Voice For Liberty

Tag: Taxation

  • Tax Abatements in Wichita

    Remarks to Wichita City Council, June 3, 2008.

    A few months ago I spoke before this council asking that you not grant a tax abatement. At that time I was told that granting a property tax abatement doesn’t have any impact on City of Wichita spending.

    I found this quite remarkable, that new homes and buildings can be built but not consume any additional resources that the city and other local governments supply. If this is truly the case, why should a new development of any type at any location have to pay any property tax at all?

    There is a cost to the city and other local governments in granting tax abatements. Actually, the cost is born by the taxpayers who don’t achieve the favored status that these developers are seeking. These non-favored taxpayers — homeowners and businesses alike — have to pay for the services this development will consume but will not pay for because they seek to avoid paying their property tax.

    Mr. Mayor and Members of the Council, if there were no impact on city spending, no cost to the taxpayers of the City of Wichita when a TIF district is created or tax abatements given, why would we not grant these benefits to anyone building anything in any part of town?

    It is now apparent that TIF districts and tax abatements are entitlements that developers in politically-favored areas of town can count on receiving, while everyone else pays.

    The granting of these benefits to developers working in certain parts of Wichita amounts to central government planning. It is government, instead of people trading freely in markets, deciding to direct capital from one part of town to another for political, instead of economic, reasons. In effect, this council says to entrepreneurs who chose to invest their capital somewhere else in Wichita — somewhere that doesn’t qualify for tax abatements — that they made a mistake. And they will pay for that mistake, as they pay the property tax that these developers will escape paying.

    It may be that this project is not economically viable unless it receives the tax abatement. If so, we should ask why our taxes are so high that they discourage investment and economic activity.

  • How to pay for special tax treatment in Wichita

    Remarks delivered to the Wichita City Council, April 15, 2008. Audio is available here.

    The company that this warehouse is being built for is Cessna. In the end, it is that company that benefits from the property tax relief asked for today.

    Mr. Mayor, members of the city council, I ask that you not vote to approve this request for a tax abatement, and that you cease this practice altogether. Alternatively, I ask that you adopt a practice that will help realize the costs of these actions.

    It is no doubt difficult to compete with other states when they offer huge gifts to companies in order to lure them to their state. That’s a problem that needs to be addressed at a different level of government.

    The matter before you now, however, is not the same. This company is not threatening, to my knowledge, to leave our area if the tax abatement is not granted. It appears they would build this facility even if the tax abatement is not granted.

    The harmful effect of this tax abatement is this: When someone escapes paying taxes, someone else has to make up the difference. While the tax abatement being considered at this moment is relatively small, many are large, and when companies appear before this body week after week asking for tax favors, it adds up.

    This same effect applies to the other governments that are affected: Sedgwick County, the Wichita public school district, and the State of Kansas. When one person does not pay, someone else has to pay more.

    These special tax favors expose an inconsistency: business and government leaders tell us all the time that we must “build up the tax base.” Granting these tax favors destroys that base.

    Now I don’t blame this company for asking for this tax favor. When councils, commissions, and legislatures indicate their willingness to grant these, businesses respond. So this company, of which I am a shareholder, by the way, is simply responding rationally to its environment.

    But some of these companies that are asking for tax favors have problems with consistency. The president of this company has testified in favor of higher taxes to pay for building a facility that his company will benefit from. Now his company asks for relief from paying the taxes he wants others to pay.

    As long as this body is willing to grant tax abatements and other special tax favors, I propose this simple pledge: that when the City of Wichita allows a company to escape paying taxes, that it reduce city spending by the same amount. By following this simple rule, the City can be reminded of the cost of granting special tax favors, and the rest of us won’t have to pay for them.

  • Tax Day is Here. Take No Cheer.

    As the annual tax deadline is here, we should take a moment to examine our level of awareness of the taxes we pay.

    Many families don’t pay any federal income tax. According to a study by the Tax Foundation (link: http://www.taxfoundation.org/ff/zerotaxfilers.html) 58 million households, representing some 122 million people, or 44 percent of the U.S. population, pay no federal income tax. I made a few calculations, and Kiplinger’s TaxCut software for 2004 shows that a family with two children and $40,000 income (that’s approximately the median household income in Wichita), taking the standard deductions, pays $0 federal income tax.

    These families probably do pay quite a bit in the form of Social Security tax, but as we’re told, that’s not really a tax. Instead, it’s the government saving for our future retirement. At least it tells us so.

    For those who do pay taxes, they often aren’t aware, on a continual basis, of just how much tax they pay. That’s because for wage earners, federal and state taxes are conveniently withheld for us on our paychecks. Many people, I suspect, look at the bottom line — the amount they receive as a check or automatic bank deposit — and don’t really take notice of the taxes that were withheld. This makes paying taxes almost painless.

    For local property taxes, anyone who has a mortgage probably has these taxes incorporated into their monthly mortgage payment. Renters pay them as part of their rent. Everyone who trades with a business pays them, as taxes are part of what goes into formulating prices.

    An alternative would be to eliminate the withholding of taxes from paychecks and from monthly mortgage payments. Instead, each month or year the various taxing governments would send a bill to each taxpayer, and they would pay it just like the rest of their periodic bills. In this way, we would all be acutely aware of just how much tax we pay.

    A curiosity is that many people are happy during tax season because they get a refund. And they’re delighted to get that refund, so much so that many will pay high interest rates on a refund anticipation loan just to get the money a little earlier. The irony is that by adjusting their withholding, they could take possession of much of that money during the year as they earn it.

    The other people happy during tax season are tax preparers. As a country we spend an enormous effort on tax recordkeeping and compliance. Another study by the Tax Foundation estimates that in 2002 we spent, as a nation, 5.8 billion hours and $194 billion complying with the federal tax code. (5.8 billion hours is equivalent to about 2,800,000 people working 40 hours per week, 52 weeks per year.) By simplifying our tax code, we could eliminate much of this effort, and return that effort to productive use.

    Since tax withholding from paychecks and mortgage payments reduces our awareness of just how much tax we pay, it’s unlikely that governments will stop the withholding of taxes and submit a bill to taxpayers. Instead, it’s left to ourselves to remain aware of how much we are paying.

  • Distaste for tax increases faded quickly on Wichita school board

    In a candidate questionnaire from the Wichita Metro Chamber of Commerce before the recent USD 259, the Wichita public school district board member election, Kevass Harding answered “No” when asked if he would support a tax increase for Wichita schools. The other successful candidates — Betty Arnold, Jeff Davis, and Barb Fuller — were more artful in their responses, promising “financial responsibility” and the usual empty pledges to spend wisely and efficiently. Ms. Fuller did say “I would not want to raise these taxes,” referring to local property taxes.

    The election took place in April 2007. In August 2007, just four months later, all Wichita school board members, including those mentioned above, voted to increase taxes. It didn’t take long for Kevass Harding to reverse his position. It didn’t take long for Barb Fuller to overcome her dislike for raising taxes. Power has a way of doing these things.

    In February 2008, all members except Jeff Davis approved the idea of a $350 million bond issue, asking voters to decide the issue. There is no doubt, however, what position the board members take on the necessity of the bond issue and its tax increase. And before you get the impression that Mr. Davis was overtaken by a sudden wave of wisdom regarding tax increases, he voted no only because he felt his district wasn’t slated to get enough. He later changed his vote.

  • Wichita School Bond Issue: It’s not the $40, it’s the $1,749

    Editor’s note. This article has been updated with new figures. See Wichita School Bond Issue: It’s not the $42.55, it’s the $1,927.

    Listen to this article in audio form by clicking here.

    The proposed USD 259 (Wichita public school district) school bond issue in 2008 is estimated to cost the owner of a $100,000 home about $40 per year in additional taxes. Proponents divide that into a monthly cost of about $3.33 per month, or sometimes a daily cost of $.11, to dramatize how little this bond issue actually costs.

    Eleven cents per day per household! Who could oppose such a paltry amount? Especially when bond issue supporters make it seem as though that’s all we spend on schools. But we do, in fact, spend a great deal more on our public schools.

    How much more? There’s another number that bond issue proponents don’t publicize. In fact, I’m sure that many of them don’t have an idea of the magnitude of this number. But this number gives us insight into the size and impact of the Wichita school district, and helps us view the district’s spending in context.

    What is that number? It’s $1,749. That’s what you get when you take the annual spending of USD 259 ($544,384,275) and divide it by the number of people living within the district’s boundaries (311,228).

    That’s how much the Wichita public school district spends each year, per person living in the district. It’s not the same as saying each person is taxed that amount each year by USD 259, as only 31% of district spending is paid for from local sources. The rest came from the State of Kansas (58%) and the federal government (11%). USD 259 residents, of course, pay a good share of those state and federal taxes.

    That number — $1,749 in spending by USD 259 per year for each person living in the district — gives us an idea of the huge volume of resources that the district has at its command. It is a tremendous amount of money. Think of all the people you see each day. For each of those people, $1,749 has to be raised each year to pay for Wichita public school spending.

    For a household of two adults and two children, $6,996 per year, or $19.17 per day, must be raised through a variety of taxes to support USD 259 spending. Keep this in mind as bond issue supporters ask for another increase in taxes.

    Sources of data: Spending figures are for the 2006-2007 school year, from The Kansas Department of Education at http://www.ksde.org/Default.aspx?tabid=1810. The population of USD 259 is from the National Center for Education Statistics at http://nces.ed.gov/surveys/sdds/acs05/index.aspx, from the 2005 American Community Survey data.

  • Homeowners not only people affected by Wichita school bond issue

    A letter in the February 27, 2008 Wichita Eagle makes the case that using property tax increases to fund improvements to Wichita public schools gives renters a “free ride.” This is because renters, as they don’t own the homes they live in, escape paying property taxes. This is distinguished from homeowners, who “pay for everything,” according to the letter writer.

    In Kansas, residential rental property pays property tax at the same rate as homes. It is true that the property tax bill goes to the landlord, not the renter. This property tax, however, is a cost that goes into determining what landlords want to charge for rent. This tax affects all rental properties at the same rate; I don’t think there is much opportunity for one landlord to be more “efficient” regarding property taxes than others, so these property taxes are pretty much passed on to the renter. Therefore, renters pay, too. We can expect rents to rise when property taxes increase.

    A greater problem is in the property taxes that businesses and utilities pay. Residential property is assessed at 11.5% of appraised value. Business and utility property, however, is assessed at 25% and 33%, respectively. Again, both businesses and utilities seek to pass on their costs to the customers to the extent possible. This means that anyone who buys something from a business located within the boundaries of USD 259, or who consumes electricity, natural gas, telephone service, or other utility services within the same area, may face increased prices, should the bond issue pass.

    For example, Simon Property Group LP, an owner of shopping malls in Wichita, is the seventh largest taxpayer to USD 259, accounting for .43% of the assessed valuation in the district. Together, Western Resources (the electric company), Southwestern Bell Telephone (the phone company that some people still use), and Kansas Gas Service (the natural gas company) represent 3.69% of the assessed value within USD 259, presumably paying the same proportion of the tax revenue collected. Customers of these companies will likely face price increases should the bond issue pass.

    These increased prices affect renters and property owners equally. It’s pretty hard to avoid paying these taxes.

    Other articles on this topic:

    Wichita School District Arithmetic

    Wichita School District Tax Revenues Rise Rapidly

    Wichita Public School Spending and Enrollment

    Wichita School Bond Issue Impact Is an Illusion

    Wichita School Bond Issue Not the Only Proposed Tax Increase

    Wichita School Bond Issue: Don’t Indulge Superstition

    Wichita School Bond Issue Economic Fallacy

  • Wasteful tax cuts

    In the February 21, 2008 debate between Sen. Clinton and Sen. Obama, Clinton mentioned the “wasteful tax cuts of the Bush administration.”

    That’s a phrase that only a leftist politician such as Sen. Clinton could utter with a straight face, and it tells us a lot about the beliefs of Sen. Clinton and her supporters. (I don’t think Sen. Obama’s beliefs are very different on this matter.)

    It tells us that they feel they have first claim on the money we earn, and if we are allowed to keep more of it, it is wasted. Wasted, according to Sen. Clinton, that is, because she didn’t get a chance to spend it.

    That is perhaps the most important thing to remember about Sen. Clinton, and Sen. Obama, too. They believe that they know better than you how a large portion of your money should be spent, and if you don’t let them spend it that way, it is wasted.

    Not that Sen. McCain is that much better. He didn’t support the Bush tax cuts, although he says he does now.

    There are many problems with the Bush Administration’s spending, and it’s correct to claim that a large portion of that spending is wasted. There is certainly a problem with the deficits year after year, but that is a problem caused by too much spending, not too little taxation, as Clinton and Obama claim. Taxing less — meaning that people keep more of their own money and spend it the way they see fit — is wasteful only for those politicians and their supporters who believe they know best how to spend the money we earn.

  • Wichita school district tax revenues rise rapidly

    The combination of a rising mill levy (the rate at which property is taxed) and rising appraised values mean that property taxes paid to USD 259, the Wichita public school district, rise rapidly.

    Appraised values in Wichita have risen faster than general inflation. The Consumer Price Index, a measure of the general inflation rate, rose by 24% from 1999 to 2007. Over the same time period, the Sedgwick County house price index rose by 34%. This means that district revenues — if the mill levy didn’t change — will rise faster than the inflation rate. When the mill levy is increased, property tax revenues rise very rapidly. The following table illustrates.

  • Testimony against taxpayer-funded lobbying

    The following testimony from John Todd explains some of the harmful effects of taxpayer-funded lobbying. Isn’t it terrible that that interests of governmental bodies like the city and county you live in or your local school district are different from your interests? As John explains, local government has become a special interest group, and like other such groups, it must lobby for its own interests.

    February 18, 2008

    House Committee on Federal and State Affairs
    Kansas Legislature
    State Capitol
    Topeka, Kansas 66612

    Subject: My testimony is presented in SUPPORT OF House Bill No. 2775 concerning governmental ethics; requiring the reporting of lobbying expenses by municipalities.

    Mr. Chairman, and members of the House Committee on Federal and State Affairs, my name is John Todd and I live in Wichita, Kansas. Thank you for allowing me this opportunity to speak to you in Support of the passage of House Bill No. 2775 concerning governmental ethics; requiring the reporting of lobbying expenses by municipalities.

    “Government lobbying is toxic to representative democracy,” says Goldwater Institute Chairman Tom Patterson. “It distorts the democratic process by pitting government interest against those of citizens. Letting government agents lobby with taxpayer funds … drowns out the voices of regular citizens, putting private citizens at a distinct disadvantage.” (See Goldwater Institute Policy Report No. 217, January 23, 2007 “Your Tax Dollars at Work: The Implications of Taxpayer-funded Lobbying” by Benjamin Barr at www.goldwaterinstitute.org)

    I have personally witnessed this abuse over the last several years as a citizen appearing before a number of legislative committees. During the 2006 and 2007 legislative sessions government lobbyists and their associations opposed popular reform efforts in the area of eminent domain.

    In previous legislative sessions government lobbyists were successful in blocking two attempts to obtain Municipal Court Reform that would have allowed the election of Municipal Court Judges by the people. A third attempt at Municipal Court reform was opposed by a lobbyist from the Kansas Supreme Court itself, resulting in this measure never making it out of committee.

    Local government in Wichita and Sedgwick County has become “big business” with government spending for our city, county, and local school district at nearly $1.4 Billion. In addition to their taxpayer-funded associations like the League of Kansas Municipalities, the Kansas Association of Counties, and the Kansas Association of School Boards, these government entities employ their own taxpayer-funded lobbyists.

    At a minimum, the passage of House Bill #2775 is a start towards making taxpayer-funded government lobbying more transparent and accountable to the people. I would request that you study the report “Your Tax Dollars at Work: The Implications of Taxpayer-funded Lobbying” by Benjamin Barr posted on the Goldwater Policy web page, as referenced above, to consider additional taxpayer-funded lobbying reform that is needed in Kansas.