Voice For Liberty

Tag: Taxation

  • Wichita property tax on commercial property: High

    Wichita property tax on commercial property: High

    An ongoing study reports that property taxes on commercial and industrial property in Wichita are high. In particular, taxes on commercial property in Wichita are among the highest in the nation.

    Click for larger.

    The study is produced by Lincoln Institute of Land Policy and Minnesota Center for Fiscal Excellence. It’s titled “50 State Property Tax Comparison Study” and may be read here. It uses a variety of residential, apartment, commercial, and industrial property scenarios to analyze the nature of property taxation across the country. I’ve gathered data from selected tables for Wichita.

    In Kansas, residential property is assessed at 11.5 percent of its appraised value. Commercial property is assessed at 25 percent of appraised value, and public utility property at 33 percent. (Appraised value is the market value as determined by the assessor. Assessed value is multiplied by the mill levy rates of taxing jurisdictions to compute tax.)

    This means that commercial property faces 2.104 times the property tax rate as residential property, according to this study. (1)The ratio of 25 to 11.5 is 2.174, so some small factors have a role. The U.S. average is 1.713. Whether higher assessment ratios on commercial property as compared to residential property is desirable public policy is a subject for debate. But because Wichita’s ratio is high, it leads to high property taxes on commercial property.

    For residential property taxes, Wichita ranks below the national average. For a property valued at $150,000, the effective property tax rate in Wichita is 1.19 percent, while the national average is 1.34 percent. The results for a $300,000 property were similar.

    Of note is the property taxes on a median-valued home. In this case, Wichita is a bargain, due to our lower housing prices. A home at the median value in Wichita pays $1,655 in taxes, while the nationwide average is $4,562. (The median home value in Wichita is $139,800 and for the nation, $326,392, according to this report.)

    Looking at commercial property, Wichita taxes are high. For example, for a $100,000 valued property, the study found that the national average for property tax is $2,206 or 1.84 percent of the property value. For Wichita the corresponding values are $3,229 or 2.69 percent, ranking seventh-highest among the 50 largest cities. Wichita property taxes are 46 percent higher than the national average, for this scenario.

    For industrial property taxes, the situation in Wichita is better, with Wichita ranking near the middle of the 50 largest cities. For an industrial property worth $1,000,000, taxes in Wichita are $29,372. The national average is $30,498.

    References

    References
    ↑1The ratio of 25 to 11.5 is 2.174, so some small factors have a role.

  • Kansas tax revenue, July 2020

    Kansas tax revenue, July 2020

    For July 2020, total Kansas tax revenue rose by 97.7 percent from last July, reflecting the tax deadline postponement from April.

    Tax reports from the State of Kansas for July 2020 reveal some of the effects of the response to the pandemic on state finances.

    When reporting on Kansas tax collections, the comparison is usually made to the estimated collections. Those estimates were revised in April based on economic conditions affected by the response to the pandemic. To get a feel for the effects of the response to the pandemic, it is best to compare to the same month the prior year.

    This year, however, as a response to the pandemic, the state delayed the tax filing deadline from April to July. The effect of this can be seen in both individual and corporate income tax collections. For July 2020, individual income tax collections were $619,554,243, up 173.6 percent from last July. Corporate income tax collections were $69,793,599, up 357.9 percent from last July.

    Retail sales tax collections rose by 6.9 percent to $204,575,638. Total tax collections were $980,841,216, up 97.7 percent from the same month last year. A nearby table summarizes.

    My report on tax revenue for April details some changes made by the estimating group.

    My interactive visualization of Kansas tax revenue has been updated with July 2020 data. Click here to use it.

    Example from the visualization. Click for larger.
  • Federal revenue and outlays

    Federal revenue and outlays

    An interactive visualization of federal government revenue and spending from 1962 to the present.

    This data comes from the Congressional Budget Office Budget and Economic Data page. While CBO often makes projections of the future and those projections may be controversial, the data in this visualization is historical.

    CBO presents this data in current dollars and as a percent of gross domestic product, or GDP. When current dollars are adjusted to account for inflation, the result is “real dollars.” In this visualization, I have used the CPI to convert current dollars to the value of dollars in 2019.

    CBO also presents data as a percentage of gross domestic product. This is a measure of the portion of our national income that is spent as outlays or taxed as revenue.

    Click here to learn more about the data and access this visualization.

    Example from the visualization. Click for larger.
  • Century II maintenance to be considered

    Century II maintenance to be considered

    The Wichita city council will consider spending $250,000 on maintenance for Century II. There are questions regarding the source of funding.

    This week the Wichita City Council will consider spending $250,000 on maintenance items for Century II and the attached expo hall. The items are mostly ventilation, air conditioning, and plumbing. 1 There is some uncertainty as to how the city plans to fund these projects.

    In a Facebook conversation, an unknown city official was quoted: “We are using Transient Guest Tax funds for these repairs. The bonding resolution provides us with the flexibility to cash fund or debt fund the improvements. But in either case it will be paid from the TGT.” 2

    This seems at odds with material from the agenda packet for the meeting, which states: “Financial Considerations: The 2019-2028 Adopted CIP includes $250,000 in General Obligation bond funding for Century II Repairs in 2020. Staff recommends initiating $250,000 at this time”

    The city’s 2019-2028 Adopted Capital Improvement Program shows these amounts as either actual or adopted for the category “Cash Transfer to CIP Projects” from the Tourism and Convention Fund”

    2017 $1,624,585
    2018 $891,960
    2019 $1,857,891
    2020 $550,000
    2021 $2,050,000

    The same document notes for this fund: “Revenues are received primarily from the Transient Guest Tax, currently set at 6% of gross receipts.” From other city documents, the fund receives no dollars other than the transient guest tax in some years, 2019 and 2020 specifically. In 2021, the city budget projects the fund will receive $350,000 in other revenue and $7,635,348 from the transient guest tax.

    As is common with these expenditures, even as small as this, the city plans to borrow the funds: A related ordinance states: “Section 2. Project Financing. All or a portion of the costs of the Project, interest on financing and administrative and financing costs shall be financed with the proceeds of general obligation bonds of the City.”

    As you can see, there is some confusion. One source says the funding is the transient guest fund, while other sources state funding is general obligation bonds, which could, of course, be paid with transient guest funds revenue. Hopefully, city staff will clarify this at the July 14, 2020 meeting.

    I’ve gathered relevant pages from city documents and present them here.

    Painting courtesy Goffrier Studio.

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    Notes

    1. The bonding resolution, number 20-192, states: “Facility repairs and improvements to Century II (District I). Including, but not be limited to, prioritized critical building system improvements, renovation and repairs as well as replacement of Expo Hall HVAC Roof-Top Unit systems and Century II circulation pumps throughout the facility and mechanical, electrical and plumbing and fire/life safety and structural concerns where hazardous conditions may develop.” ↩
    2. Facebook. Available at https://www.facebook.com/groups/CenturyII/permalink/1439270942947133/. ↩
  • Kansas tax revenue, June 2020

    Kansas tax revenue, June 2020

    For June 2020, total Kansas tax revenue fell by 4.8 percent from last June. For the just-completed fiscal year 2020, revenue was down by 5.7 percent from the previous year.

    Tax reports from the State of Kansas for June 2020 reveal some of the effects of the response to the pandemic on state finances.

    When reporting on Kansas tax collections, the comparison is usually made to the estimated collections. Those estimates were revised in April based on economic conditions affected by the response to the pandemic. To get a feel for the effects of the response to the pandemic, it is best to compare to the same month the prior year.

    For June 2020, individual income tax collections were $353,085,379, down 9.0 percent from last June. Retail sales tax collections rose by 1.9 percent to $202,954,351. Total tax collections were $744,387,640, down 4.8 percent from the same month last year. A nearby table summarizes.

    June also marks the end of fiscal year 2020. For the year, individual income tax was down by 11.1 percent, retail sales tax was up slightly, and all other taxes down by 1.6 percent. In sum, tax revenue fell from $7,471,302,208 in fiscal year 2019 to $7,049,143,310 in fiscal year 2020, a decline of 5.7 percent.

    My report on tax revenue for April details some changes made by the estimating group.

    My interactive visualization of Kansas tax revenue has been updated with June data. Click here to use it.

    Example from the visualization. Click for larger.
  • Kansas tax revenue, May 2020

    Kansas tax revenue, May 2020

    For May 2020, total Kansas tax revenue fell by 20 percent from last May.

    Tax reports from the State of Kansas for May 2020 reveal some of the effects of the response to the pandemic on state finances.

    When reporting on Kansas tax collections, comparison is usually made to the estimated collections. Those estimates were revised in April based on economic conditions affected by the response to the pandemic. To get a feel for the effects of the response to the pandemic, it is best to compare to the same month the prior year.

    For May 2020, individual income tax collections were $215,902,744, down 22.3 percent from last May. Retail sales tax collections declined by 13.6 percent to $173,858,126. Total tax collections were $448,655,015, down 20.3 percent. A nearby table summarizes.

    My report on tax revenue for April details some changes made by the estimating group.

    My interactive visualization of Kansas tax revenue has been updated with May data. Click here to use it.

    An example from the visualization. Click for larger.
  • Wichita presents industrial revenue bonds

    Wichita presents industrial revenue bonds

    A presentation by the City of Wichita regarding IRBs is good as far as it goes, which is not far enough.

    Recently the City of Wichita prepared a short video explaining the city’s industrial revenue bonds (IRB) program. The video may be viewed on YouTube by clicking here.

    Several times the presenters emphasized that in the IRB program, the city does not lend money. They properly identify the true purpose of the program, which is to subsidize companies by allowing them to avoid paying property taxes and possibly sales taxes.

    Several times the presenters emphasized that the IRB program has no cost to the city. But that isn’t true. Part of the rationale for taxes, especially the property taxes that cities, counties, and school districts collect, is to pay for services that people and business firms demand. Well, don’t new businesses firms demand or require services from the government? And if a business is not paying its share of taxes, who is paying for the services it consumes?

    If we don’t think that a new or expanded business spurs demand for services, then we need to rethink the basis of taxation.

    The presenters mentioned the benefit-cost analysis produced for the city by Center for Economic Development and Business Research at Wichita State University and concluded that the city profits from the IRB program. This analysis purports that if the city incurs costs — either by spending one dollar or giving up one dollar of tax revenue — it will receive a certain amount in return. City policy requires that the city receive $1.30 or more in benefits for each dollar of cost. But there are issues:

    • The city says IRBs have no cost, but the benefit-cost ratio identifies costs. The city hopes the benefits outweigh these costs.
    • There is no guarantee that the city will receive any benefits, or that the benefits will be close to what the CEDBR model estimates.
    • The CEDBR model asks companies to make projections of economic activity for up to ten years in the future. Especially in the out-years, these estimates are subject to large errors.
    • No effort is made to scrutinize these projections. They are taken at face value, as supplied by the applicant company.
    • The benefits to the city are in the form of taxes paid. Taxes are a burden to those who must pay them.
    • Applicant companies do not have to demonstrate economic necessity.
    • The policy of requiring a benefit of $1.30 for each dollar of cost has many loopholes.

    Perhaps the most important policy issue is that the city realizes the benefits of increased economic activity whether or not the activity is subsidized with IRB tax breaks. The benefit-cost ratio for unsubsidized projects is infinite: All benefit, no cost. Therefore, the benefit-cost ratio is meaningful only for those projects which could not proceed without the subsidy.

    Some incentive programs require the demonstration of economic necessity. That is not the case with IRBs.

    Additionally, when the city issues IRBs and grants tax abatements, other jurisdictions are affected. Both the overlapping county and school district have their property tax collections eliminated. If a sales tax exemption is granted, the state is most prominently affected, as nearly all sales tax paid goes to the state. (For sales tax paid in Sedgwick county, the state’s share is 86.7 percent.) None of these overlapping jurisdictions can opt-out of the tax abatement that the city imposes.

  • State government tax collections for 2019

    State government tax collections for 2019

    Kansas state government tax collections rose to $3,443 per person in 2019, an increase of 5.0 percent from 2018.

    Each year the United States Census Bureau collects a summary of taxes collected by each state for 5 broad tax categories and up to 25 tax subcategories. 1 I’ve collected this data and made it available in an interactive visualization. Data is through 2019, released in April.

    For the past two years, Kansas has collected more taxes per resident than our surrounding states. This is counting state taxes only. The primary reason for Kansas overtaking these states is the increase in individual income tax rates, which includes many businesses, even large firms. In 2019, Kansas collected $3,778.5 million in individual income taxes and $486.4 million in corporate income taxes.

    Click here to learn more about the data and access the visualization.

    Click images for larger versions.

    In the following chart showing total tax collections per person over time, Kansas now collects more than our surrounding states.

    This chart shows individual income tax collections only, with Kansas highlighted. The wide swings over the past decade are evident.

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    Notes

    1. United States Census Bureau. Annual Survey of State Government Tax Collections (STC). Available at https://www.census.gov/programs-surveys/stc.html. ↩

  • Kansas tax revenue experiences effects of pandemic response

    For April, Kansas retail sales tax collections fell by 8.2 percent from last April, and much income tax revenue is deferred to July.

    Two reports from the State of Kansas reveal some of the effects of the response to the pandemic on state finances.

    On the current situation, the Consensus Revenue Estimating Group remarked, “given the magnitude and number of uncertainties that currently exist, and the potential for volatility of our forecasts has never been higher.” The group met on April 20, 2020, and issued its long-form report dated April 30.

    For revenue, the group “decreased the overall estimate for FY 2020 and FY 2021 by a combined $1.272 billion relative to the previous estimate made in November.” Fiscal year 2020 ends on June 30, 2020.

    When reporting on Kansas tax collections, the comparison is usually made to the estimated collections. Those estimates have been revised in April. To get a feel for the effects of the response to the pandemic, it is best to compare to the same month the prior year, with a few caveats.

    For example, individual income tax revenue fell by $526 million (65.0 percent) from last April, based on a revenue report released on May 1. Corporate income tax revenue fell by nearly the same percentage. The estimating group notes that the deadline for filing and paying these taxes was moved from April to July, which explains the steep decline. The CRE group estimates $645.8 million of tax revenue will be deferred to July, which is in fiscal year 2021. Note that this revenue is deferred, meaning the state still expects to collect it, as it reflects economic activity during calendar year 2019, before the response to the pandemic.

    Retail sales tax collections fell by $16 million (8.2 percent) from last April. For all excise taxes, which includes retail sales tax, revenue fell by $11 million (4.5 percent). Compensating use tax rose by $5 million (14.9 percent).

    My interactive visualization of Kansas tax revenue has been updated with April data. Click here to use it.