable,” “moderate” Kansan Republicans be defeated in the August 7, 2012 Kansas primary? Would that defeat be good or bad for Kansas?

    Kansas newspapers have featured an op-ed by H. Edward Flentje of the Hugo Wall School of Urban and Public Affairs at Wichita State University. (A referendum on Brownback, July 27 Winfield Courier.) His tone, as is that of many newspaper editorials appearing through the state, is that it is vital to preserve the “traditional” moderate Republican approach to Kansas government, as it is those who “believe government has a more affirmative role in assuring a high quality of life for Kansans.” The implication, made explicit later on, is that the rise of a conservative majority in the Kansas Senate would be bad.

    Here’s one area in which Flentje is incorrect. He characterizes the moderates as “Republican legislators who may exercise independent judgment on alliance issues.” He and others use the phrase “march in lockstep with [Kansas Governor Sam] Brownback” as criticism of conservative challengers, who they say will be merely puppets of Brownback, incapable of independent thought.

    But when we look at the record of “moderate Republican” legislators, we usually see them “marching in lockstep” with the Kansas National Education Association, labor unions — especially public employee unions, trial lawyers, and other assorted special interest groups.

    Following are the areas in which Flentje says Brownback wants legislators to “march in lockstep” and whether it would be good to maintain these policies that Flentje prefers.

    “Eliminating state income taxes and seeking higher sales and property taxes to address state obligations, consequently shifting the state tax burden to lower-income residents.” I’m not aware that conservatives are pressing for higher sales and property taxes. There has been some difference of opinion over ending the temporary statewide sales tax increase, and that may play out in the next legislative session. The best way we can address state spending — living up to the obligations Flentje alludes to — is to streamline Kansas government. But moderates oppose this. See Kansas reasonable: Government reform.

    The best way to pay for government services is to grow the economy and create jobs. But Kansas has performed poorly during the past decade under the reign of “traditional” moderate Republicans (and their coalition with Democrats) in the House and Senate. Just a few years ago, after a decade of moderate policies, Kansas was the only state to have a loss in private sector jobs over the past year.

    “Restraining state spending on public schools and shifting school funding to property taxes at the local level.” Moderates oppose one way we can save on schools: school choice through charter schools, vouchers, or scholarship tax credits. All these programs reduce the burden of school spending on both the state and school districts. Other than this, moderates “march in lockstep” with those who constantly call for more school spending, even to the point of suing the state’s taxpayers for more money. They join with the special interests who fight against accountability measures. They also fight against an honest assessment of the condition of public schools in Kansas, and when you look under the covers, it’s not the pretty picture that education bureaucrats paint. See Kansas reasonable: The education candidates.

    “Cutting funding for the arts and public broadcasting.” Those who seek money from government for arts are a special interest group. They make an economic case that government spending on the arts is good for the economy, but there’s no evidence that this form of government spending is different from any other. Instead, it takes tax money from people and forces them to spend it on things they may not want. Instead, government bureaucrats — listening to narrow special interest groups — decide how to spend money.

    “Shifting the funding of state universities to students and their families through higher tuition and fees.” What a novel idea! Expecting those who use a service to pay for it!

    “Challenging judicial independence and enacting measures that make state judges more susceptible to outside political influence.” Kansas judicial selection is highly politicized and undemocratic, with out-sized power concentrated in a special interest group: lawyers. Among the fifty states, Kansas is at the undemocratic extreme in the way we select judges, and moderates support this. See Kansas reasonable: Judicial selection.

    “Placing out-of-state, for-profit insurance companies in charge of managing aid to elderly, disabled and vulnerable residents.” Outsourcing is one way that governments can increase quality of service and reduce cost. There’s no reason to think that just because a service is presently provided by the state, that is the best way to provide it. In fact, waste and inefficiency are characteristic of government. Far from being a rip-off or waste of taxpayer monies, the profit motive — found only in the private sector — is a reliable motivator. The challenge of the state will be to make sure that companies profit when they provide good service, efficiently.

    “Spending more time finding ways to limit a woman’s access to abortion and targeting with legal action any group that supports such access.” My focus is primarily on issues of economic freedom. Others will have to weigh in on this issue.

    “Punishing party members who dare to cooperate with Democrats on legislation.” Both parties do this. Ask Senator Chris Steineger how the Kansas Democratic Party feels about those who don’t toe the party line.

    Whether the election is or is not a referendum on Kansas Governor Sam Brownback, Kansans need to reflect on the legacy of traditional Republican leadership and governance and realize this has not been the path to jobs and prosperity.

  • Why Kansas had to cut taxes

    By Sam Brownback, Governor of Kansas

    When Jeff Colyer and I took office in January of 2011, tens of thousands of fewer Kansans were working in private sector jobs than a decade ago. Our state was losing residents to all surrounding states. We had the highest taxes in the region and ranked among the worst in private sector job creation. Something had to be done if Kansas was going to be a place where our children and grandchildren could stay to find a job and raise a family.

    When we took office, there was $876.10 in the state’s coffers and a projected deficit for the next fiscal year of $500 million. Through a combination of fiscal restraint, smart cuts, and focusing our resources on the core functions of government, we took that half billion dollar deficit and turned it into a half billion dollar surplus. This billion dollar swing was achieved in one year.

    Now that Kansas’s economy is getting back on track and we’ve taken the necessary steps to get the government’s fiscal house in order, it was time to take a stand for the future of our state. In May, the Kansas Legislature passed and I signed the largest tax cut in state history, eliminating state income taxes on small businesses and reducing the tax burden on every hardworking Kansan.

    From day one, my administration’s top priority has been to grow the Kansas economy and create jobs. We had to reverse the trend of capital loss that we were suffering to every state around us and still the tide of rural population decline. This is what we ran for office promising to and we have taken swift and decisive action.

    We did this because it was time to shake up the status quo of taxing, spending, and declining. In our federalist system, state governments are forced to compete against each other for capital, jobs, and residents. Competition offers two options: you can either refuse to adapt to changing conditions and fall behind those who do, or you can lead the way to the future. Kansas had to change the way it competes regionally and nationally for residents and jobs, and so far we have made great progress.

    In addition to reducing the tax burden on Kansas families and small businesses, we also improved our economic development toolbox with targeted incentives like letting businesses of any size deduct 100 percent of the expense of new business equipment and machinery. We created Rural Opportunity Zones to help recruit people to counties with sharply declining populations. And we established education programs to increase engineering and tech career students to meet our businesses’ future workforce needs.

    Our new pro-growth tax policy will be like a shot of adrenaline into the heart of the Kansas economy. It will pave the way to the creation of tens of thousands of new jobs, bring tens of thousands of people to Kansas and help make our state the best place in America to start and grow a small business. It will leave more than a billion dollars in the hands of Kansans — they know far better how to spend their money than the state government. An expanding economy and growing population will directly benefit our schools and local governments.

    We will continue to work to provide a business environment that will keep our state regionally and globally competitive. We will continue to reform state government so that it is more efficient, effective and responsive to our citizen’s needs. We will continue to meet the needs of our state’s most vulnerable. We will continue to provide for high quality schools.

    But most of all, we will continue to strive to make our state even better. Kansas’ lost decade is over. No longer will we be satisfied with our children moving to another state for better opportunities. No longer will we accept having the highest tax burden in the region. Now is the time to grow our economy, not state government, and that’s what this our policies will do.

    We are just getting started in Kansas, but we are off the sidelines and in the game.

  • KNEA email a window into teachers union

    An email from an official of Kansas National Education Association (KNEA) asks union members to switch their voter registration party in order to vote in Republican party primaries.

    The fear of the teachers union is that control of the Kansas Senate may fall into hands of conservative members instead of the coalition of Democrats and liberal Republicans that forms the working majority in that chamber. If that happens, it would not be good for union members’ “professional interests,” says the email.

    The email, printed in its entirety below, is from Tony White, Director of UniServ Southeast. UniServs are regional offices that provide services to teachers union members.

    In the email, White tells union members that state revenues will be reduced by 40 to 50 percent as a result of the recent Kansas tax reform legislation. This is a great exaggeration. Projections by Kansas Legislative Research indicate a decline of revenue of about 12 percent from 2013 to 2014. After that year revenue rises each year, and by 2018 revenue is projected to rise to nearly the level of 2012.

    White also writes that due process — tenure, in other words — and bargaining for salaries may be lost. While both of these reforms would be good for Kansas schoolchildren and taxpayers, they don’t seem likely very soon in Kansas.

    Surprisingly, the email never mentions what the Kansas school establishment and the teachers union fears most: accountability through market-based competition. This could happen through charter schools, vouchers, or tax credit scholarships. It is this accountability that teachers unions fear most. So far Governor Sam Brownback has not forcefully advocated for these reforms that would greatly help Kansas children.

    The tone of the email, overall, is that it is teachers that are important. Never once are schoolchildren mentioned. This email is another example of how the Kansas school spending establishment, of which KNEA is a prime member and political force, exists for the benefit of adults, not children and parents.

    Subject: KNEA Email
    Tony.White@KNEA.ORG 6/16/2012 6:13 PM
    Although this might seem like a rather personal request, I’d like you to register to vote, and more specifically, to register to vote as a Republican.

    That way you can vote for a supporter of public schools in the August 7 primary in either Senate 13 (Marshall v LaTurner) or new Senate 15 (Umbarger v King). The winner of those primaries will undoubtedly be the winner in November, and if you’re not a registered Republican, you don’t get to help make that decision.

    Here’s the email I sent to our members, and the links to change one’s registration.

    AND TELL ANYONE ELSE YOU KNOW THAT CAN HELP OUT. It’s no time for being shy. We’ll regret losing this next election for a long, long time.

    Subject: Registration and Voting

    I am sending this information (and a few opinions, too) to you as a KNEA member in SEK.

    I realize about every election we tell you how important this one is. Those elections sure did seem important at the time. But this summer in the Republican primary Senate races and then this fall in some of the House races, the stakes simply could not be higher for teachers and for schools.

    And right out of the gate, when I talk elections and politics, I means our Kansas races for Kansas House and especially the Kansas Senate.

    With the electoral college system and our current Congresswoman, there’s no point spending any time or energy on the national level. It’s a lost cause. But when it comes to teachers and schools, it matters more what happens in Topeka anyway, and we can affect those!

    If we don’t retain the moderate majority in the State Senate, we will be in a world of hurt. The tax cuts signed this spring by Governor Brownback – if unchecked — will reduce state revenue by 40-50%, and the deep cuts to schools and every other state service or function — will inevitably follow. Teacher protections like due process and the right to bargain salaries will probably be lost. Our current public school system will be unrecognizable.

    That’s if we lose this election. So, let’s win it.

    How can you help?

    Vote in the Republican primary on Tuesday August 7. Vote for our moderate Republican incumbent friends, for 4-term Senator Dwayne Umbarger and for Senator Bob Marshall. They have supported us, and it’s time to step up and help them.

    1. If you’re already a registered Republican, you’re ready to go. Make sure you vote.

    2. If you’re registered to vote, but not registered as a Republican, you need to switch. Otherwise, you can’t vote in the primary, and frankly, these two critical races will be settled in the primary in
    August. The primary winner will cruise in November.

    3. If you’re now a Democrat, you need to switch to a Republican. I know, I know, but otherwise you can’t vote in the election that counts, and that’s the Republican primary. I did it today, just like we have over the years to vote for Jana Shaver or Val DeFever for State Board. You can switch right back after the election, and we promise not to tease you about it.

    How does one register in the first place? Or change registration to a Republican? It’s the same form, and you can even do it online. Here’s the online link: https://www.kdor.org/voterregistration/Default.aspx

    You use your driver’s license. I just tried the link and it worked fine. It’s submitted to the Clerk in Crawford County and they’ll mail me a confirmation. I’m a Republican!

    But if the site gives you trouble, there is also the old-fashioned paper form: http://www.kssos.org/forms/elections/voterregistration.pdf

    One prints it, fills it out and takes it in to the county clerk or mails it in. The addresses for all 105 counties are right there on the back of the form.

    Registration has to be done by July 17 – or you’re locked out of the primary. So get your paperwork right so you can vote to protect our profession and our schools.

    And print off extra copies of the form for spouses, adult kids, neighbors, friends, or kindred spirits. If they will vote to support public schools, we want them and need them on August 7. It’s the same form all across Kansas – it just goes to the appropriate clerk of the county where the person lives. Or use the online link.

    And if you want to get involved in either the Umbarger or Marshall campaign, from planting yard signs to letters to the editor to walking with the candidates – just let me know. They both are clearly better for our professional interests than their primary opponent.

  • Reducing Kansas taxes and government footprint

    Across Kansas editorial writers and candidates for state offices are harshly criticizing the new tax policy passed this year. Editorials with titles like “Tax cut is huge gamble” predict doom and gloom for our state. But we’ve been in the doldrums in Kansas, and reducing taxes is a good first step on the road to recovery for many reasons.

    The most fundamental reason we need to reduces taxes in Kansas is that the money people earn belongs first to themselves, not the government. Not everyone believes this. You can tell these people when they talk about the cost of a tax cut. An example is a recent op-ed by KU political science professor Burdett Loomis, when he wrote “We will, however, discover the public costs to disbursing these private benefits.” The political class believes the current level of taxation belongs to them, and any reduction in tax revenue is a cost to government.

    The correct view is that government is a cost to taxpayers. Reducing that cost leaves more money in the pockets of people, where it belongs. Reducing taxes is the correct thing to do for this reason.

    Another reason to reduce taxes is that it leaves more money in the hands of the private sector. Examples of government waste, fraud, and abuse are everywhere. No one spends money as carefully as their own, so leaving money in the private sector almost guarantees the money will be spent or invested more wisely than sending it to government to spend.

    As far as the prediction of drastic cuts in services or the shifting of costs to local property taxes, Kansas Policy Institute has shown that reducing state spending by 6.5 percent in 2013 — and then working to control the rate of increase — will result in a balanced budget. Who doesn’t believe that government can cut spending by that amount and still provide essential services? Kansas employs no budgeting methodologies that have been shown to root out wasteful and unneeded spending. Two examples are zero-based and priority-based budgeting.

    Some complain that there is no evidence that cutting taxes will spur economic growth and job creation. An example is from the Loomis op-ed: “There is simply no evidence, nor any studies, to suggest that tax reductions alone can ever generate this kind of economic growth, much of it untaxed.” (Note the lament that the growth won’t be fully taxed.)

    We don’t have to look hard to find evidence that low taxes work. We can’t perform controlled experiments regarding states and income tax rates, but we can look at what has happened in the states. There, the results are striking. Analysis in the current edition of Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index shows that low taxes are conducive to economic growth: “When it comes to growing gross state product (GSP), the [states with no personal income tax] have, on average, outperformed those states with the highest rates by 39.2 percent over the past decade. They have also outperformed the U.S. average by 25.6 percent. Additionally, not even one state in the high tax rate group performed as well as the average no personal income tax state.”

    We also need to face the grim realization that the Kansas economy has not been performing well. Rich States, Poor States evaluates state economies two ways. The “Economic Outlook Ranking” is a forecast looking forward. It is based on factors that are under control of the states. The “Economic Performance Ranking” is a backward-looking rating that measures state performance, again using variables under control of each state.

    For Economic Performance Ranking, Kansas is ranked 39 among the states, near the bottom in terms of positive performance. In the 2010 edition, Kansas was ranked 40th, and in 2010, 34th. Kansas is not making progress in this ranking of state performance.

    In the forward-looking Economic Outlook Ranking, Kansas ranks 26th. Again, Kansas is not making progress, compared to other states. In annual rankings since 2008 Kansas has been ranked 29, 24, 25, 27, and now 26.

    Recently the Tax Foundation released a report that examines the tax costs on business in the states and in selected cities in each state. The news for Kansas is worse than merely bad, as our state couldn’t have performed much worse: Kansas ranks 47th among the states for tax costs for mature business firms, and 48th for new firms. The report is Location Matters: A Comparative Analysis of State Tax Costs on Business.

    The most startling fact, and one that should be a wake-up call to anyone who cares about the future of Kansas, is the uncovering by Kansas Policy Institute that not long ago, Kansas was the only state to have a loss in private sector jobs over a year-long period.

    All the spending on schools, highways, and other government programs that are supposed to spur our economy to greatness lead to this: last place. The only state with private-sector job loss. We couldn’t have done worse.

    You might think that this evidence would matter to those who care about the future of Kansas. Judging from the flurry of opposing editorials the last month, it doesn’t seem to have an impact.

    Kansas will do better by leaving more of its citizens’ resources in the private sector, under their own control. Cutting taxes — and government spending to match — is the way to generate prosperity in Kansas for all of its citizens.

  • In Kansas, redistricting went well, after all

    The Kansas political class is upset because a federal court drew new districts they way they should be drawn — compactly and contiguously, and also considering communities of interest.

    The court, in its opinion, explained: “we have developed new legislative maps that distribute population as evenly as practicable between districts, while also considering to a much lesser degree the state’s legislative policies guiding redistricting.”

    In drawing Congressional districts the court took into consideration the Roeck score, a measure of compactness.

    What the court has done is to ignore the desires of the political class. The legislature’s consideration when attempting redistricting was all politics, all the time. Incumbents were protected and not pitted against each other. The residencies of potential challengers to incumbents were considered. The infighting was so protracted that the legislature failed to produce new districts, and is said to have affceted progress on other important legislation.

    It’s good the court didn’t consider the entrenched political class, because they don’t count. The legislature should not be run as a club. Said the court: “We have subordinated protection of incumbents to other state policy factors and, of course, to the constitutional requirement of one person, one vote. … any efforts to protect incumbents would require our choosing among incumbents, an inherently political exercise that we are neither able nor inclined undertake.”

    In creating the new districts for the Kansas House and Senate, the court — unintentionally — imposed a rough and not complete one-time implementation of term limits. In the House, there are 48 districts with more than one incumbent and 25 districts with no incumbent. This means a lot of turnover, which is good. We need fewer professional politicians and more citizens in legislatures. This is not as large a problem in Kansas as in the U.S. Congress, as our legislature meets for four months each year, and legislators are pretty much regular citizens the remainder of the year. But still, the redistricting battle has reminded us that there is indeed a political class in Kansas that believes it is entitled to office, term after term.

    Further evidence of an entrenched political class is the number — five at current count — of incumbents who moved their residence in order to run.

    I believe that Kansans will appreciate the large number of new members that are likely to take office next January. Hopefully the new members will realize the benefit themselves and implement term limits in Kansas. That would require an amendment to the constitution, which requires a two-thirds vote of each chamber of the legislature. Then, the people would have to pass the amendment by a simple majority. It’s quite likely that voters would approve term limits, as they are consistently popular with voters.

    Kansas Governor Sam Brownback does not play a formal role in passing constitutional amendments. His involvement would be to exercise his influence. Brownback, when elected to the U.S. Senate, imposed a two-term limit in himself, and he held true to that pledge. He has spoken in favor of term limits for members of Congress.

  • Brownback on wind, again

    This week Kansas Governor Sam Brownback again made the case for government spending on a particular industry. The industry is wind power, and the governor made his remarks at a national conference of the wind industry.

    The wind industry, with Brownback’s support, wants to extend the production tax credit (PTC) for the production of electrical power by wind. In March Brownback and U.S. Senator Jerry Moran of Kansas wrote an op-ed making the case for extending the PTC. At the conference this week, Brownback called for extending the PTC, although he did support a four-year phaseout.

    The PTC pays generators of wind power 2.2 cents per kilowatt-hour produced. To place that in context, a typical Westar customer in Kansas that uses 1,000 kilowatt-hours in the summer pays $95.22 (before local sales tax), for a rate of 9.5 cents per kilowatt-hour. (This is the total cost including energy charge, fuel charge, transmission charge, environment cost recovery rider, property tax surcharge, and franchise fee, according to a March 2010 illustration provided by Westar.) So 2.2 cents is a high rate of subsidy for a product that sells for 9.5 cents.

    Brownback and Moran contend that the PTC is necessary to let the wind power industry “complete its transformation from being a high tech startup to becoming cost competitive in the energy marketplace.” The problem with this line of argument is that wind is not an industry in its infancy. The PTC has been in place since 1992, a period of twenty years. If an industry can’t get established in that period, when will it be ready to stand in its own?

    The authors also contend that canceling the PTC is, in effect, a “tax hike on wind energy companies.” To some extent this is true — but only because the industry has enjoyed preferential tax treatment that it should never have received, coupled with a misunderstanding of the tax credit mechanism.

    The proper way to view the PTC is as a government spending program. That’s the true economic effect of tax credits. Only recently are Americans coming to realize this, and as a result, the term “tax expenditures” is coming into use to accurately characterize the mechanism of tax credits.

    Amazingly, Brownback and Moran do not realize this, at least if we take them at their written word when they write: “But the wind PTC is a winning solution because it allows companies to keep more of their own dollars in exchange for the production of energy. These are not cash handouts; they are reductions in taxes that help cover the cost of doing business.” (Emphasis added.)

    It is the mixing of spending programs with taxation that leads these politicians to wrongly claim that tax credits are not cash handouts. Fortunately, not everyone falls for this seductive trap. In an excellent article on the topic that appeared in Cato Institute’s Regulation magazine, Edward D. Kleinbard explains:

    Specialists term these synthetic government spending programs “tax expenditures.” Tax expenditures are really spending programs, not tax rollbacks, because the missing tax revenues must be financed by more taxes on somebody else. Like any other form of deficit spending, a targeted tax break without a revenue offset simply means more deficits (and ultimately more taxes); a targeted tax break coupled with a specific revenue “payfor” means that one group of Americans is required to pay (in the form of higher taxes) for a subsidy to be delivered to others through the mechanism of the tax system. … Tax expenditures dissolve the boundaries between government revenues and government spending. They reduce both the coherence of the tax law and our ability to conceptualize the very size and activities of our government. (The Hidden Hand of Government Spending, Fall 2010)

    U.S. Representative Mike Pompeo of Wichita recognized the cost of paying for tax credit expenditures when he recently wrote: “Moreover, what about the jobs lost because everyone else’s taxes went up to pay for the subsidy and to pay for the high utility bills from wind-powered energy? There will be no ribbon-cuttings for those out-of-work families.” See Mike Pompeo: We need capitalism, not cronyism.

    So when Brownback and Moran write of the loss of income to those who profit from wind power, we should remember that these profits do not arise from transactions between willing partners. Instead, they result from politicians like these who are willing to override the judgment of free people and free markets with their own political preferences — along with looking out for the parochial interests of the home state. We need less of this type of wind power.

  • Five questions with Mike Pompeo

    Originally published in The Washington Times. Below, U.S. Representative Mike Pompeo from Wichita explains his opposition to tax credits for all energy production, the problems with over-regulation of business, and the state of the economic recovery. As Decker notes, Pompeo’s stance against energy tax credits, which includes the production tax credit for wind power, is contrary to that of several Kansas politicians, including Kansas Governor Sam Brownback and U.S. Senator Jerry Moran. These have editorialized in favor of tax expenditures to support the wind power industry.

    5 Questions with Rep. Mike Pompeo: “We can’t spend our way out of this mess”
    By Brett M. Decker
    The Washington Times

    Rep. Mike R. Pompeo was elected in 2010 by the 4th Congressional District of Kansas. A native of Wichita and graduate of the United States Military Academy at West Point, he patrolled the Iron Curtain as an Army officer before the Berlin Wall came down in 1989. After leaving active duty, Mr. Pompeo attended Harvard Law School, where he was as an editor of the Harvard Law Review. Before running for office, he managed two small businesses. He founded Thayer Aerospace, which grew to employ more than 400 workers, and was president of Sentry International, a company that manufactures oilfield equipment. You can find out more about the congressman’s work at: pompeo.house.gov.

    Decker: You have authored a bill to eliminate all energy tax credits. That can’t be popular for a congressman from a corn state. What’s so important about your legislation that it is worth ticking off constituents back home?

    Pompeo: The federal government has been a proven failure in picking winners and losers in the energy sector. Democrats and Republicans alike have used our tax code to reward their favorite energy sources — that is, ones in their home district — with tax loopholes. This causes every American taxpayer to subsidize those industries and causes consumers to pay higher prices for energy. This results in terrible energy policy and even worse tax policy. More importantly, taxpayers are getting hammered both coming (higher taxes) and going (higher energy costs).

    My bill, the Energy Freedom and Economic Prosperity Act (HR 3308), would eliminate all energy tax subsidies from our Internal Revenue Code and turn that savings toward lowering our corporate tax rate to foster job growth here in America. The bill is revenue neutral and supported by every major conservative group, such as: Americans for Prosperity, Americans for Tax Reform, Club for Growth, Council for Citizens Against Government Waste, Freedom Action, Heritage Action, National Taxpayers Union, 60 Plus Association and Taxpayers for Common Sense. It gets rid of every tax credit related to energy; it favors no company, no person and no energy source. It treats them all equally. That is the American way.

    When I’m at home, Kansans tell me they want honest and serious leadership from their elected representatives, not the business-as-usual policies that got us into this economic mess. I am working hard to provide solutions to meet a most pressing goal: preserving our way of life for our kids and grandkids.

    Decker: I understand that you would use savings from the elimination of energy subsidies to lower the corporate tax rate. How would that work and why is it necessary?

    Pompeo: My goal in getting rid of tax loopholes is not to raise taxes. Our problem in Washington, D.C. is not a revenue problem, it is a spending problem. My goal is to make the tax code fairer and flatter and reward energy sources that lower costs for consumers. So, any increase in taxes that occurs because these tax goodies are eliminated will be offset by lower taxes for every single business in America. My bill would mean fewer tax loopholes for the powerful and the connected, and lower tax rates for everyone willing to take risk and engage in American commerce. This is the perfect combination and the way our tax code needs to be reformed. The Energy Freedom and Economic Prosperity Act does this in one small place — the realm of energy tax credits — and it provides a model for the broader tax reform that will set our nation on a prosperous course for decades to come.

    Sen. Jim DeMint [of South Carolina] has sponsored a companion provision which garnered the support of a majority of the Republican Conference, including Minority Leader Mitch McConnell [of Kentucky], during a recent vote on the Senate Floor. In the House, my bill enjoys the support of strong conservatives, including Budget Committee Chairman Paul Ryan [of Wisconsin]. I believe there is a growing consensus that my bill represents a free-market model for how to enact real, comprehensive tax reform.

    Decker: Before coming to Washington last year, you spent your career in the private sector, including building a successful aerospace company from the ground up. I have had many job creators tell me that if they had to start all over again that creating their own company would no longer be worth all the hassle, harassment and heartache. What are the most damaging government hindrances to entrepreneurs today?

    Pompeo: I’d start a business again in a heartbeat. Indeed, I hope that one day I may get the chance to do so when my mission here in Washington, D.C. is complete.

    It is true that President Obama has unleashed a slew of regulations upon small business. I struggled against that regulatory burden firsthand while running a company in Kansas. It is difficult to create jobs when you face an overwhelming tax burden, as well as countless compliance and reporting rules. I’ve been there. I’ve grappled with these issues while keeping the lights on and making payroll. That’s why we need to roll back government interference and grow our economy so people can find jobs. The energy sector is a perfect example where the Obama administration’s actions are harming both businesses and consumers. Having run a small business that provided oil and gas exploration equipment to domestic energy producers, I have seen this firsthand. Why, for example, has this president’s Environmental Protection Agency attacked with intent to destroy the coal industry that provides over 50 percent of all American power? Layer upon layer of regulations aimed at — in the president’s own words — “bankrupting” that industry. Why, for example, has this president put 10 (ten!) agencies on the beat to regulate hydraulic fracturing — a process that has been effectively regulated by states for decades with a tremendous safety record.

    These are the reasons some entrepreneurs are reluctant to start businesses and take risks. We can do better, we can create jobs in America, and I am confident the next administration will.

    Decker: Every time I sit down with a business leader, I get an earful about 2002’s Sarbanes-Oxley Act that dramatically altered federal accounting regulations and 2010’s Dodd-Frank Act to supposedly reform Wall Street. Should these laws be repealed? Why or why not?

    Pompeo: I’ve heard a great deal more about Dodd-Frank than I have Sarbanes-Oxley from Kansans. Both laws have had very significant and negative consequences for our economy. I support the repeal of Dodd-Frank in its entirety. Its goal to protect taxpayers from failures of the nation’s largest financial institutions is not accomplished and, instead, has negatively impacted community and regional banks along with their customers. It has also created yet another “do-good” organization, the Consumer Financial Protection Board. The CFPB will not protect consumers. Instead, it will add to the cost for every hardworking taxpayer who seeks to purchase a home with a mortgage or who wants to engage in other banking activity. Once again, the federal government, in its effort to protect citizens, fails in its mission and instead creates a bureaucracy that eclipses any good that might have been sought.

    Decker: The Obama administration talks an awful lot about an economic recovery, yet the unemployment rate is still sky high, record numbers of Americans are on food stamps and the national debt continues to mount due to runaway federal spending. What does such an anemic recovery say about the real state of our economy?

    Pompeo: This very weak data shows this is not a recovery that will truly provide the jobs and opportunity our nation must have and the next generation deserves. The $831 billion “economic stimulus,” passed into law in 2009, dug the hole deeper and did not accomplish what the president said it would – keeping unemployment below 8 percent. This should come as no surprise. Businesses have no interest in hiring new employees in this environment of higher taxes, regulatory uncertainty and the staggering costs of Obamacare. Republicans were swept into power in 2010 because Americans saw our solutions for recovery: less spending, less government and less regulation. All of these things are what will kick-start our recovery. We can’t spend our way out of this mess. That’s been tried and it failed. The real economy, private-sector job growth, will return when leaders in Washington, D.C. recognize what Kansans already know: The solutions are not to be found in ever-expanding government. The solutions are found through freedom, liberty, innovation and rewarding earned success.

  • Kansas tax reform is needed

    In Kansas, lower income tax rates are needed to ensure that Kansas has a bright economic future. Failing to reform income tax rates will mean that Kansas will continue to under-perform other states.

    Why should we care about reducing tax rates? We must remember that taxation is not a voluntary activity. Although it is not fashionable to say this in public, ultimately taxes are collected by coercion or its threat. While those who are (supposedly) enlightened will argue that taxes are like dues paid to belong to a club, or maybe the price we pay to have a civilized society, these arguments are easily dispatched. What, for example, if I don’t want to belong the the “club”? Big government — supported by high taxes — destroys civil society, if by that we mean a society based on liberty and voluntary participation and cooperation. The choice is stark, as explained in the mission statement of the Cato Institute: “In civil society individuals make choices about their lives while in a political society someone else makes or attempts to greatly influence those choices.”

    We also need to recognized the relative productivity of the public and private sectors of the economy. We find over and over that the private sector is more efficient at delivering goods and services than is the government, or public, sector. There are a number of reasons for this.

    First, government spending is filtered through the lens of special interest groups that fight to obtain every dollar they can. This “mining for dollars” is the prime reason why so much effort is spent lobbying government, both at the national, state, and local level. Almost every spending program exhibits the qualities of concentrated benefits and dispersed costs. There is a group, usually relatively small, that will benefit mightily from a spending program. The costs, however, are spread across the entire state, so the cost to each person is small. Sometimes this argument is made explicit, as when advocates for Kansas arts spending said the cost was only $0.29 per person, per year.

    This leads to an imbalance of interest and effort. The small group receiving the concentrated benefit of the spending is highly motivated to press its case and seek victory, while the average citizen sees the 29 cents — if he sees anything at all — and comes to the rational conclusion that it’s easier to pay than fight.

    Repeat this scenario many times, however, and soon the cost to the individual is substantial. This cost, remember, is to pay for spending that benefits special interest groups, and often provides little benefit to society at large. See the video Public Choice: Why Politicians Don’t Cut Spending for more. In the video, Benjamin Powell concludes: “This is the logic of politics, and this is why we end up with more spending than the average voter wants.”

    Second: Government doesn’t have the same profit motive that the private sector has. While most people want government to do some things that the private sector might not do on its own, such as caring for the sick and disabled, there a difference between government paying for a service and government providing the service. In government, spending programs are usually looked on as jobs programs. Politicians crow over how many jobs the program creates, and the more jobs, the better. In the private sector, however, different motivations come into play. There, efficiency is valued and rewarded by profit.

    Some do not recognize the beneficial effect of the profit motive, using arguments that say private for-profit companies can’t provide adequate care for disabled people. They argue that these companies will short-change patients on their care so that they can earn more profit. This, however, misunderstands how profits are earned, which is by providing a good or service which is valued by the customer, and doing that efficiently enough that something is left over after costs are paid. In competitive markets — and we must see that these exist — customers can switch to other suppliers if they don’t get what they want or contracted for. This benefits customers, which in this case, is the state in purchasing services for its citizens.

    There’s also no reason to think that government bureaucrats are immune from the profit motive. Bureaucrats benefit through expansion of the budgets and power spheres. Most seek to expand both.

    Results from other states

    While we can’t perform controlled experiments regarding states and income tax rates, we can look at what has happened in the states. There, the results are striking. Analysis in the current edition of Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index shows that low taxes are conducive to economic growth: “When it comes to growing gross state product (GSP), the [states with no personal income tax] have, on average, outperformed those states with the highest rates by 39.2 percent over the past decade. They have also outperformed the U.S. average by 25.6 percent. Additionally, not even one state in the high tax rate group performed as well as the average no personal income tax state.”

    Besides this, low tax rates are good for government budgets, too, finds the authors of Rich States, Poor States: “You may be surprised to learn that the growth premium of the no personal income tax states also benefits the public treasury. The average growth of all state and local tax revenues over the past decade was 51 percent. Interestingly enough, the no personal income tax states saw their state revenue grow 81.7 percent faster than that of the nine highest personal income tax states. Clearly, private sector growth matters a great deal for government revenues. Leaders of states with the highest rates ought to reconsider: If the rates don’t result in more money (relative to the no personal income tax states), then why are they so high?”

    Kansas compared to other states

    In the Rich States, Poor States analysis, Kansas does not perform well. Rich States, Poor States evaluates state economies two ways. The “Economic Outlook Ranking” is a forecast looking forward. It is based on factors that are under control of the states. The “Economic Performance Ranking” is a backward-looking rating that measures state performance, again using variables under control of each state.

    For Economic Performance Ranking, Kansas is ranked 39 among the states, near the bottom in terms of positive performance. In the 2010 edition, Kansas was ranked 40th, and in 2010, 34th. Kansas is not making progress in this ranking of state performance.

    In the forward-looking Economic Outlook Ranking, Kansas ranks 26th. Again, Kansas is not making progress, compared to other states. In annual rankings since 2008 Kansas has been ranked 29, 24, 25, 27, and now 26.

    Recently the Tax Foundation released a report that examines the tax costs on business in the states and in selected cities in each state. The news for Kansas is worse than merely bad, as our state couldn’t have performed much worse: Kansas ranks 47th among the states for tax costs for mature business firms, and 48th for new firms. The report is Location Matters: A Comparative Analysis of State Tax Costs on Business.

    The most startling fact, and one that should be a wake-up call to anyone who cares about the future of Kansas, is the uncovering by Kansas Policy Institute that not long ago, Kansas was the only state to have a loss in private sector jobs over a year-long period.

    All the spending on schools, highways, and other government programs that are supposed to spur our economy to greatness lead to this: last place. The only state with private-sector job loss. We couldn’t have done worse.

    Kansas will do better by leaving more of its citizens’ resources in the private sector, under their own control. Cutting taxes — and then government spending — is the way to generate prosperity in Kansas for all of its citizens.