Voice For Liberty

Tag: Taxation

  • Don’t forfeit Kansas’ economic future to the United Nations

    By Phil Kerpen and Derrick Sontag

    The global warming debate is at a crossroads. With a skeptical American public already rising up against a cap-and-trade scheme that would send energy prices through the roof, a whistleblower at the influential Climate Research Unit revealing that the temperature data used to make the case for global warming was badly manipulated, predictions of yet another cold winter, and the fact it has been nearly a decade since global temperatures stopped rising.

    India and China have suggested they might agree to increase their emissions at a slightly slower rate, but that’s it, and would still put the U.S. at a huge competitive disadvantage. Developing countries in the Third World are willing to get on board, but only if they get staggering wealth transfers from U.S. taxpayers.

    In the face of all this, President Obama is expected to stop by the United Nations Climate Change Conference in Copenhagen — on the way home from picking up his Noble Peace Prize in Norway — to commit the United States to a path of emissions reductions that will, in his own words, cause energy prices to “necessarily skyrocket,” as if nothing had changed at all and global warming remained the world’s most pressing problem.

    The world is starting to come to grips with the limits of the American president’s rhetoric, but Obama has yet to face this reality. During his goodwill tour of Asia last month, Obama stood with Chinese President Hu Jintao and promised to “rally the world” toward a binding global agreement on global warming — a Kyoto II — in Copenhagen.

    Obama followed up his Chinese appearance by announcing he would attend the conference in person. He plans to tell the world America is “politically committed” to reduce its greenhouse gas emissions by 17 percent by 2020 and 83 percent by 2050. Those happen to be the reduction levels in the cap-and-trade bill passed by the House, but surely the president knows from his brief stint in Congress that he can’t commit the country to doing such a thing without a vote in the Senate.

    The more the American people learn about cap-and-trade — and what it will mean for their jobs, communities and family budgets — the less they like it. Here in Kansas, according to a study by the National Association of Manufacturers, it would mean the price of gasoline would increase 24 percent, electricity by 64 percent, and natural gas by 77 percent. We would stand to lose twenty-nine thousand Kansas jobs by 2030.

    Obama, it seems, is more interested in pleasing adoring crowds in Europe than blocking a policy that would slam Kansans with huge costs. But these huge price impacts create problems abroad, too. Australia’s Senate rejected cap-and-trade last week. China and India can accept some efficiency measures, but certainly cannot risk disrupting economic growth. It looks increasingly clear that the most likely result from Copenhagen will be a lot of sweeping rhetoric about progress, a commitment to meet again next year in Mexico City, and no agreement of any substance.

    Unfortunately, that doesn’t lessen the anger for the American people because the Obama administration is doing more than making promises abroad. They are actually taking active steps to circumvent the Senate and implement policies that outsource our economic future the United Nations. Under the direction of White House Climate Czar Carol Browner, the Environmental Protection Agency is preparing to unleash on onslaught of greenhouse gas regulations through a twisted interpretation of the 1970 Clean Air Act, leaning on the United Nations climate reports that depend, in turn, on the now-discredited temperature data from the Climate Research Unit.

    Americans for Prosperity will be there in Copenhagen to tell the real story of what is at stake: our country’s economic future, and whether this administration will get away with outsourcing it to bureaucrats at the United Nations and so-called scientists who are willing to obfuscate and manipulate. We can’t afford to lose this fight.

    Phil Kerpen is director of policy and Derrick Sontag is Kansas state director for Americans for Prosperity, a national grassroots organization dedicated to fiscal responsibility and accountability. On the web at www.AmericansforProsperity.org.

  • Wichita city council discusses economic development incentives

    Last week a Wichita company that’s expanding made an application for industrial revenue bonds and accompanying property tax abatements. The company’s application wasn’t timely, and for that reason is not likely to receive the requested help. The discussion surrounding the item provides insight into city council members’ ideas about the role of the city in economic development.

    Industrial revenue bonds, or IRBs, are not a loan from the city, and the city does not make any guarantee that the bonds will be repaid. The primary benefit to the recipient of IRBs is that the property purchased with the bonds will generally be exempt, in whole or in part, from property taxes for some period. Also, the company may not have to pay sales tax on the property purchased with the bonds.

    The agenda report for this item is at Request for Letter of Intent for Industrial Revenue Bonds, Michelle Becker, Inc. (District V).

    In introducing the item, the city’s economic development chief Allen Bell said that because the project has already started construction, it falls outside the guidelines for the city’s IRB program. The construction is 85% to 90% complete.

    A question by council member Sue Schlapp established that if the company had made application before the building was started, the application would have been approved as routine.

    She also asked that if we approve this action today, will we have to go back and look at other businesses that are in the same place? Wichita City Manager Bob Layton asked that the council establish guidelines that if a project has already started, a project is not eligible for this type of assistance.

    There was also some discussion about whether this company would move away from Wichita if the tax abatement was not granted. Since the building is already under construction, Bell said this is evidence that the company is intending to stay in Wichita. “It’s difficult to think of an incentive as something that’s given after the fact,” he said.

    A question by council member Paul Gray established that there have not been many cases where companies have asked for tax breaks retroactively, according to Bell’s answer. Bell also said that he didn’t think that approving the current application would spur an avalanche of similar requests.

    Gray also noted that we can create economic disparities between companies by granting incentives, so how do we justify doing this? Bell’s answer was that an important consideration is bringing business from out of state instead of taking business away from other local companies.

    Layton added that an important consideration is whether the project can more forward without public assistance.

    Council member Jeff Longwell remarked that “we really don’t have that many tools in our toolbox for emerging businesses.” Bell agreed.

    In later discussion, Longwell said “I hate to penalize this emerging company … I should have got them in on this process long before we did and we wouldn’t even be having this argument. So I suppose I am at fault in part of this delay.”

    Gray said that because we’re not competing against another community for this company — the normal use of incentives — he can’t support this application.

    Council member Janet Miller said that the appropriate time to look at incentives is, as the manager said, when we think a company can’t move forward without the incentive. She also noted that we’re being asked to approve an action for which we’re going to soon have a policy against.

    Schlapp, indicating a desire to approve the incentive, asked for justification: “We have a company here that doesn’t need an incentive but wants an incentive … can somebody justify that?”

    Longwell said it’s not as simple as a need and a want. He said the applicant is a smart, well-managed company. But we shouldn’t use the qualifier of helping only the companies that couldn’t succeed without the city’s help. “Why not reward some some of those companies that are very well managed and run smart and have the ability to grow even more with our help than without it?” Again he referred to the lack of tools for emerging businesses. “We ought to be helping these types of companies that we think can truly prosper even more with our help … I think they fully warrant our help because they’re successful …”

    Mayor Carl Brewer said that we have a proven track record of trying to help businesses and to get businesses to come to our area. He agreed with Longwell in that we need additional tools to use for economic development, as other communities have been competing successfully. We don’t have the same tools that other communities have, he said.

    Longwell suggested the city visit with the applicant about her financing. He made a motion to defer this item. Council member Williams asked about the impending completion of the project, since it’s scheduled to be completed at the end of December. The answer from the manager was that with regard to IRBs, the project would not be eligible after it’s complete. The motion passed with Council member and Vice-mayor Jim Skelton opposed.

    Analysis

    What’s striking about the discussion are these two things:

    First, many council members and some city staff believe that the city doesn’t have enough “tools in the toolbox” for shoveling incentives on companies for economic development purposes. Evidently the ability to grant exemptions from property taxation — and not only the city’s property tax levy, but also that of the county, school district, and state — along with the ability to make outright gifts of money is not enough.

    Second, many council members and some city staff believe that they can determine which companies are worthy of incentives.

    According to city manager Layton, the city is going to revisit its economic development policies soon. This would be a good time for Wichita to come up with ideas that would benefit all companies, not only those that fall within guidelines that the council or city staff creates. My suggestion, explained in Wichita universal tax exemption could propel growth, is to give all new capital investment a tax abatement for a period of five years.

    At the state level, there has been some discussion about the costs of tax abatements or exemptions. In a recent debate in Wichita, Kansas Secretary of Revenue Joan Wagnon used the term “tax expenditures” to describe these giveaways of the state’s income. The idea is that if the state (or other governmental body) didn’t create tax abatements or exemptions, revenue to the government would be higher. Her debate opponent Alan Cobb said it’s wrong to term these tax giveaways as “expenditures,” as the money belongs to the people first, a position I agree with.

    There is the related issue of these tax abatements or exemptions really being appropriations of money that, if processed through the normal process of legislative hearings, etc., would be noticed for what they are. In Wichita city government we don’t have hearings quite like the Kansas Legislature, but the idea is the same: if this company had asked for a grant from the city for $22,253 (that’s the value of the first year of the requested tax abatement, with a similar figure for the following nine years, less $2,500 a year to the city for administrative fees), citizens — news media too — would quite likely look at this matter differently. Presented as industrial revenue bonds — just what are those anyway? — and a tax abatement, well, it all seems so … so innocent, so municipal.

    A few more observations:

    Council member Jeff Longwell’s confession of being at fault for the lateness of this company’s application should be remembered by voters in the next election, should he decide to seek to retain his current post, or — as some have told me — he seeks the mayorship of the city.

    There’s also Longwell’s use of the term “reward,” in that the city should “reward some some of those companies that are very well managed and run smart.” I’d like to remind him and the rest of the council that the free enterprise system contains a very powerful reward mechanism for companies that do well: profit. That alone is sufficient.

    Coverage from the Wichita Eagle is at Wichita City Council puts off tax breaks for accounting firm.

  • Kansas news digest

    News from alternative media around Kansas for November 16, 2009.

    2010 Commission advocates tax hikes and wants more K-12 funding

    (Kansas Liberty) “The 2010 Commission, which monitors school finance, is recommending that Gov. Mark Parkinson and the Kansas Legislature raise taxes to maintain funding for K-12 education. The commission is not only asking that K-12 receives no cuts for fiscal year 2010, but that schools also receive an increase in funding for fiscal year 2011. School districts have threatened legislators that they will pursue a lawsuit if they do not receive the level of funding they have requested.”

    Higher-than-expected demand for ‘at risk’ funding to result in millions more for education

    (Kansas Liberty) Are these numbers real? “A November 2006 audit conducted by the Legislative Division of the Post Audit delved into the topic of whether or not the number of students identified as receiving free lunches, actually qualified for the benefit. The audit found that out of a sample of 500 students who received free lunches, 85 actually did not qualify for the benefits.”

    Letter from the Newsroom — Cap & Trade Edition

    (State of the State Kansas) “This week we focus on the impact of federal cap and trade legislation on Kansas. As an agricultural state, Kansas seems caught in the cross hairs of farming and climate regulation.

    At its most simple, Cap and Trade is a system designed to limit pollution by assigning emissions credits. If you emit more than your share, you can buy more credits on an market, similar to the New York Stock Exchange. The Environmental Protection Agency has a great Cap and Trade 101 program on their website to learn more.

    Things get complicated when it becomes clear that some industries are harder hit by this regulation and agriculture it at the top of the list.”

    No Decision by Schools for Fair Funding on Lawsuit

    (Kansas Watchdog) “Schools for Fair Funding (SFFF) met in Newton today, including a one-hour executive session, to consider a possible lawsuit against the state. The only motion offered after the executive session was to approve next month’s meeting in Salina.”

    Kansas Made $254.3 Million in Confidential Payments in 2009

    (Kansas Watchdog) “Access to data is only part of the battle to maintain citizen oversight of government spending. Kansas agencies and departments classified $254.3 million in 2009 vendor payments as ‘confidential by law or legal authority.’”

    Carryover Cash and Consolidation Hot Topics Before Kansas Board of Education

    (Kansas Watchdog) “Kansas Department of Education officials told the state board of education they’re expecting more funding cuts and discussed ways to help stretch this year’s budget, including school consolidations and spending unencumbered cash left over from last year’s operating funds. District unencumbered cash balances were a recurring topic and one board member commented, ‘Please, lets stop talking about $1.3 billion in unencumbered funds.’ Actually, that was last year’s number.

    This year total unencumbered funds grew to almost $1.5 billion. The portion in operating funds totaled $699 million and Deputy Commissioner of Education Dale Dennis told board members districts can access most of that amount. Districts can spend the operating funds carried over from last year by spending them down and not replenishing the funding category from the district’s general fund. ‘If you wanted to run balances down in funds just don’t transfer money over there.’”

    Anderson Still in Republican KS-04 Campaign, Though ‘Anything’s Possible’

    (Forward Kansas) “On Tuesday, Forward Kansas broke the story that Jim Anderson was looking at a potential third party run for the KS-04 seat, and, yesterday, we had the chance to catch up with the Anderson campaign in KS-04. We asked Shanen Taylor, media coordinator for the Anderson campaign, whether Anderson was eyeballing a run as a third party conservative candidate in the Congressional race. Taylor admitted that ‘anything’s possible’ and running as a third party candidate was a consideration in the wake of the coup pulled off by Doug Hoffman against the Republican Party establishment in the NY-23 special election last week.”

    Joan Finney’s People Power

    (Kansas Free Press) “Knowing that she wouldn’t possibly remember meeting me, I acted like I had never met her before and let the host introduce me to Kansas 42nd Governor. ‘Governor, nice to meet you,’ I said. I then walked into the kitchen, and let others visit with the Governor in the living room. I was content that I got to meet Finney again, and went to the kitchen to talk to friends while others bothered the Governor about this or that.”

  • Kansas economy debated in Wichita

    Last Thursday at a meeting of the City Clerks and Municipal Finance Officers Association of Kansas, the effectiveness of the federal economic stimulus and the Kansas economy were discussed. Americans For Prosperity National Director of State Operations Alan Cobb and Kansas Secretary of Revenue Joan Wagnon were the participants, with Dale Goter, Wichita Governmental Relations Manager, as moderator.

    Wagnon started the debate by reciting the distress that the economy has experienced over the past year. She said that these conditions said to the new president “You need to do something.” She said that about 10,000 jobs were picked up in Kansas by the federal stimulus plan. The stimulus worked, she said.

    Cobb said that to conclude that the stimulus has worked is premature. He said that in Kansas 6,500 jobs were created at a cost of $500 million, a cost of about $75,000 per job created. There’s a fundamental problem in politics, he said, in that politicians look at the short-term, not the long term. In the long term, there is no question that the stimulus spending will result in lower growth, as the borrowed money must be repaid. It’s the “seen” versus “unseen” problem.

    Goter asked: “What if nothing had been done?”

    Cobb replied that the President Obama’s team had said that without the stimulus, unemployment would rise to 7.5%, noting that today the rate is 10.2%. Wagnon relied that without intervention, more Kansas banks would have failed, and that the flow of credit would have shut down more than it has. Kansas would have run out of unemployment compensation funds, too, requiring the state to ask employers to make larger contributions at the same time they were laying off employees, resulting in a downwards spiral. She recited a list of construction projects and counties that received stimulus money.

    Wagnon referred to lessons learned during the Great Depression, that the power of the federal government was used to save the economy. Cobb replied that the lesson to be learned is the opposite. It took ten years to recover. Massive government intervention and higher taxes prolonged the Great Depression, he said.

    Goter asked: “Where do we go from here?”

    Wagnon explained that we spent a lot of our stimulus money on K-12 education. This helped the state get through fiscal years 2009 and 2010. For 2011 — the budget year that the Kansas legislature will begin working on in January — the stimulus money is no longer available. She said that we’re likely to see another round of cuts, not only in budget expenditures, but also in tax expenditures.

    There’s no appetite for raising taxes, she said. She noted that the 2010 Commission has recommended raising taxes instead of cutting spending.

    Cobb replied that the stimulus money is misnamed, as much of the spending is not stimulative. It simply replaced existing state spending and delayed some tough political decisions. Spending is the real problem, he said, noting that if spending had increased at just the rate of population growth plus inflation over the last six or seven years, Kansas would have perhaps $500 million in the bank now.

    Wagnon referred to the large number of governmental bodies in Kansas, saying that we may not be able to afford small school districts and the large number of county governments.

    Goter asked “Have we gone too far with tax exemptions?”

    Wagnon referred to these as tax expenditures. She said there’s a report on the Kansas Revenue Department website that details the cost of these. We should look at the cost of these expenditures, she said. The effectiveness of economic development tools should be looked at, and we’re giving away more than we need to in order to attract jobs.

    Wagnon said we’ve phased out the estate and franchise tax, and we need these revenues. She also mentioned the giveaways of employee withholding tax that Kansas has granted, where a company gets to use its employee tax contributions to repay economic development incentives. “What’s the value of a job, then, at that point?” People go after tax expenditures because they’re confidential and easier to get than going through the appropriations process, she said.

    Cobb said he agrees with some of the problems with these exemptions, although they’re not really expenditures, as the money belongs to the people to begin with. A better policy is lower tax rates for everyone with fewer exemptions. Corporate welfare does not grow a state’s economy, he added. Government is not equipped to pick winners and losers in the economy. Companies make location decisions based on labor force, tax rates, and markets, with incentives viewed simply as gravy.

    Analysis

    One of the most important lessons to take from this debate is to realize that the attitude commonly held by government officials such as Joan Wagnon is that taxes belong to the government first. Government, according to many officials, has a legitimate claim on the income and property of citizens, and if a reduction is given, it’s considered a cost to government. This is why Wagnon called them “tax expenditures.” This is the attitude of our former governor. The Kansas school spending lobby feels the same way, too.

    To learn more about the “seen and unseen” that Cobb referred to, read this excerpt from Economics in One Lesson, in which Hazlitt explains the fallacy of the broken window.

    Kansas Senator Chris Steineger has introduced legislation to reduce the number of counties in Kansas, as reported in Steineger introduces Kansas county consolidation bill.

    A report by the Kansas Division of Legislative Post Audit on the effectiveness of $1.3 billion spent by Kansas on economic development incentives is at Determining the Amounts the State Has Spent on Economic Development Programs and the Economic Impacts on Kansas Counties. Reporting from the Lawrence Journal-World is at Effect of economic spending in doubt. Readers of this site know that the effectiveness of economic development efforts by government is one of the issues I feel most strongly about. My recent testimony on this matter to the Wichita City Council is at Wichita universal tax exemption could propel growth.

  • Uncertainty over Broadview’s future doesn’t bother Wichita

    Yesterday the Wichita City Council approved plans for riverbank improvements that would benefit the Broadview Hotel in downtown Wichita. The cost is $2,200,000.

    One of the problems with this action is that the renovation of the hotel is on hold, according to recent reporting. The reason given by the hotel’s owners, Drury Southwest Inc., is a problem with tax credits issued by the State of Kansas.

    These tax credits, which are in effect a free grant of money to the hotel’s owner that does not need to be repaid, could potentially be worth 25% of the renovation project’s budget of $19 million. That’s up to $4,750,000 that the taxpayers of the state would be giving to the hotel owners.

    This year the Kansas legislature realized that these tax credits are costly to the state, and facing a very tight budget, it placed a cap on the amount of tax credits that could be given.

    By all accounts, the legislature will be facing an even tougher situation in January when it returns to the statehouse for its 2009 session. With everyone scrambling to find cost savings (and new sources of revenue), the tax credits for historic renovation could face an uncertain future.

    How does the uncertainty surrounding the tax credits affect the plans for the Broadview’s renovation? I don’t know. A telephone call and email message to Drury Southwest Inc. seeking an update on its plans was not returned.

    In his remarks after the unanimous vote passing the improvements, Mayor Carl Brewer thanked representatives from Drury for attending the meeting. He noted the budget challenges at the state level, and pledged that the city will continue to work with them on the tax credits. He said he appreciates the work they’re doing and thanked them for their commitment to the city. The hotel is important to the city, he said, as commitments have already been made to lease rooms in the Broadview.

    Analysis

    Because of the uncertainty surrounding the future plans for the Broadview Hotel’s renovation, the city should have delayed these riverbank improvements.

    A problem is the shaky economics surrounding this hotel. Besides the tax credits, the hotel received a 10-year exemption from paying property taxes and a sweetheart deal on a parking garage across the street. It’s little wonder representatives from Drury traveled to Wichita for the council meeting. They have a lot of taxpayer subsidies to protect.

    If we want a thriving and vibrant downtown Wichita — including a convention hotel that can be relied on — we need to rely on something more than massive taxpayer subsidies and the mayor’s appreciation to those who receive them.

  • Rep. Steve Brunk on Kansas taxes and spending

    Speaking to the Wichita Pachyderm Club on Friday, Kansas Representative Steve Brunk (Republican from Bel Aire) addressed taxation and spending in Kansas government.

    Brunk said “We need more taxpayers, not more and higher taxes.” In evaluating legislation, he said he asks these questions: Does this help the state of Kansas bring companies to the state, and does it offer encouragement to companies already here?

    Kansas is usually just about in the middle of all states in ability to attract companies to the state. We should be able to better than that, and a way to do better is to reform our taxing environment.

    Some of our taxes should go away. The franchise tax is in the process of being phased out. That money is now available to make capital investment and create more jobs.

    The corporate income tax should be eliminated, he said. The death tax or inheritance tax is inherently unfair, as people should be able to pass their estates to heirs without being tax.

    Also, the capital gains tax is punitive, he said. It should be reduced or eliminated.

    “We need a low and predictable tax base, so that we can attract businesses to Kansas to provide jobs without having to offer special and unique incentives.”

    When revenues have increased in Kansas, we spent it rather than setting some aside in a rainy day fund. When revenues have not increased as quickly, it causes problems with the budget. Today, we’re probably facing a period of slow growth.

    Brunk showed a chart of Kansas spending as compared to the inflation rate. Spending increased much faster, almost four times faster, he said, adding that this is unsustainable.

    So Brunk has proposed what he termed a “speed limit.”

    The spending problem is due to Republicans and Democrats alike, although Brunk said Republicans are amateurs at spending compared to Democrats. Without Republican help, budgets could be passed. There is a core of about 55 or so conservatives in the Kansas House of Representatives. The rest of the House Republicans are willing to spend along with the Democrats.

    To this end, Brunk has proposed a constitutional amendment that he calls the REAL Act: Revenue and Expenditure and Assessment Limitations.

    One thing this act does, he says, is to limit the rate of growth of spending to the rate of inflation. This would force the state to prioritize what it spends on, and to take a look at finding excess spending. Existing programs would be reviewed.

    The REAL act would also limit the ability to increase taxes or start new taxes by requiring a two-thirds majority in the legislature.

    The REAL act also provides for a rainy day fund, sometimes called a budget stabilization fund. The money in this fund could be used only to stabilize the budget when revenue drops below the rate of inflation growth. After this fund is full, an emergency fund would be created and funded for dealing with disasters such as the Greensburg tornado or the southeast Kansas floods.

    We also need to avoid download state spending to counties, he said. There could be no mandates with accompanying funding.

    Turning to property taxes, Brunk mentioned Proposition K, an effort to stabilize property taxes. Introduced in this year’s legislative session, the measure was referred to a tax subcommittee that didn’t do much to advance the proposal. Based on feedback and concerns, he’s going to adjust Proposition K and introduce it again.

    Responding to a question from the audience, Brunk said that he conceptually likes the idea of a Fair Tax, a tax based on consumption rather than income or property ownership. Later, someone else asked, in jest, if an exemption for cigars could be part of a consumption tax law.

    Answering another question, Brunk said that a problem with Kansas budgeting is that we have “add-on” budgeting instead of zero-based budgeting. Each year agencies must justify not their entire budget, but only the additional amount that they’re asking for this year.

    Analysis

    The REAL Act, as described on The Kansas Real Act page, is much like the Taxpayer Bill of Rights proposals, in that it limits spending to inflation plus population growth. These measures are universally and vigorously attacked by government spending advocates such as teachers unions and public employee unions, as they, amongst others, live off of ever-increasing government spending.

    In my opinion, the components of the REAL act — limits on tax increases, the requirement of a supermajority to increase taxes, and a rainy day fund — are eminently sensible. Whether these measures can be passed as a package as a constitutional amendment is difficult to answer. In Kansas, such amendments require passage by two-thirds of the Kansas House and Senate, and then by a majority vote of the people. Action by the governor is not required, not can the governor block an amendment, except through persuasion of the legislature or the people.

    An amendment to the constitution is required for any laws of this type to be truly effective. Kansas law already requires that the state hold ending balances of 7.5% in its funds. But each year the legislature decides to waive or ignore this law. That can’t be done, to my knowledge, to measures that exist in the constitution. Similarly, the Kansas Supreme Court can’t overrule the constitution and order the legislature to take action, as it has done with K-12 school spending.

    The difficulty in passing clear and coherent laws was illustrated by the question about the exemption for cigars. Although proposed in jest, there will be constituencies that will be quite serious about exemptions to nearly any law that is passed.

  • Wichita universal tax exemption could propel growth

    Remarks to the Wichita City Council, October 20, 2009.

    Mr. Mayor, members of the council,

    I’m not here to speak as much to the specifics of the current case, but to the city’s policy of granting property tax exemptions and abatements, whether they are implemented through the economic development exemption program or through industrial revenue bonds.

    At the same time we’re told we must build up our tax base, we tear it down. Nearly every week this council grants tax exemptions or abatements to companies that meet the criteria of the several programs the city uses.

    These tax breaks are justified by benefit-to-cost analysis. I’ve been told that the modeling tools used to perform this type of analysis have no negative numbers in them, and that many people, myself included, believe that these tools are suspect.

    But there’s also the simple recognition that when companies make capital investment, more economic activity happens. In the case before you today, benefit-to-cost ratios range from a scant 1.06 to one up to 9.70 to one, depending on the local governmental unit.

    These numbers — especially the larger ones — sound like a good deal for citizens. But I think that what a lot of people may not realize is that the benefits to the various units of local government are in the form of the taxes they collect. After all, taxes are what constitute revenue to government. It’s not like a business making a capital investment and then gaining additional sales revenue. That represents, of course, voluntary transactions with their customers.

    Or if a business makes a capital investment and becomes more efficient, its increased productivity is a benefit. More capital will be available for investment somewhere else.

    Instead, the benefit to government is more tax revenue. That’s not really a benefit to citizens.

    The broader question is this: If it’s good for the city and other local governmental units to give tax exemptions or abatements to Company A, what about granting them to Company B? And Companies C, D, E, and F? It’s almost like a perpetual motion machine: The more taxes we forgive, the more we gain.

    Actually, the reality is not far removed. I spoke with Art Hall, Executive Director of the Center for Applied Economics at the University of Kansas. He suggested that we should grant all businesses an automatic property tax exemption for five years on new capital investment. That would generate a lot of new economic activity and jobs.

    The city’s own analysis hints at this when it states “Granting an ad valorem property tax exemption will encourage the business to create new job opportunities and stimulate economic growth for the City of Wichita and Sedgwick County.”

    The problem now is that a business and its capital investment must fit into a set of criteria in order to qualify for an exemption. There is a lengthy list of criteria. Some are objective. I am concerned that companies may find themselves formulating their capital investment plans so that they qualify for the tax exemption, rather than doing what makes the most sense economically for their unique situations.

    Other criteria are subjective, and that opens the door for decisions to be made for political rather than economic reasons.

    We have to wonder if these are the correct criteria. Are we smart enough to recognize the types of capital investment we want in Wichita? Have companies made investments, only to find they don’t qualify for tax breaks? Can very small businesses qualify? They create a lot of jobs, too.

    There also the issue that the city has not always applied its own policies. There have been several cases where a company did not meet the promised performance goals at the five year review time, but the city continued the tax exemption contrary to policy. In the case of one company last year, Mr. Bell said “I don’t think it would be productive at this time to further penalize them … by putting them back on the tax roles at this time.”

    In any case, if the city decides to forgo property taxes, the rest of the taxpayers in the city must step up to make the difference. This leads to resentment.

    A solution is this: If the city grants a tax exemption of a certain amount, it should, at the same time, cut city spending by the same amount.

    This would accomplish two goals. First, we’d be aware of the cost of granting these exemptions. Second, the rest of the taxpayers in the city — businesses, utilities, and homeowners — wouldn’t have to step up and pay the taxes that are exempted or abated.

    That’s important because these parties engage in economic activity too. When they have to pay more tax, they have less to spend and invest.

    Mr. Mayor and members of the council, instead of this city granting tax exemptions and abatements company by company, week by week, I urge that we consider a broad revision to our property tax policy that will stimulate investment across the city, for all businesses.

  • Kansas news digest

    News from alternative media around Kansas for October 19, 2009.

    Letter from the Newsroom: National Security Edition

    This week State of the State Kansas takes an in-depth look at national security, with interviews of Mike Pompeo, Bob Beatty, Dennis Farnsworth, and news stories as well.

    Film and Mike Smith Debunk Global Warming

    (Kansas Watchdog) Coverage of “Not Evil Just Wrong” and the presentation before the film. “A 50-minute presentation by atmospheric scientist Mike Smith of Wichita preceded the presentation. Smith, CEO and Founder of WeatherData Inc., talked about the science and opinion behind manmade global warming theory. Smith, like the film that followed his presentation, debunked many claims of global warming theorists who are calling for major changes in environmental and economic policy.”

    Eye on the Stimulus: 209 New Jobs in Kansas

    (Kansas Watchdog) “On Thursday Recovery.gov released its first hard data on stimulus jobs.”

    CPA Steve Anderson talks about Performance Review of Johnson County Government

    (Kansas Watchdog) “At the October meeting in Overland Park of the Sunflower Republican Club,which was open to the public, CPA Steve Anderson talked about the Performance Review he conducted of Johnson County Kansas government for Americans for Prosperity Kansas. … Anderson said a standard performance review was a look at a single point in time, where his ‘enhanced finanical reporting’ attempted to look at trends in five-years of data and added cost-benefit analysis. Anderson pointed out several issues he had with Johnson County Government, and suggested a ‘second set’ of books detailing true cost and benefits would give better government transparency and accountability.”

    Roberts: Baucus plan would raise taxes and cut benefits for seniors

    (Kansas Liberty) “Before the vote, Roberts cautioned his fellow committee members that the ‘so-called moderate’ Baucus plan would become ‘radically’ different once it was voted out of the committee.”

    Report recommends changing the way schools can spend special-ed funds

    (Kansas Liberty) “So-called ‘catastrophic’ funding to be made more flexible. One big question: How did Shawnee Mission schools go from zero claims to 333 — in one single year?”

    State Financial Mess; Please Not the Same Old Thinking

    (Kansas Free Press) The case for more taxes in Kansas is made: “I believe we must look at tax fairness. Make sure everyone is paying their fair share. This will mean some who have received tax breaks in the past will need to step up.”

    Cerner-Kansas City Wizards Development in Village West Advances

    (Forward Kansas) “Great first step in bringing new jobs to Kansas! This a great opportunity for Wyandotte County and Kansas as a whole!”

  • Welshimer files for re-election to Sedgwick County Commission

    Gwen Welshimer campaign announcement 2009-10-09Sedgwick county commissioner Gwen Welshimer files for re-election.

    Today, Sedgwick County Commissioner Gwen Welshimer filed for re-election to her position as a member of the commission. Her statement is below.

    Welshimer, a Democrat, is so far the only candidate in that party. There are three Republicans who have either filed or are considering filing.

    Welshimer campaigned and has voted as a fiscal conservative. I asked her given your fiscal conservatism, how will these Republicans differentiate themselves from you? Welshimer said that she’s not heard their campaign platforms. They are all city people, she said, likely to support funding of downtown Wichita.

    Responding to my question about the downtown Wichita revitalization planning and the likelihood of a tax to fund it, she said that we’ve given the city a $210 million economic development tool called the downtown Wichita arena. The county has also given many years of property tax incentives, both in the past and in the future. The other 19 cities in the county have not enjoyed this treatment, she said.

    In 2006, Welshimer signed a pledge to not raise taxes if elected, and she has fulfilled that pledge so far. Her opponent in that election, incumbent Ben Sciortino, received the endorsement of the Wichita Eagle. Welshimer narrowly won that election, 10,081 votes to 9,941.

    Analysis

    Given Welshimer’s fiscal conservatism, Republican candidates will find it difficult to run to her right. Her stand against tax increment financing (TIF) districts and subsidies to downtown developers means she’s not likely to get the support of those downtown developers who thrive on taxpayer subsidy. Those people contribute heavily to political campaigns. Additionally, her support for the dismissal of Sedgwick County Manager Bill Buchanan — a position I support — puts her at odds with the Chamber of Commerce crowd. They make political contributions, too.

    In this district (district 5), my analysis of a recent voter file shows voter registration runs 29% Democratic, 40% Republican, and 31% unaffiliated. (The remainder are Libertarian and Reform party registrants.)

    Considering recent voters (those who voted in an election in 2008), the numbers change a bit. In this case, 30% are Democratic, 44% Republican, and 26% unaffiliated.

    Welshimer’s statement

    I have filed as a candidate for re-election to the 5th District Seat on the Sedgwick County Commission. I want to continue holding the line for Sedgwick County taxpayers.

    At this time, center Downtown redevelopment is the number one issue for this race. I want the tax dollars paid by Southeast Wichita, Derby, and Mulvane to be used for paving roads, drainage, infrastructure, traffic controls, township assistance, and business district enhancements in District #5. The $210 million sales tax arena and decades of property tax incentives for center Downtown have been a weight around the neck of my district. I will support redevelopment of Downtown through private investment only in the future.

    I want more property tax reduction. I want to pay for it with new revenues and more efficient policies.

    If re-elected, I will continue to work for safe, sensible, and reasonable alternatives to a costly new jail.

    The Coliseum site has the potential for 1,000 new jobs and $10 million in new revenue over the next five years. I want to work to make this happen.

    I want to continue to work for the success of the National Center for Aviation Training at Jabara Airport. This is evolving into a job training destination center for employers around the world and it offers an incredible new future for Sedgwick County.

    I believe in the power of progressive new ideas. I have not been a commissioner who gives in to the out-of-touch “good old boy” network.

    I am ready for a rigorous campaign.