Tax abatements

The harmful effects of Wichita’s special tax favors

In the past few weeks a handful of companies in Wichita have asked to be exempted from paying property taxes on investments they have made. This week Wichita may decide to grant special tax treatment to a large development in downtown Wichita. Is it wise for the City of Wichita to grant these special tax favors? Because capital for investment is in short supply, it is important that our economy allocate it where it does the most good, where it is valued most. Markets do a very good job of this when they operate free of government meddling. When government…
Read More

City of Wichita acknowledges taxes are not good for business

On November 6, 2007, the Wichita City Council considered and approved a request by Learjet for industrial revenue bonds. One of the benefits of IRBs such as these is that the property purchased with the proceeds is usually exempt from property tax. In this case, the period of tax abatement is ten years. In the minutes of the meeting, under the heading "Economic Vitality and Affordable Living" we can read: "Granting an ad valorem property tax exemption and sales tax exemption will encourage the business to create new job opportunities and stimulate economic growth for the City of Wichita and…
Read More

Tax increment financing in Wichita benefits few

Today the Wichita City Council votes on granting $4.5 million in tax increment financing to a developer. Here's an article from August 17, 2006 that explains why the council should not approve this gift. (Note to The Wichita Eagle: Why not report stories like this a little earlier than the day the council is voting?) Recently the City of Wichita formed a TIF (tax increment financing) district to aid a developer who wishes to build in the College Hill neighborhood. How does a TIF district work? The Wichita Eagle reported: "A TIF district doesn't cost local governments any existing tax…
Read More

Wichita City Council and Cessna Aircraft Company Industrial Revenue Bonds

I received this letter written to Wichita Mayor Carlos Mayans and members of the Wichita City Council. The author makes excellent points about the harmful effects of special tax treatment for special interests. A better goal would be to work to reduce taxes for all companies and all people. This way, each company and individual can decide how to make best use of their own funds, instead of the Wichita City Council deciding for us. That is, in effect, what tax breaks like this do. It is the government deciding that resources should be allocated in a way different than…
Read More

Maximum taxes means minimum growth

Maximum Taxes Means Minimum Growth By Karl Peterjohn, Kansas Taxpayers Network Kansas has high taxes. Even worse, the high taxes are high property taxes that stifle capital formation and hold down wages. Two new studies rank Kansas at the bottom of this region when it comes to soaring property taxes. That should not be too surprising since Kansas and Nebraska are the two states that provide their citizens will almost no opportunity to vote on whether or not property taxes should be raised. The Tax Foundation as well as the Small Business & Entrepreneurship Council both issued reports recently pointing…
Read More

Tax increment financing in Wichita benefits few

Recently the City of Wichita formed a TIF (tax increment financing) district to aid a developer who wishes to build in the College Hill neighborhood. How does a TIF district work? The Wichita Eagle reported: "A TIF district doesn't cost local governments any existing tax money. It takes property taxes paid on new construction that would ordinarily go into government coffers and redirects it to the bond holders who are financing the project." In the present case, the value of the benefit the developer sought is estimated to be worth $3.5 million to $4 million. Whether this benefit is given…
Read More

Sedgwick County surrenders key tax advantage

Sedgwick County Surrenders Key Tax Advantage By Karl Peterjohn, Executive Director, Kansas Taxpayers Network Spirit Aerosystems CEO Jeff Turner defended the massive spending hike that was used as the primary justification for the county's 8.8 percent property tax hike in his editorial August 9, 2006. Turner's support for this increased government spending ignored some important ramifications behind this economically destructive vote. Sedgwick County has an important fiscal advantage over 19 other Kansas counties. Sedgwick County has no community college and hence no community college property tax. That property tax is a major reason why this levy makes the total tax…
Read More

Tax increment financing in Iowa

Writing from Cedar Rapids, Iowa Readers of The Voice For Liberty in Wichita are well aware that I believe that when the government provides subsidies to businesses -- either in the form of cash payments or preferential tax treatment -- we create a corrosive business environment. Government picks winners and losers for political reasons, rather than letting the market decide which companies are doing a good job. Government also spends money inefficiently. Instead of letting the market decide where to best allocate capital, government chooses who receives capital taken from the people through taxation according to the whims of politicians…
Read More

Local economic development in Wichita

Writing from Memphis, Tennessee Today's Wichita Eagle (November 5, 2005) tells us of a new economic development package that our local governments have given to induce a call center to locate in Wichita. The deal is described as "one of the biggest the two-year-old economic development coalition [Greater Wichita Economic Development Coalition] has landed." There is an interesting academic paper titled "The Failures of Economic Development Incentives," published in Journal of the American Planning Association, and which can be read here: www.planning.org/japa/pdf/04winterecondev.pdf. A few quotes from the study: Given the weak effects of incentives on the location choices of businesses…
Read More

Tax Abatements For All

Recently I wrote about the Mississippi Beef Plant (The Mississippi Beef Plant Has a Lesson For Us) and its spectacular costs to the taxpayers of Mississippi. I wondered if there were less spectacular failures that we didn't know about because they weren't reported in the news media. Failures in this context could mean a situation where the taxpayers have to make good on a bond or debt that the benefiting company didn't pay, or it could mean a situation where the company doesn't default, but fails to deliver on the promised economic development activity. In an article in the June…
Read More