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.