Last week KAKE Television news anchor Jeff Herndon addressed the Wichita Pachyderm Club. Today, on the Joseph Ashby Show, the host commented on Herndon’s views on Wichita news media, and drew some conclusions about anti-conservative bias in Wichita news media.

The KAKE Television news story referred to is Wichita mayor comes under scrutiny for controversial vote.

If Kansas wants to experience growth in income, it’s important that the legislature finish the session without raising taxes. The paper The Robust Relationship between Taxes and U.S. State Income Growth by W. Robert Reed, published in National Tax Journal, establishes a link between high taxes and negative effects on income growth. The abstract of the research report explains:

I estimate the relationship between taxes and income growth using data from 1970 to 1999 and the forty-eight continental U.S. states. I find that taxes used to fund general expenditures are associated with significant, negative effects on income growth. This finding is generally robust across alternative variable specifications, alternative estimation procedures, alternative ways of dividing the data into “five-year” periods, and across different time periods and Bureau of Economic Analysis (BEA) regions, though state-specific estimates vary widely. I also provide an explanation for why previous research has had difficulty identifying this “robust” relationship.

As Kansas must produce a balanced budget each year, reducing taxes means reducing spending. Therefore, Kansas needs to get serious about reducing government spending. Some ideas may be found in the article In Kansas, there are ways to reduce the cost of government.

(Although the state must balance its budget each year, Kansas has managed to accumulate over $16 billion in debt, about $5,591 for each person. See Kansas Total Indebtedness Exceeds $16 Billion.)

The full article is on taxation and income growth is The Robust Relationship between Taxes and U.S. State Income Growth.

Judging the effectiveness of economic development incentives requires looking for the unseen effects as well as what is easily seen. It’s easy to see the groundbreaking and ribbon cutting ceremonies that commemorate government intervention — politicians and bureaucrats are drawn to them, and will spend taxpayer funds to make sure you’re aware. It’s more difficult to see that the harm that government intervention causes.

That’s assuming that the incentives even work as advertised in the first place. Alan Peters and Peter Fisher, in their paper titled The Failures of Economic Development Incentives published in Journal of the American Planning Association, wrote on the effects of incentives. A few quotes from the study, with emphasis added:

Given the weak effects of incentives on the location choices of businesses at the interstate level, state governments and their local governments in the aggregate probably lose far more revenue, by cutting taxes to firms that would have located in that state anyway than they gain from the few firms induced to change location.

On the three major questions — Do economic development incentives create new jobs? Are those jobs taken by targeted populations in targeted places? Are incentives, at worst, only moderately revenue negative? — traditional economic development incentives do not fare well. It is possible that incentives do induce significant new growth, that the beneficiaries of that growth are mainly those who have greatest difficulty in the labor market, and that both states and local governments benefit fiscally from that growth. But after decades of policy experimentation and literally hundreds of scholarly studies, none of these claims is clearly substantiated. Indeed, as we have argued in this article, there is a good chance that all of these claims are false.

The most fundamental problem is that many public officials appear to believe that they can influence the course of their state or local economies through incentives and subsidies to a degree far beyond anything supported by even the most optimistic evidence. We need to begin by lowering their expectations about their ability to micromanage economic growth and making the case for a more sensible view of the role of government — providing the foundations for growth through sound fiscal practices, quality public infrastructure, and good education systems — and then letting the economy take care of itself.

Following is the full paper, or click here.

As the Kansas Legislature struggles to end its 2013 session, budgetary and taxation issues remain to be resolved. It’s important that the legislature resolve these issues in a way that positions Kansas for economic growth, rather than retaining the policies that have led to stagnation compared to other states.

Here’s what the Kansas Legislature needs to do:

• Keep the current sales tax rate.
• Eliminate sales tax on food.
• Reduce individual income and corporate income tax rates.
• Get serious about reducing spending.

The legislature should reduce Kansas income tax rates by an amount that would be revenue-neutral, so that state spending does not grow. This moves Kansas towards more of a “Fair Tax” model, which many economists agree is better than taxing income. Elimination of the sales tax on food removes much of the regressive nature of the sales tax.

To the extent that the legislature believes it needs other funds, take it from transportation funding. We’ve spent a lot on roads and highways in recent years. It’s enough for now.

Another important thing the legislature needs to do is get serious about reducing government spending. Kansas lost an important chance to save money — although a relatively small amount — when school choice programs failed to pass. These programs, across the country, save state and local governments money. Unfortunately, Kansas legislative leaders did not use this argument.

How to save

In 2011 the Kansas Legislature lost three opportunities to save money and improve the operations of state government. Three bills, each with this goal, were passed by the House of Representatives, but each failed to pass through the moderate-controlled Senate, or had its contents stripped and replaced with different legislation.

Each of these bills represented a lost opportunity for state government services to be streamlined, delivered more efficiently, or measured and managed. These goals, while always important, are now essential for the success of Kansas government and the state’s economy.

One bill was called the Kansas Streamlining Government Act, another would have created the Kansas Advisory Council on Privatization and Public-Private Partnerships, and another would have created performance measures for state agencies and report that information to the public. More information on these bills is at Kansas budget solution overlooked.

We have to wonder why these bills — or similar measures — were not introduced and advanced this year when the opposition in the Senate is weaker. These are the types of measures we need to take as a state.

This Tuesday the Wichita City Council considers economic development incentives to Starwood Hotels & Resorts for a call center to open in Wichita.

Besides the usual problems with cronyism and corporate welfare (see Wichita-area economic development policy changes proposed for explanation of some problems), there are a few issues to consider regarding this item.

First, the site where the Starwood call center will be located is owned by Max Cole. He and his wife are significant campaign contributors to Wichita City Council Member James Clendenin (district 3, southeast and south Wichita). Under the concept of pay-to-play laws that Wichita needs, Clendenin should refrain from voting on this matter.

Second, a table of salaries supplied in the agenda packet makes an implied promise that probably won’t be kept. The table shows numbers of jobs (actually full-time equivalents), the hourly pay rate, and the annual wage. The annual wage, in all cases, is 2,080 times the hourly rate, meaning it is assumed that workers will work 40 hours per week, 52 weeks per year.

Information from the Kansas Department of Commerce offers more detail. Initially, 495 full-time and 55 part-time jobs will be created. In year five, the total will be 860 full-time and 95 part-time total. There is also this notation: “The company will pay at least 50% of employee health insurance benefits.”

As you may be aware, one of the provisions of Obamacare is that if employees work over 30 hours per week, the employer must provide health insurance or be fined. As a result, many companies across the county are scaling back weekly work hours to less than 30.

We ought to ask if Starwood intends to hire employees who will work 40 hours per week, if they want to. Will the liberals on the Wichita City Council — Mayor Carl Brewer, Council Member Lavonta Williams (district 1, northeast Wichita), and Council Member Janet Miller (district 6, north central Wichita) — ask that Starwood operate under the standards of Obamacare? The table presents data as “full-time equivalents,” which provides room for Starwood to go either way.

Starwood is asking for a forgivable loan of $200,000 from Wichita, and another of the same amount from Sedgwick County. I asked the Kansas Department of Commerce if it would reveal the programs and incentives that Starwood will receive from the State of Kansas. It would not supply that information at this time, but I obtained the information by another means. The state describes its offer to Starwood as worth “up to $1,583,272.” Of this, $750,000 would be in the form of direct cash grants.

Here is a link to the relevant pages from the Wichita city council agenda: Starwood Hotels & Resorts Economic Development Incentive Agreement with City of Wichita, Kansas. Also, from the Department of Commerce: Starwood Hotels & Resorts Economic Development Incentives offered by State of Kansas.

To help Kansans understand how legislators vote, Kansas Policy Institute has produced the Kansas Freedom Index for 2013.

Legislative scorecards like this are important as they let citizens know how legislators have actually voted, which is sometimes different from their campaign rhetoric, and even different from their current proclamations. Generally, scorecards include a large sampling of votes, so that no single issue paints a member into a corner.

The Kansas Freedom Index, as produced by KPI this year, is important and significant because it focuses on issues of economic freedom along with education freedom, which was added this year. So far, 45 bills have been included in the scorecard, and as the legislature is still in session and has at least two important bills to pass, there may be additions to the scorecard.

This year’s index is a continuation of the construction of indexes for past years, many of which may be found at Kansas Economic Freedom Index.

In a press release KPI president Dave Trabert said “An informed citizenry is an essential element of maintaining a free society. Having a deeper understanding of how legislation impacts education freedom, economic freedom and the constitutional principles of individual liberty and limited government allows citizens to better understand the known and often unknown consequences of legislative issues.”

He added, “Our 2012 index made clear that support of economic freedom isn’t an issue of political affiliation — the highest and lowest score in the Senate were both held by Republicans. The 2013 results bear out the same as a wide range of scores exists within both parties. Too often votes come down to parochial or personal issues and the idea of freedom is left on the legislature’s cutting room floor. Hopefully, the Kansas Freedom Index can start to recalibrate citizens and legislators towards supporting the freedoms of everyday Kansans and not be driven by politics.”

The importance of economic freedom

Why is economic freedom important? Here’s what Milton Friedman had to say in the opening chapter of his monumental work Capitalism and Freedom some 50 years ago:

The Relation between Economic Freedom and Political Freedom

It is widely believed that politics and economics are separate and largely unconnected; that individual freedom is a political problem and material welfare an economic problem; and that any kind of political arrangements can be combined with any kind of economic arrangements. The chief contemporary manifestation of this idea is the advocacy of “democratic socialism” by many who condemn out of hand the restrictions on individual freedom imposed by “totalitarian socialism” in Russia, and who are persuaded that it is possible for a country to adopt the essential features of Russian economic arrangements and yet to ensure individual freedom through political arrangements. The thesis of this chapter is that such a view is a delusion, that there is an intimate connection between economics and politics, that only certain arrangements are possible and that, in particular, a society which is socialist cannot also be democratic, in the sense of guaranteeing individual freedom.

Economic arrangements play a dual role in the promotion of a free society. On the one hand, freedom in economic arrangements is itself a component of freedom broadly understood, so economic freedom is an end in itself. In the second place, economic freedom is also an indispensable means toward the achievement of political freedom.

For more about Friedman and his thoughts on economic freedom, see Milton Friedman, the Father of Economic Freedom.

Economic freedom is the most important factor in determining the well-being of people across the world. Where economic freedom exists, countries become wealthy. In introducing the Economic Freedom of the World report, its authors write: “Economic freedom has been shown in numerous peer-reviewed studies to promote prosperity and other positive outcomes. It is a necessary condition for democratic development. It liberates people from dependence on government in a planned economy, and allows them to make their own economic and political choices.”

One of the authors of the Economic Freedom of the World report, Robert Lawson, expands on the importance of economic freedom: “The big question is: Do countries that exhibit greater degrees of economic freedom perform better than those that do not? Much scholarly research has been and continues to be done to see if the index [of economic freedom] correlates with various measures of the good society: higher incomes, economic growth, income equality, gender equality, life expectancy, and so on. While there is scholarly debate about the exact nature of these relationships, the results are uniform: measures of economic freedom relate positively with these factors.”

By Dave Trabert, Kansas Policy Institute.

Merriam-Webster defines extortion as the “… exaction of money or property through intimidation or undue exercise of authority.” It’s illegal for individuals or corporations to engage in extortion, but some governments are increasingly using forms of extortion to exact higher taxes, make citizens more dependent upon government and ultimately, strip away economic and political freedom.

Government intimidation may not come with Soprano-like threats of violence. Some government officials may not even realize they are extorting the populous — the practice of presenting the government solution as the only option has become that commonplace. But no matter how politely or subtly phrased, the message is “give us what we want or else …” The “or else” comes in many forms.

The federal government punishes citizens with flight delays and service cuts to senior citizens while continuing to lavish taxpayer money on favored political friends and countless other examples of waste and duplication. The federal government will either get to borrow and spend as much as it wants or innocent citizens will pay the price.

Some state officials in Kansas want to extend a temporary sales tax and/or take away deductions for home mortgage interest and property taxes. They say it’s necessary to avoid massive budget deficits that would de-fund schools and services. The message is that higher taxes are the only alternative, when in fact they could choose to bring down the cost of government services and stop giving out corporate welfare in the name of economic development.

University officials in Kansas say they will raise tuition, eliminate professors, and restrict student admissions if state aid is even slightly reduced. They say nothing of reducing administrative costs that rose three times faster than inflation or using large cash reserves that accumulated from a 137 percent increase in tuition and fees over the last ten years. Give them what they want or students, parents, and staff will suffer.

Local governments routinely tell citizens that taxes must be increased to avoid police and fire layoffs, pool closings and other direct service reductions. Why not consolidate overlapping government programs and bureaucracy instead of raising taxes? Or maybe stop giving taxpayer money away to friendly developers who support the growth of government and help underwrite campaigns for public office?

Our state and nation were founded on the principles of freedom and limited government. Yet those who stand in defense of freedom are often met with ridicule. Carl Brewer, the Mayor of Wichita, recently issued a thinly veiled threat to sue a woman for asking him to recuse himself from a vote to give a $700,000 sales tax exemption to a campaign contributor (and fishing buddy). A columnist for the Hutchinson News falsely blamed those who want less government intrusion in our lives for poverty, high property taxes and other woes as opposed to following his prescription for progressive, big government solutions.

Thomas Jefferson said, “Government exists for the interests of the governed, not for the governors.” Some in our state seems to have forgotten that and are working to prove another of his maxims, “The natural progress of things is for liberty to yield and government to gain ground.”

Citizens must be persistent and vocal in reminding elected officials of the former or we shall continue to suffer the loss of liberty.

If you spot government waste and you have an iPhone, you can make a difference. There’s now an app for that.

Bankrupting America is, according to its website, “an educational project that explores the policies hindering economic opportunity and growth in America. The project focuses on the causes of the country’s current economic downturn and the future implications of careless policy-making.” It’s produced many informative videos and infographics, many which I’ve shared here or on Quick Takes.

Now, Bankrupting America has a free app for your iPhone. Besides providing a convenient way to read Bankrupting America’s content and view videos, it’s also a way to report government waste. That’s what I did last week.

Readers in Wichita may be aware that the city may not open the “Waltzing Waters” fountain this year, citing the water shortage. This compounds the waste of the purchase of the fountain and the building of its stage with its non-use.

Using my iPhone to submit a tip concerning government waste to Bankrupting America.

So when I was near downtown Wichita I used the Bankrupting America app to take a picture and submit my tip. It was easy to do, and resulted in this article on Bankrupting America. Note that the editors at BA took my tip as just that — a starting point. They then did their own research to write the article.

Initiatives like this are helpful in keeping a watchful eye on government spending and waste. The city will freely and liberally spend taxpayer funds promoting the goodness of the Waltzing Waters and everything else City Hall does. Local newspapers, television, and radio may report on waste, but this legacy media can’t report on everything that needs highlighting. Citizens like yourself can now step up and fill in the gap.

The resulting article at Bankrupting America.

It’s worse than President Obama saying “You didn’t build that.” Wichita Mayor Carl Brewer tells us you can’t build that — not without government guidance and intervention, anyway.

When President Barack Obama told business owners “You didn’t build that,” it set off a bit of a revolt. Those who worked hard to build businesses didn’t like to hear the president dismiss their efforts.

Underlying this episode is a serious question: What should be the role of government in the economy? Should government’s role be strictly limited, according to the Constitution? Or should government take an activist role in managing, regulating, subsidizing, and penalizing in order to get the results politicians and bureaucrats desire?

Historian Burton W. Folsom has concluded that it is the private sector — free people, not government — that drives innovation: “Time and again, experience has shown that while private enterprise, carried on in an environment of open competition, delivers the best products and services at the best price, government intervention stifles initiative, subsidizes inefficiency, and raises costs.”

But some don’t agree. They promote government management and intervention into the economy. Whatever their motivation might be, however it was they formed their belief, they believe that without government oversight of the economy, things won’t happen.

But in Wichita, it’s even worse. Without government, it is claimed that not only would we stop growing, economic progress would revert to a previous century.

Mayor Carl Brewer made these claims in a 2008 meeting of the Wichita City Council.

In his remarks (transcript and video below), Brewer said “if government had not played some kind of role in guiding and identifying how the city was going to grow, how any city was going to grow, I’d be afraid of what that would be. Because we would still be in covered wagons and horses. There would be no change.”

When I heard him say that, I thought he’s just using rhetorical flair to emphasize a point. But later on he said this about those who advocate for economic freedom instead of government planning and control: “… then tomorrow we’ll be saying we don’t want more technology, and then the following day we’ll be saying we don’t want public safety, and it won’t take us very long to get back to where we were at back when the city first settled.”

Brewer’s remarks are worse than “You didn’t build that.” The mayor of Wichita is telling us you can’t build that — not without government guidance and intervention, anyway.

Many people in Wichita, including the mayor and most on the city council and county commission, believe that the public-private partnership is the way to drive innovation and get things done. It’s really a shame that this attitude is taking hold in Wichita, a city which has such a proud tradition of entrepreneurship. The names that Wichitans are rightly proud of — Lloyd Stearman, Walter Beech, Clyde Cessna, W.C. Coleman, Albert Alexander Hyde, Dan and Frank Carney, and Fred C. Koch — these people worked and built businesses without the benefit of public-private partnerships and government subsidy.

This tradition of entrepreneurship is disappearing, replaced by the public-private partnership and programs like Visioneering Wichita, sustainable communities, Greater Wichita Economic Development Coalition, Regional Economic Area Partnership (REAP), and rampant cronyism. Although when given a chance, voters are rejecting cronyism.

We don’t have long before the entrepreneurial spirit in Wichita is totally subservient to government. What can we do to return power to the people instead of surrendering it to government?

Wichita Mayor Carl Brewer, August 12, 2008:

“You know, I think that a lot of individuals have a lot of views and opinions about philosophy as to, whether or not, what role the city government should play inside of a community or city. But it’s always interesting to hear various different individuals’ philosophy or their view as to what that role is, and whether or not government or policy makers should have any type of input whatsoever.

“I would be afraid, because I’ve had an opportunity to hear some of the views, and under the models of what individuals’ logic and thinking is, if government had not played some kind of role in guiding and identifying how the city was going to grow, how any city was going to grow, I’d be afraid of what that would be. Because we would still be in covered wagons and horses. There would be no change.

“Because the stance is let’s not do anything. Just don’t do anything. Hands off. Just let it happen. So if society, if technology, and everything just goes off and leaves you behind, that’s okay. Just don’t do anything. I just thank God we have individuals that have enough gumption to step forward and say I’m willing to make a change, I’m willing to make a difference, I’m willing to improve the community. Because they don’t want to acknowledge the fact that improving the quality of life, improving the various different things, improving bringing in businesses, cleaning up street, cleaning up neighborhoods, doing those things, helping individuals feel good about themselves: they don’t want to acknowledge that those types of things are important, and those types of things, there’s no way you can assess or put a a dollar amount to it.

“Not everyone has the luxury to live around a lake, or be able to walk out in their backyard or have someone come over and manicure their yard for them, not everyone has that opportunity. Most have to do that themselves.

“But they want an environment, sometimes you have to have individuals to come in and to help you, and I think that this is one of those things that going to provide that.

“This community was a healthy thriving community when I was a kid in high school. I used to go in and eat pizza after football games, and all the high school students would go and celebrate.

“But, just like anything else, things become old, individuals move on, they’re forgotten in time, maybe the city didn’t make the investments that they should have back then, and they walk off and leave it.

“But new we have someone whose interested in trying to revive it. In trying to do something a little different. In trying to instill pride in the neighborhood, trying to create an environment where it’s enticing for individuals to want to come back there, or enticing for individuals to want to live there.

“So I must commend those individuals for doing that. But if we say we start today and say that we don’t want to start taking care of communities, then tomorrow we’ll be saying we don’t want more technology, and then the following day we’ll be saying we don’t want public safety, and it won’t take us very long to get back to where we were at back when the city first settled.

“So I think this is something that’s a good venture, it’s a good thing for the community, we’ve heard from the community, we’ve seen the actions of the community, we saw it on the news what these communities are doing because they know there’s that light at the end of the tunnel. We’ve seen it on the news. They’ve been reporting it in the media, what this particular community has been doing, and what others around it.

“And you know what? The city partnered with them, to help them generate this kind of energy and this type of excitement and this type of pride.

“So I think this is something that’s good. And I know that there’s always going to be people who are naysayers, that they’re just not going to be happy. And I don’t want you to let let this to discourage you, and I don’t want the comments that have been heard today to discourage the citizens of those neighborhoods. And to continue to doing the great work that they’re doing, and to continue to have faith, and to continue that there is light at the end of the tunnel, and that there is a value that just can’t be measured of having pride in your community and pride in your neighborhood, and yes we do have a role to be able to help those individuals trying to help themselves.”

As the Kansas Legislature prepares to end its 2013 session, budgetary and taxation issues remain to be resolved. It’s important that the legislature resolve these issues in a way that positions Kansas for economic growth, rather than retaining the policies that have led to stagnation compared to other states.

First, let’s stop talking about the need to “pay for tax cuts.” The only way in which tax cuts have a cost is if you believe that your income belongs first to government, and then to you. While that schema is preferred by Kansas Progressives, it’s contrary to freedom and destructive to jobs and prosperity. Kansas will be better off if Kansans are able to control more of their own spending, rather than having government spend it for them.

Second, we must remember that the projected “holes in the budget” or deficits have two moving parts: Income and spending. Any deficit or surplus is produced equally by both factors. A reduction in income to the government produces a deficit only if government chooses to keep spending.

Third, let’s stop talking about “irresponsible tax cuts” and how cutting taxes is an “experiment.” To proceed as Kansas has — that would be irresponsible, as we know that Kansas has been underperforming relative to other states. No experimentation is needed. We know that Kansas has not done well.

Fourth, we need to make sure that everyone is starting from the same set of facts. Here’s one example: While critics of the new Kansas tax policy focus on the elimination of state income taxes on certain forms of business organization, marginal tax rates were lowered for everyone. Additionally, the standard deduction was increased for everyone, meaning that zero tax is paid on a larger share of everyone’s income.

But one tax was raised. Kansas had a program that rebated sales tax paid on food. This was limited to those with modest incomes or over a certain age. It is generally recognized that the sales tax is a regressive tax, meaning that those with low incomes pay a larger share of their income in tax. Reducing this perceived inequity was the goal of the credit program.

In recognition of this, Kansas should eliminate the sales tax on food, especially if we keep the current high sales tax rate. This eliminates the clunky tax credit program and lets everyone save on food taxes every day, not just at tax filing time.

Critics also say that taxes were raised on some low income families. This argument is based on some tax credit programs that were eliminated, such as the tax credit for child and dependent care expenses, and another tax credit for child day care expenses. It’s important to remember that these programs were implemented as a tax credits, and they are properly categorized as welfare spending accomplished through the tax system. If we want to keep this welfare spending, let’s do it some other way. Spending through the tax system complicates the understanding of government finances.

What Kansas should do

Here’s what the Kansas Legislature needs to do: Keep the current sales tax rate, eliminate sales tax on food, and reduce individual income and corporate income tax rates. Reduce the income tax rates by an amount that would be revenue-neutral, so that state spending does not grow. This moves us towards more of a “Fair Tax” model, which many economists agree is better than taxing income. Elimination of the sales tax on food removes much of the regressivity of the sales tax.

To the extent that the legislature believes it needs other funds, take it from transportation funding. We’ve spent a lot on roads and highways in recent years. It’s enough for now.

Another important thing the legislature needs to do is get serious about reducing government spending. Kansas lost an important chance to save money — although a relatively small amount — when school choice programs failed to pass. These programs, across the country, save state and local governments money. Unfortunately, Kansas legislative leaders did not use this argument.

More ways to save: In 2011 the Kansas Legislature lost three opportunities to save money and improve the operations of state government. Three bills, each with this goal, were passed by the House of Representatives, but each failed to pass through the moderate-controlled Senate, or had its contents stripped and replaced with different legislation.

Each of these bills represented a lost opportunity for state government services to be streamlined, delivered more efficiently, or measured and managed. These goals, while always important, are now essential for the success of Kansas government and the state’s economy.

One bill was called the Kansas Streamlining Government Act, another would have created the Kansas Advisory Council on Privatization and Public-Private Partnerships, and another would have created performance measures for state agencies and report that information to the public. More information on these bills is at Kansas budget solution overlooked.

We have to wonder why these bills — or similar measures — were not introduced and advanced this year when the opposition in the Senate is weaker. These are the types of measures we need to take as a state.