Voice For Liberty

Tag: Taxation

  • Tax Chambers of Commerce, Right Here in Kansas

    This week, Kansas Liberty has a very fine editorial titled The KC Chamber: Enemy of Life, Enemy of Business. Prominent is the mention of the work of my friend the Kansas Meadowlark in revealing the funding of the The Greater Kansas City Chamber of Commerce. See Greater Kansas City Chamber PAC, Awash With Cash, Forms New PACs to “Buy” Kansas Elections for the Meadowlark’s original reporting.

    I won’t reveal the entire content of the Kansas Liberty piece, as I urge you to read it in its entirety. But here’s a sample: “Through its well-funded political action committees, the best funded in the area, the Chamber is working to create a high tax environment that is indifferent to small business and the free market and downright hostile to the culture of life.”

    This reminded me of an article from last year. Here’s something from Stephen Moore in the article “Tax Chambers” published in The Wall Street Journal on February 10, 2007:

    The Chamber of Commerce, long a supporter of limited government and low taxes, was part of the coalition backing the Reagan revolution in the 1980s. On the national level, the organization still follows a pro-growth agenda — but thanks to an astonishing political transformation, many chambers of commerce on the state and local level have been abandoning these goals. They’re becoming, in effect, lobbyists for big government.

    …

    In as many as half the states, state taxpayer organizations, free market think tanks and small business leaders now complain bitterly that, on a wide range of issues, chambers of commerce deploy their financial resources and lobbying clout to expand the taxing, spending and regulatory authorities of government. This behavior, they note, erodes the very pro-growth climate necessary for businesses — at least those not connected at the hip with government — to prosper. Journalist Tim Carney agrees: All too often, he notes in his recent book, “Rip-Off,” “state and local chambers have become corrupted by the lure of big dollar corporate welfare schemes.”

    …

    “I used to think that public employee unions like the NEA were the main enemy in the struggle for limited government, competition and private sector solutions,” says Mr. Caldera of the Independence Institute. “I was wrong. Our biggest adversary is the special interest business cartel that labels itself ‘the business community’ and its political machine run by chambers and other industry associations.”

  • CARE Dropped Ball on Educating About Wichita School Bond Issue

    My friend Helen Cochran of Citizens for Better Education contributes this article, which appeared in the Wichita Eagle.

    In this article, Helen analyzes the work of Citizens Alliance for Responsible Education, a group that supports the Wichita school bond issue. As Helen notes, attendance at the four educational meetings CARE held was low. In one meeting, the only two people in attendance who weren’t either school district personnel, Schaefer Johnson Cox Frey Architecture employees (the school district’s architect), or associated with CARE were associated with Wichitans For Effective Education, a group opposing the bond issue. So at this meeting, there were effectively no members of the general public attending.

    It is truly a puzzle as to why the attendance at these meetings was so low. Especially when Randy Thon, co-leader of CARE, mentioned that some 1,500 people participated in the formulation of the bond issue plan. On a personal level, I spoke to Mr. Thon after the first meeting and expressed some sympathy that so few people attended the meeting. I don’t think he thought I was serious, or that it even mattered at all.

    On April 7, the Wichita school board postponed a scheduled May 6 special election for a proposed $350 million school bond at the behest of a volunteer bond-support group. Citizens Alliance for Responsible Education argued that more time was needed to “educate the public” regarding the bond specifics and therefore a postponement was warranted. The board concurred, despite earlier arguing that postponing the vote would add tens of thousands of dollars to construction costs.

    It was concluded that CARE would educate the community and return to the board with a bond recommendation. Prior to hosting four community meetings this summer, CARE commissioned a telephone survey in early June to gauge public sentiment and asked such questions as the age and political party affiliation of the responder as well as questions with regard to the size of the bond and other proposal specifics. The results of the survey have not been made public.

    Fewer than 50 citizens attended the four educational community meetings. Perhaps people did not attend because they already had made up their minds as to how they would vote. Perhaps people were busy with summertime activities. Or perhaps people felt that because opponents were denied a voice when the bond postponement was suggested to the board, any opposing viewpoint would not be welcomed at these community forums. As the summer meetings failed to attract the public, neither the school board nor the volunteer group had a backup plan to educate the public. No bulk mailing was undertaken, nor were informational telephone banks set up to reach the public. The “more time is needed” argument translated into a waste of time, as no further steps were taken.

    The educational ball was dropped. CARE squandered all opportunity for credibility when it dropped that ball, leaving USD 259 board members to wallow in their indecisiveness. This is troubling because the school board has postured itself to heavily rely upon a recommendation from CARE, scheduled to be made at Monday’s school board meeting, while ignoring other community groups’ recommendations. What are CARE’s credentials to recommend this board spend millions of property owners’ dollars without having fulfilled a promise to better educate this community regarding such an expenditure? CARE may suggest a scaled-back version of the original bond, recommend the proposal be withdrawn (as suggested by some bond opponents) or encourage the board to throttle full-speed ahead for the originally proposed $350 million.

    Regardless of what is presented to the board Monday night, the public should be justifiably skeptical of any recommendations made or agreed upon when attempts to educate the public were poorly conceived and executed and failed miserably.

    If CARE plans to use its survey results as grounds for its recommendation, the school board should insist upon full public disclosure of those results.

    Asking a community to endorse a $350 million bond issue, an issue less than $350 million or a bond issue in any amount should warrant a more conscientious and disciplined effort than what has been offered to date.

  • No New Sedgwick County Sales Tax Without Property Tax Elimination: Taxpayer Protection is Needed

    A press release from the Peterjohn for County Commissioner campaign

    23 July 2008

    The Wichita Eagle’s lead story July 23 mentions a new county proposal to raise a new local sales tax to cover a variety of new spending programs. A variety of new or expanded county spending projects were mentioned in this article.

    There is a history of trying to shift taxes. Sometimes this has been done to intentionally raise additional revenue (see 1992 statewide tax hike) or to shift from property to sales tax (1984 in Sedgwick County) and expand other spending. Sadly, the net effect in almost all of these case has been expanding tax revenues for government. This is a reason why we need to proceed carefully and with a detailed plan.

    “There should not be any new local sales tax until the following steps occur,” said Karl Peterjohn, candidate for the 3rd district county commission seat. “First, any new local sales tax should eliminate the county’s current 31.3 mill property tax. By my rough estimate this would require a sales tax of approximately 1.5-to-1 5/8 cents to be revenue neutral for the county. At the same time protection must be provided to taxpayers to prevent property taxes from rising again.”

    “Voter protection can be provided by a requirement that all county taxes receive voter approval before being raised. The county cannot raise sales taxes without voter approval. This protection for taxpayers must also be provided for all other new or existing county taxes too,” said Peterjohn.

    “Second, the county must go to the state to receive authorization before it could implement this tax shift from property to sales (or tax on capital to one on consumption). That can’t happen until the 2009 legislature. I believe that a county wide sales tax that eliminates the existing county mill levy would be a net positive for economic growth in our community by cutting total property taxes by over 25% for most taxpayers in our county.

    “Many businesses currently seek property tax abatements due to the high level of property taxes in our county. Eliminating the county’s property taxes would be very economically stimulative and would provide an overall property tax reduction for all homeowners, farmers, and businesses. Roughly 10-to-15% of retail sales in this county occur from purchases made by folks who do not live in Sedgwick County,” Peterjohn said.

    “Sadly, there are a number of cases where shifting from property to sales taxes has provided a permanent increase in sales taxes and only temporary property tax relief. One example is just up the road in Shawnee County. That is why it is imperative that any new local sales tax hike contain ironclad provisions to protect county taxpayers. It is also imperative that we should eliminate the county’s property tax with any new local sales tax proposal.”

    Donations to the campaign can be mailed to the address listed below. A paypal account is available to accept on line donations at the karlpeterjohn.com campaign web site. There is a limit of $500 per person or business for contributions made until the August 5 primary.

    Peterjohn for County Commissioner
    PO Box 8734
    Wichita, 67208
    316-312-1585
    karlpeterjohn.com

    Discolsure: I am one of the campaign co-managers for this candidate.

  • Wichita City Council’s misunderstanding of tax increment financing

    On July 8, 2008 I testified at a public hearing at a Wichita city council meeting. Afterward, a council member told me that I had a “glaring error” in my arguments. I won’t identify this member in order to avoid embarrassing the member. The minutes of the meeting don’t identify the member who said this, but video is available.

    My purpose in testifying that day was not to question the merits of tax increment financing (TIF) districts. Instead, I was identifying an ethics problem that a Wichita school board member has regarding his involvement in a proposed TIF district. (See Reverend Kevass Harding and His Wichita TIF District.) In my testimony I stated, with a qualification, that the applicant for this TIF district was asking for relief from paying some of the property tax for his real estate development. After my testimony, a council member told me that I was wrong, that the TIF district won’t allow someone to avoid paying property taxes. True, I said. It was sloppy for me to have said that without clarification, but it wasn’t the point I was making that day.

    But since the city council member brought up the point, let’s examine how TIF districts work. I am sure you will be able to agree that the use of TIF districts allow developers to effectively avoid paying some of their increased property taxes.

    In material prepared by Wichita’s Office of Urban Development and presented at the March 18, 2008 city council meeting, we may read this: “The developers have identified a financing shortfall of $2.5 million, for which they are seeking tax increment financing assistance. The preliminary project budget presented to City staff indicates that TIF funds would need to be used for site acquisition costs in order to spend $2.5 million on project costs eligible for TIF funding.”

    So without the formation of the TIF district, the developers are $2.5 million short. With the TIF district, they’ve got the money they need. We must conclude, then, that the TIF district financing, no matter what it is used for, is worth $2.5 million to the developers.

    Now if the developers borrowed that money from a bank, they’d pay back the loan over some period of years. Each year, out of the cash flow the project generates, the developers would have to make the loan payments, and also, just like everyone else, they’d have to pay their property taxes. (Those taxes have increased as now the development is worth more due to the improvements made by the developer. That’s the “increment” in TIF.)

    But with a TIF district, the “bank” is the City of Wichita, which issued bonds to pay for the benefits the developers needed to make the project work. So the developers have to pay back the city. But instead of making payments on a loan from a bank and their property taxes, all the TIF developers have to do is pay their property taxes. By merely paying the same taxes that everyone else has to pay, their loan (the bonds issued by the City of Wichita) is repaid.

    That’s why a TIF district allows developers to effectively avoid paying some of the increased property taxes on their development. When a development is undertaken without the benefit of a TIF district, developers have to repay loans and pay higher taxes. With a TIF district, all the developers have to pay is higher taxes.

    It is as simple as this.

  • Wichita School District: Tax Rates Not Increasing, But Taxes Paid Are

    According to the Wichita Eagle article School board plans no tax increase for coming year, USD 259, the Wichita public school district, does not “plan to raise property taxes” to pay for school operations next year.

    Now if you read that and that alone, you might want to congratulate Wichita school officials for respecting the taxpayer.

    But not so fast.

    For one thing, the taxes that are under the control of USD 259 are increasing. The rate is not, but the amount collected is. That’s because property taxes increase each year as property is reappraised to a higher value, and as new property comes into existence. This increase can be high, too. From 2005 to 2006, the two most recent years I could find data at usd259.com, the total assessed value of property taxable by USD 259 increased from $2,314,710,733 to $2,428,891,164. That’s an increase of 4.9%, and even without an increase in the mill levy (the rate at which property is taxed), much more tax will be collected.

    Then, it’s not like the school district’s appetite for tax increases is sated. Last August the board increase the mill levy by two mills. That brought the district to its statutory limit. It can’t increase the mill levy further without asking for voter approval. If not for that, we can be fairly sure that the board would pass another tax rate increase.

    Finally, remember that this Wichita school board and its surrogates Schaefer Johnson Cox Frey Architecture and Citizens Alliance for Responsible Education are campaigning for the voters to approve a large tax increase in the form of the bond issue, which may or may not appear on a ballot soon.

  • Happy Cost of Government Day

    According to Americans for Tax Reform today, July 16, 2008, marks national Cost of Government Day:

    On July 16, Americans mark the national Cost of Government Day (COGD), the date on the calendar year when the average American finishes paying off his or her share of federal, state and local spending, and the regulatory burden. Cost of Government Day falling on July 16 means that you had to work 197 days out of the year just to meet all the costs imposed by government. In other words, the total cost of government – far more than taxation alone – consumes 53.9 percent of national income.

    Americans for Tax Reform also calculates Cost of Government Day by State. For each state, the number of days worked for the government is shown, ranging from 172 days for Alaska to 212 days for Connecticut. Kansas is state number 25 in these rankings, right in the middle. We work 192 days for government, meaning our freedom day was July 11, a few days ago.

  • Reverend Kevass Harding and His Wichita TIF District

    Remarks to be delivered to the Wichita City Council, July 8, 2008.

    Mr. Mayor and members of the council, today I will not discuss the desirability of tax increment financing (TIF) districts in general, or the merits of this one in particular. I’ll leave that for the August 12 public hearing. Instead, I wish to express my concerns about a thorny situation involving the applicant and overlapping governmental jurisdictions.

    In Wichita, Reverend Kevass Harding, a member of the USD 259 (Wichita public school district) board is also a real estate developer. His development group is asking the City of Wichita for the creation of a tax increment financing district (New life for Ken-Mar Shopping Center: Harding plans to revitalize 13th Street mall, March 14, 2008 Wichita Business Journal).

    In Kansas, when a city creates a TIF district, the affected county and school district have 30 days to veto its creation. When Wichita creates TIF districts, the county and school district usually agree. To my knowledge, there has been no veto by either. These overlapping taxing jurisdictions don’t have to pass a resolution to agree to the TIF district. All they have to do is not pass a resolution that vetoes it.

    In this case, Reverend Harding is asking Wichita for relief from paying some of the property tax for his real estate development. (Some might disagree that the TIF district provides relief from paying taxes, but that’s not important for now. It is undoubtedly a benefit of some type, and that’s what matters.) Then the Wichita public school board, Reverend Harding being a member of that, has to give its agreement for the TIF district to proceed.

    The problem is that the way the school board indicates its agreement to the establishment of the TIF district is by doing nothing. Only passive agreement is required. Negative action is what is required. If the school board was required to pass a resolution agreeing to the TIF district, Reverend Harding could declare a conflict of interest and sit out the vote. That’s positive action. That happened last week in this very chamber.

    But since no vote is required by Reverend Harding or his board — only passive assent — how can we ask him to recuse himself? Can we insist that he cease to do nothing? That’s the problem with requiring someone to take negative action.

    So what do we do?

    The best solution is for Reverend Harding to withdraw his request for the creation of the TIF district that benefits his development. Then there is no problem with conflicts of interest. This is also congruent with Reverend Harding’s votes to increase taxes while a member of the school board. His business would pay the same taxes he demands others pay.

    Failing that, one way we could handle this situation is that the city could ask the school board to agree to pass a resolution agreeing to the TIF, even through they aren’t required to do this. Then Reverend Harding could publicly acknowledge his conflict of interest and step aside.

    But should the City of Wichita even care about this? Is it the city’s responsibility to ensure that other governmental entities act ethically and transparently?

    In the end, it may not matter, as to my knowledge, neither Sedgwick County nor the Wichita public school district has vetoed the creation of a TIF district passed by the City of Wichita. But I think the citizens of Wichita and USD 259 would appreciate this situation resolved in a way that avoids all conflicts of interest.

  • Kansas Giveaways to Wealthy Homeowners

    A Wichita Eagle news story (Help with historic houses, July 4, 2008) describes two apparently wealthy College Hill homeowners who plan to benefit from Kansas tax credits. These credits are given to people who own homes that have a historic designation.

    If you own such a historic house and plan to, for example, replace the windows or the roof, the State of Kansas will give you a tax credit of up to 25%.

    Sounds like a good program, doesn’t it? Tax credits — do they cost the state anything when given? Tax credits mean that your taxes are reduced. Suppose you spent $5,000 replacing windows. 25% of that is $1,250, so with a tax credit, your Kansas income tax would be reduced by $1,250. If your taxes were going to be $4,000, after the tax credit you’ll pay only $2,750.

    (This is much better than a tax deduction, which reduces your taxable income and taxes, but by a much smaller amount. The highest Kansas personal tax rate is 6.45%, so reducing your income by the $5,000 spent on windows means a tax savings of $322.50. Not nearly as good for the homeowner as a credit of $1,250.)

    The problem with all this is that unless the state reduces its spending by the amount of the tax credits, someone else has to make up the difference.

    So, average hard-working Kansans of all income levels will pay more taxes so that gifts — wait, I mean tax credits — can be given to wealthy homeowners living in historic homes.

    Now does this seem like a good program? The irony is that liberals (or “social progressives”) are usually in favor of historic preservation laws, while at the same time decrying tax giveaways to the rich, who do not pay their fair share, they say. Go figure.

  • Wichita Tax Swap Has Dangers

    The City of Wichita is thinking about raising its sales tax and using the proceeds to lower property taxes (“City starts talks on 1-cent hike in sales tax”, May 14, 2008 Wichita Eagle).

    While some debate the relative merits of sales taxes vs. property taxes, there is one thing I am certain of: if Wichita reduces its property taxes, politicians in overlapping jurisdictions will see this as an opportunity to raise the property taxes they levy.

    Wichita city council member and vice-mayor Sue Schlapp recognizes this threat, as evidenced by reporting in the Wichita Eagle article: “But council member Sue Schlapp said the city must consider that other taxing entities, such as Sedgwick County and the Wichita school district, could see the reduction of the city’s share of taxes as an opening to raise property taxes, which would mean an overall increase for residents.”

    If Wichita goes through with this plan, I would urge all other local governmental bodies to adopt resolutions requiring voter approval of tax increases. As it is, many of the taxes we pay have a built-in escalator. This is the case with sales and property taxes. As prices rise, people spend more, and sales tax receipts rise. As the tax assessor raises the valuations in property, people and businesses pay more property tax.