Kansas fiscal policy is stifling the state’s economy

Dave Trabert of Kansas Policy Institute explains that Kansas economic policies are leading to the growth of government at the expense of private sector economic activity. Separately, KPI released figures showing that it will be very difficult for the state to meet the revenue projections made for the current fiscal year, which ends on June 30, 2011. Kansas tax collections in March were below projections, meaning even more trouble balancing the current year budget.

State Fiscal Policy is Stifling the Kansas Economy

By Dave Trabert, Kansas Policy Institute.

Kansas’ fiscal policy has stifled the state’s economy for more than a decade and the effects are now being severely felt. Policy debates are often thought of in terms of party identification but the dividing line in Kansas is about the size and role of government; specifically, limited government versus large, expanding government. Most major policy debates really come down to whether government or taxpayer interests take precedent.

For example, last year’s 19 percent sales tax increase was designed to allow government spending to increase by more than $200 million. Efforts to instead have government operate more efficiently were rebuffed by the demand for higher revenues, even though both academic studies of the proposed sales tax increase concluded it would cost thousands of jobs. The February employment report from the Kansas Department of Labor confirms those predictions.

Kansas employmentKansas employment

Kansas continues to lose private sector jobs, while government jobs increase. The adjacent table shows a loss of 12,100 private sector jobs over the last year; you have to go back to 1997 to find fewer jobs in February. To fairly compare February employment to the July implementation of the sales tax, we have to use seasonally adjusted data from the U.S. Department of Labor. On that basis, there are 23,200 fewer private sector jobs since the sales tax increase.

There’s been talk of repealing the sales tax but opponents say it would make it harder to balance the state budget. That’s true, but it can be done by having government operate more efficiently, eliminating programs no longer deemed effective, and treating government employees the same as all other taxpayers. Others oppose repealing the sales tax because they’d rather retain it and use the revenue to begin reducing income tax rates. The March to Economic Growth Act (MEGA) would restrict the growth in state revenue and ease the tax burden but opponents are concerned about the impact on government. Never mind that Kansas has one of the highest state and local tax burdens in the country (number 19 according to the Tax Foundation and getting worse) and that jobs and population are migrating to states with lower tax burdens.

Last year’s smoking ban was another fine example of putting government interests first, with state-owned casinos getting an exemption. Opponents of an effort to remove that exemption say it would cost state-owned casinos millions of dollars in lost revenue and reduce state tax revenues. Bar owners said the same thing last year but their concerns were dismissed.

And then there’s the Kansas Public Employees Retirement System (KPERS). The debate over resolving a KPERS deficit of at least $9.3 billion is perhaps the most egregious example of fiscal policy favoring government growth. KPERS is one of the worst funded plans in the country and provides benefits many times greater than received by most private sector workers. Fully funding it will have catastrophic impact on taxpayers and the economy, but even minor benefit reductions are vehemently opposed. Even a proposal to reduce benefits for employees not yet hired can’t get off the ground.

Continuing to strip taxpayers of their economic freedom so that we can sustain and grow government will eventually cause the state’s economy to implode, as governments in California, Illinois and many nations are currently experiencing. This isn’t theory, it’s history — and we should avoid repeating it.


4 thoughts on “Kansas fiscal policy is stifling the state’s economy”

  1. I do not see you addressing the loss of revenue to the state from tax exemptions for business and unproductive governmental subsidies to develop business that did not work. When times were good, the state did not pay back what it failed to pay to the KPERS pension fund that it had promised and instead gave tax breaks to others. Now it seeks to cheat those workers who thought this contract was done in good faith. Maybe tax revenues and business is failing because the working person has money to spend beyond the basics.

  2. Correction: Maybe tax revenues and business is failing because the working person has NO money to spend beyond the basics.

  3. Our newly elected House Rep Garber submitted a Bill three weeks ago, which would have allowed our taverns and other adults only small businesses to allow smoking with proper signage. He fought for property rights and for personal responsibility along with Landwehr. It is unfortunate that in last November’s election, we only removed 18 of the House members who voted for the ban. Rep Garber’s Bill lost by 10 votes. Those who voted against small businesses were very much aware of all the businesses that have been closing, and of the lost tax revenue to the State. They did not care. Those include Ward and Flaharty, of Wichita, and Pauls and Bethell, in the Hutchinson area. Those two voted against the ban last election year, and then NOW, after knowing the losses and closings, they voted to keep the draconian ban in place. I realize that the pro ban, out of state, pharma money, looks pretty juicy to these people. What other reason would they have done this? Now Harry and Ollie’s, a 15 year business in Wichita, is closed. So add that to the long list. We, in the hospitality industry, do not want the casinos to fail due to this nannyism and cronyism. We simply want our property rights restored in small businesses. We do not force anyone to work for us or to enter and breathe OUR air. And, my dear, any air in my business is MINE! And I take responsibility for it. I pay the property tax on it. If you don’t like MY air, or my music, or my attitude, take your business elsewhere. This one is MINE!
    We had high hopes that the days of Barney Fife’s running of Kansas was over. We shall see if we just shoot ourselves in the other foot! Two wrongs don’t make a right, and taking away the earning power of the casinos is just that! Stupid. Just like those bought off Reps who do not support property rights!

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