Voice For Liberty

Tag: Taxation

  • Kansas tax exemptions should be cut

    One of the ways that Kansas might increase revenue this year is to reduce or eliminate the many sales tax exemptions that our state has issued over the years. The governor didn’t mention this in his state of the state address, but this reform would be a good thing to do, even if we’re not in a tight budget year with legislators desperately looking for revenue or savings.

    The Tax Foundation provides some principles of sound tax policy. The many exemptions in Kansas don’t conform to several of these principles, as follows:

    First, a tax policy should be simple with low administrative costs. Each tax exemption creates administrative work. Have you ever stood in line at the grocery store behind someone buying groceries for a tax-exempt organization? The paperwork seems complex and takes time to complete. I’ve been tempted to offer to pay the sales tax just to get the line moving.

    Then, there’s transparency. According to the Tax Foundation: “Tax legislation should be based on sound legislative procedures and careful analysis.” When combined with the principal of neutrality (“The primary purpose of taxes is to raise needed revenue, not to micromanage the economy”), Kansas tax policy is lacking. For example, there are many “named” exemptions, meaning that an organization is granted an exemption crafted specifically for its benefit.

    For example, there is this exemption: “3606 (vvv) Property and services purchased by Jazz in the Woods and sales made by or on behalf of such organization.” This benefits a charitable project of the Overland Park South Rotary Club. The Kansas Advisory Council on Intergovernmental Relations (KACIR) has recommended this policy: “Repeal all exemptions granted ‘by name’ to a specific organization. Either replace it with an exemption for all organizations similarly situated, or revoke the exemption.”

    While this recommendation would increase simplicity and transparency, it would not do much to conform to another principle: broad bases and low rate. “As a corollary to the principle of neutrality, lawmakers should avoid enacting targeted deductions, credits and exclusions.” While charitable activity is noble, there’s no real reason why it should have a favored tax status. Someone has to decide which charities deserve the special status, which leads to problems. While paying tax means a charity will have less money to spend on its mission, a compensating factor is that if tax rates were lower, people would have more money to donate.

    Most of the advocates of exemption elimination hope to raise more money for government to spend. We ought to simplify this part of our tax code for reasons of good government, whether it raises more tax revenue or not.

  • Wichita makes case for tax credits

    At yesterday’s meeting of the South-central Kansas legislative delegation with government officials, the City of Wichita spent most of its time presenting the case that cuts made to a program of tax credits for historic buildings should be restored.

    Initially Mayor Carl Brewer asked legislators for continued funding for the affordable airfares effort, for the National Institute for Aviation Research, and the aquifer recharge project.

    But the primary focus of the city’s requests became clear when Jeff Fluhr of the Wichita Downtown Development Corporation introduced Christy Davis, a historical preservation consultant who operates a company that assists property owners and governments in obtaining funding for historic preservation projects.

    She said that there is public policy in Kansas that supports historic preservation, and that the tax credit program has been a great success. In particular, she said the tax credits leverage the financing necessary for historic preservation projects.

    She said that every dollar in tax credits supports an additional three dollars of private investments. Rehabilitation of existing structures is 50 percent more labor intensive than new construction, so more jobs are created. Since 2002, $66.4 million in Kansas tax credits have been issued, and Davis said this has leveraged over $260 million in private investment, also creating jobs and income.

    Returning to the podium, Fluhr said that tax credit program needs to be predictable, so that the private sector knows they can depend on it. Also the transferability of the credits is important, so that developers can sell them to raise capital.

    Fluhr presented examples of several buildings in Wichita that have been rehabilitated, including the Wichita High Apartments, which he said will rent for $1,000 to $2,000. He mentioned condos in the Grant Telegraph building, which he said range in price from $300,000 to $950,000. Davis presented examples of rehabbed buildings whose property owners said the projects would not have been possible without the tax credits.

    In 2009, the legislature placed a cap or lid on the amount of tax credits. Davis said that it was intended to be a 10 percent cut, but it turned out to be a 70 percent cut.

    Both Fluhr and Davis presented the case of the Broadview Hotel in downtown Wichita. That project, already receiving various forms of subsidy from the City of Wichita, requires historic tax credits for its financial viability, according to the developers and the city. (Uncertainty over Broadview’s future doesn’t bother Wichita)

    Analysis

    The city’s quest for more tax credits is likely to face a rough road in the statehouse.

    Spending advocates, especially schools, want the legislature to close tax exemptions. Generally, these are sales tax exemptions, so that organizations such as the Girl Scouts (expect them to make several field trips to the statehouse soon) don’t have to pay sales tax.

    Kansas Secretary of Revenue Joan Wagnon says that repealing these sales tax breaks could generate $200 million per year in revenue. She also wants a three-year moratorium on new tax breaks.

    These sales tax exemptions are “passive” from the standpoint of the legislature, in that the legislature created them, and then people have to initiate economic activity in order to benefit. The only involvement of the state in the transaction is that it doesn’t collect tax that it would have. For believers in limited government, that’s good.

    But tax credits are active. When an applicant qualifies, the state, in essence, pays money to the applicant. While some may disagree that tax credits are in fact a payment by the state, Fluhr mentioned the transferability of the tax credits and the ability to sell them as important to developers. Recently some have started to use the word “tax appropriations” to describe tax credits. These expenditures don’t go through the normal legislative process that most appropriation do.

    Indeed, if the state issued checks to real estate developers, citizens would look at things differently. They’d wonder why they’re subsidizing the construction of apartments that rent for up to $2,000 monthly, or condos worth nearly a million dollars. These aren’t low-income housing tax credits, after all.

    By characterizing subsidies to developers as tax credits, it seems much less benign, although the economic effect is the same.

    For believers in the collective wisdom of free people trading voluntarily in markets — instead of government intervention — making grants to favored developments through tax credits is one of the most harmful things that government can do. In the case of historic building credits, it represents the desires of a relatively small band of enthusiasts. As John W. Sommer wrote in The Cato Journal:

    With few exceptions, historic or landmark preservation illustrates the powerful force of cultural elites who impose their tastes on the landscape at the expense of the general public. City after city has been confronted by small groups of architectural aesthetes who are as highly organized as they are both righteous and wealthy. In city after city these groups have succeeded in stalling, or permanently freezing, the pace of physical and functional change. In the name of “heritage” or “culture” or “a livable city,” and invariably “in the public interest,” preservationists seek to legislate “charm” for others.

    We’d be better off with requiring that preservationists rely on the market for the financing and success of their projects.

  • Kansas state budget crisis largely self-inflicted

    Kansas Policy Institute commentary

    What should citizens do when they feel that local news media is not covering issues as they should be covered? You could do as I did, starting Voice For Liberty in Wichita. Others start think tanks like the Kansas Policy Institute and its featured projects Kansas Watchdog and Kansas Reporter.

    Now the Kansas Policy Institute has placed some of its research into our state’s largest newspaper by way of paying for advertisements. Following is the text of an an to appear on Sunday. The ad as it will appear is available at State Budget Crisis Largely Self-Inflicted.

    More information about the data presented in the research is available at KansasOpenGov.org’s data warehouse and KPI’s data warehouse.

    Following is the text of the commentary. The chart doesn’t appear — click on the ad for that.

    State Budget Crisis Largely Self-Inflicted
    Tax Increases and Service Cuts Not Necessary

    Declining revenues have forced dramatic changes in the state budget and prompted calls for tax increases. The revenue declines may be recession-driven but the budget crisis is largely self-inflicted. Recessions are not a matter of ‘if’ but ‘when’ and their inevitable appearance should be part of every government financial plan.

    Responsible budgeting prepares for periodic revenue declines by setting money aside in good years. When downturns in the economy cause revenue declines, you can draw down some reserves to weather the storm without having to dramatically cut services or prolong the recession with tax increases. Crisis is avoided by prudent financial planning.

    Crisis is invited, however, when you allow expenses to grow faster than your income and that is exactly what the State of Kansas has done over four of the last five years.

    Even though total State General Fund (SGF) revenues declined the last two years, FY 2009 SGF revenues were still 23.7% higher than five years prior. Spending, however, was 40.5% higher.

    Imagine how different things would be today if state government had kept spending in check. In fact, had we limited spending to 4.5% annual increases (well above inflation) we would have finished FY 2009 with a $3.0 billion surplus.

    Instead, reminiscent of requests for taxpayer bailouts from irresponsible Wall Street firms, some government officials and others are calling for tax increases.

    Governor Parkinson says further spending reductions simply are not possible. With all due respect, such claims are hard to believe absent confirmation by truly independent analysis. (If you would like to do your own analysis, the complete state check register, state payroll information and retiree benefits are now online at www.KansasOpenGov.org.)

    Regardless, we can work through the existing crisis without cutting essential services or increasing taxes. This fiscal year began with over a billion dollars in unencumbered carryover cash reserves in state agency accounts. Some of that money might not be available but we only need a portion of it right now. Since most balances have been growing annually and the necessary ending balances have not been determined, we can probably find what we need to avoid tax increases or service cuts.

    Excessive spending is to blame for the current budget crisis and it is wrong to ask taxpayers for a bailout. It’s also unnecessary; the state should use a portion of the carryover cash reserves being held by state agencies to get through the immediate problem and implement a full independent review of state spending in search of ways to provide good services at lower costs.

    Now tell us what you think. Send your comments to information@kansaspolicy.org.

  • Kansas news digest

    News from alternative media around Kansas for December 21, 2009.

    KNEA uses incomplete funding data to argue for tax hikes

    (Kansas Liberty) “Kansas State Department of Education Deputy Commissioner says a common practice of legislators and school advocates is only citing the base state aid K-12 receives for gauging funding levels.”

    Democrat drops out of governor’s race

    (Kansas Liberty) “Democratic gubernatorial candidate Tom Wiggans announced yesterday that he was dropping out of the race amid allegations that he had acted in an ethically questionable manner at a previous job.”

    Economist calls for scrapping state income tax

    (Kansas Reporter) “Kansas’ economy — and its taxpayers — would be a lot better off if the state scrapped its current income tax system and replaced it with a single, 8 percent sales tax, says University of Kansas economist Art Hall. Hall, executive director of the university’s Center for Applied Economics, said a proposed 8 percent retail sales tax would replace 36 other state level taxes, including personal and corporate income taxes and would help make Kansas one of the most growth oriented state tax environments in the nation. Kansans would still pay local school district and property taxes, however.”

    State executives line up to detail budget cuts

    (Kansas Reporter) Kansas budget cuts mean state highways will stay snowpacked longer and wear out faster, the state’s transportation secretary, Deb Miller, told state Senate Ways and Means Committee members Tuesday. … Miller was one of 10 state executives or other officials who spoke to the Senate’s top budget writing panel about some of the challenges that an estimated $5.3 billion in Kansas tax revenues this year will present to their departments.”

    Schools for Fair Funding to sue state for more education funding

    (Kansas Watchdog) “The Schools for Fair Funding group met in Salina today and voted to sue the state for more funding for education. A number of Kansas media sources reported about this meeting. … None of these news sources ask questions that must be answered.”

    Ethics Commission Approves Advisory Opinion

    (Kansas Watchdog) “An assistant state attorney general received permission Wednesday to work for a private tobacco ‘Master Settlement Agreement’ clearinghouse as long as he doesn’t deal with Kansas matters.”

    Letter From The Newsroom — Holiday Edition

    (State of the State, Kansas) “This week we look at 6 people who served as the Governor of Kansas. We also visit the Kansas Historical Society to find out about Christmas Past in Kansas.”

    Governor says ‘no’ to more Medicaid or education cuts

    (Kansas Health Institute News Service) “The state needs a higher levy on tobacco and a new nursing home tax would help the industry, the governor said today in an interview with KHI News Service. Other taxes also should be explored to help balance the budget because cuts to needed services over the past two years have gone too deep already, he said.”

  • Taxation: it’s more pervasive than you know

    Here’s John D’Aloia’s “Trackside” column for December 20, 2009. In this article, John traces through the pervasiveness of taxation in many common products, and how long we must work each year to pay these taxes. Besides taxation, regulation is growing, too.

    John D’Aloia lives in St. Marys, Kansas, where he serves on the city council.

    Have you ever thought about how many taxes you are paying when you buy a product or a service? An amount is obvious when a sales tax is tacked on, but is that the only tax included in the price you pay? You know the answer — of course it is not, but the remaining taxes are out of sight, out of mind.

    The Center For Fiscal Responsibility (www.fiscalaccountability.org), is a project of Americans for Tax Reform. As stated on its website, the mission of the Center is: “… to shed a light on government expenditures, and to promote transparency, accountability, and restraint in government finance.” It has taken on this mission in acknowledgment “… that the American people and its economy can best thrive and prosper when the role of government is limited and subject to the scrutiny of taxpayers.”

    The Center has calculated the percentage that represents the hidden taxes paid for by each dollar spent for 13 commonly purchased goods and services. The Center’s analysis included: excise taxes, “Sin” taxes, telecommunications taxes, taxes on tourists, common purchases sales taxes, corporate income taxes, payroll taxes, property taxes, capital gains taxes, unemployment insurance taxes, workmen’s compensation taxes, and other payments businesses must make to federal, state and local governments. The results of the Center’s analysis shows that taxes represent the following percentages of the price:

    Soda: 37.6%
    Cell Phones: 46.4%
    Gasoline: 51.2%
    Meals Out: 44.8%
    Hotel Stays: 50%
    Landline Phones: 51.8%
    Firearms: 45.6%
    Domestic Airfare: 55%
    Car Rentals: 60.6%
    Cable: 46.3%
    Beer: 56.2%
    Distilled Spirits: 79.6%

    And a drum-roll please for the taxes in the price of the 13th product: Cigarettes: 81.3%.

    Another Center project is to calculate the “Cost of Government Day” for the federal government and for each state. The Cost of Government Day is defined as “the date of the calendar year on which the average American worker has earned enough gross income to pay off his or her share of the spending and regulatory burden imposed by government at the federal, state and local levels.” The 47-page long 2009 Cost of Government Day Report is available for reading via a link on the Center’s website.

    The national average date to pay off governments is August 12th. Kansans have it a bit better. For Kansans, the date is August 4th. In comparison, the shortest period of indentured service is served by Alaskans who are free of working for government on July 11th. The longest period falls to citizens of the Nutmeg State — Connecticut residents work until September 7th to settle with all the government demands to which they are subjected.

    The Report shows the impact of the explosion of federal government spending in 2009. For the period 1999 through 2008, the number of days the average citizen had to work to cover federal spending increased from 79.62 days to 89.94 days; in 2009, the number of days jumped to 110.88.

    An interesting graph in the Center’s Report displayed the number of pages in the Federal Register each year from 1977 to the present. The Federal Register is published daily telling you what the Federal government is doing for you and to you. The more pages, the more regulations are being written to tell you how to live; the more pages, the larger is Leviathan’s appetite for power and your wallet. During the Reagan years, the average number of pages per year was 53,000. For the last seven years, the average number of pages has been 78,000. As of December 18th, this year’s Federal Register has 67,800 pages and counting, including 64 pages devoted to a proposed rule titled: “Nutrition Labeling of Single Ingredient Products and Ground or Chopped Meat and Poultry Products” and a 425-page notice “Medicare and Medicaid Programs; Quarterly Listing of Program Issuances — July Through September 2009.” I wonder how much these 425 pages enhanced medical care. More than likely, the principal effect was an added paperwork and compliance burden on doctors and hospitals.

    Thomas Jefferson did not foresee the Federal Register, but he foresaw its ultimate impact when he wrote in his autobiography: “Were we directed from Washington when to sow, and when to reap, we should soon want bread.”

    Get out and work hard — The Clerks are depending upon you.

    See you Trackside.

  • Visioneering Wichita should not receive public funds

    Remarks to be delivered to the December 16, 2009 meeting of the Sedgwick County Commission.

    Mr. Chairman, members of the commission,

    I’m here today to recommend that this body not give taxpayer funds to Visioneering Wichita.

    My reason is simple: Many of the items that Visioneering is in favor of require government spending. Mr. Rolph told me that Visioneering doesn’t advocate for higher taxes. But any government spending — at least by governmental bodies other than the federal government — requires taxation or borrowing, which is simply deferred taxation.

    For example, the items on Visioneering’s unified legislative agenda all involve funding from the state. Mr. Rolph told me, correctly, that we’re in a battle with other parts of the state to see who gets funding, and that we need to make sure we in south central Kansas get our fair share. There’s some truth in that. But the better battle we need to fight is to control state spending in all areas, so that there’s not this regional battle every year.

    If the county is inclined to spend money on legislative matters, I might suggest that restoring funding for a contract lobbyist — that was about $29,000 if memory serves — plus some expense money for commissioners to spend some time at the statehouse might be a better expenditure. This is especially true this year as this commission has proposed some legislative initiatives that deserve advocacy in Topeka.

    In another area, Visioneering supports the planning effort for the revitalization of downtown Wichita. Besides being an expenditure of taxpayer money to pay for the plan, it’s certain that the ambitious plans for downtown will require a massive infusion of taxpayer funds. The sales tax used in Oklahoma City, for example, has been cited as something that should be “of interest” to Wichita.

    Funding Visionering with taxpayer funds, therefore, amounts to taxpayer-funded lobbying for more government spending funded by taxation. This leads to a loss of economic freedom for the people of Wichita and Kansas. I am reminded of the words of Milton Friedman, who wrote in his book Capitalism and Freedom: “Freedom in economic arrangements is itself a component of freedom broadly understood, so economic freedom is an end in itself … Economic freedom is also an indispensable means toward the achievement of political freedom.”

    So no, we don’t need to do anything that encourages more government spending and taxation.

    If this commission should decide to fund Visioneering, I make this suggestion: As a condition of funding, the county should require that Visioneering agree, in writing, that it and its parent or affiliated organizations meet the definition of a “public agency” as defined in KSA 45-217 (f)(1), and are therefore subject to the provisions of the Kansas Open Records Act and the Kansas Open Meeting Act.

    By doing this, citizens may request documents without having to confront disagreements over the definition of a public agency.

  • Peterjohn’s Kansas taxpayer protection platform recognized

    Last week, Sedgwick County Commissioner Karl Peterjohn lead a successful effort to add strong protection for taxpayers to the county’s legislative platform. My coverage is at Peterjohn presses taxpayer protection platform through Sedgwick County Commission. Following is a short op-ed from Americans For Prosperity-Kansas on this matter.

    I was pleased to learn of the Sedgwick County Commission’s new legislative platform regarding property taxes. It reads, “All local sales tax increases must be approved by voters under Kansas law. All property tax increases that raise the mill levy should also be required to receive voter approval.”

    This is a significant step for the Sedgwick County Commission, considering this goes against the position of the Kansas Association of Counties. The supporters of this measure, Commissioners Kelly Parks, Karl Peterjohn, and Gwen Welshimer, should be applauded for recognizing the importance of allowing the people to vote on property tax measures.

    However the opponents, Commissioners Dave Unruh and Tim Norton, should be asked why they oppose allowing their constituents to vote on an issue as important as property taxes. If government has a compelling reason for increasing taxes, then shouldn’t it feel comfortable in taking its case to the people?

    Derrick Sontag
    Americans for Prosperity-Kansas
    Topeka

  • Oklahoma City sales tax passes; model for Wichita

    On Tuesday, voters in Oklahoma City passed a new sales tax to fund downtown improvements. It passed by a vote of 54 percent to 46 percent.

    The tax will be used to fund improvements such as a 70-acre downtown park ($130 million), a new convention center ($280 million), mass transit initiatives ($130 million), health and wellness aquatic centers for senior citizens ($50 million), and other things.

    The tax was promoted as not really a “new” tax, as it is timed to replace an existing tax of the same amount that is expiring.

    Wichita’s plans for downtown revitalization will need some sort of funding, and the Oklahoma City tax — its name is MAPS 3 — has been promoted by John Rolfe, President and CEO of Go Wichita Convention & Visitors Bureau, as “interesting.” Other downtown leaders have spoken favorably of a sales tax for funding downtown improvements.

    Wichitans can count on a similar sales tax being proposed for whatever projects the year-long downtown planning process calls for. Oklahoma City’s experience will surely be used to promote a similar tax in Wichita.

  • Peterjohn presses taxpayer protection platform through Sedgwick County Commission

    At today’s meeting of the Sedgwick County Commission, commissioners revised the county’s 2010 legislative platform, adding important and groundbreaking taxpayer protection to the platform. The split vote lets voters know without a doubt where commissioners stand on taxpayer protection issues.

    The legislative platform is Sedgwick County’s “wish list” for the legislature. The items in the platform are not laws, but instead indicate the desires of the county commission.

    Commissioner Karl Peterjohn proposed new language to add to the legislative platform: “All local sales tax increases must be approved by voters under Kansas law. All property tax increases that raise the mill levy should also be required to receive voter approval.”

    Kansas has no such provision, and this is a defect, Peterjohn said. Kansas is one of the few states that have property taxes at the city, county, school district, and state levels. Most states did away with state-wide property taxes in the 1930s, he said, but Kansas did not.

    Peterjohn made a motion that this language be included in the legislative platform, and Chairman Kelly Parks seconded.

    Peterjohn noted that three of the four states surrounding Kansas have such limitations.

    Commissioner Tim Norton asked a question that revealed that cities have more authority than counties to raise sales tax. He said this is an issue of equity, of rebalancing the ways that counties can fund their government. “Counties don’t have the ability to have more tools in their toolbox other than just property tax. … We’re very restricted.” He added that he doesn’t like the idea of artificial ceilings being placed on the county.

    Commissioner Dave Unruh agreed with Norton, saying local officials are elected to carry out the responsibility of making responsible budget decisions. A limitation from the state makes no sense, he said.

    Norton made the point that the state can place a lid on the ability of counties to raise funds through taxation, and may still place mandates on what counties must do. This compresses the decisions that the commission gets to make, and goes against representative government.

    Peterjohn’s motion passed three to two, with Commissioner Gwen Welshimer and Parks joining Peterjohn in the majority, with Unruh and Norton in the minority.

    After the meeting, Peterjohn said this platform language represents a major change in the county’s position, a reversal of the county’s historic position on property tax policy. This action is also at odds with the Kansas Association of Counties. It’s a major change, he said.

    “Traditionally the local government lobby has been in lockstep opposition to any requirement that property tax hikes get voter approval. Sedgwick County’s shift today is extremely significant for the second-most populous county in the state, the county that contains the largest city in the state, to support voter approval for any increase in property taxes.”

    Analysis

    Requiring voter approval of tax increases was one the “Five Reasons to Back Karl Peterjohn” that Peterjohn used in his successful campaign for the county commission last year. His action today represents a move towards fulfilling that pledge.

    It’s important to remember what the commission passed was simply their desire — and a split decision at that — for the legislature to pass a law requiring voter approval of tax increases. Whether the legislature acts on this request is anyone’s guess. For such a law to have any chance, it will take a determined advocate to press for it. The commission’s action today created no such advocate. As it stands now, the county will not have a lobbyist in Topeka next year, as the budget passed in August provided no funding for a lobbyist.

    Officeholders who are in favor of more government spending are generally opposed to giving voters the right approve or refuse tax rate increases, for the simple reason that voters often refuse to approve the tax hikes. Often the argument is given that the elections that are now necessary are expensive, and there may be emergencies that require the rapid raising of funds. There may be small amounts of validity in these arguments. But tax revenues, through the natural forces of economic growth and rising property tax appraisals, rise on their own without any help from officeholders. Anything that restrains the growth of tax rates, which is what today’s proposal does, is welcome relief as a restraint on the runaway growth of government.