Tax Growth Exceeds Income Growth

Tax Growth Exceeds Income Growth
By Karl Peterjohn, Kansas Taxpayers Network

Kansas Legislative Research is reporting that state and local taxes grew 9.83 percent last year. That is a major reason the state has $300 million in revenue growth to either spend or return to the folks who earned it: taxpayers. It is clear that Kansas has some sizable economic problems facing this state.

Governor Sebelius’ State of the State speech did recommend some business tax breaks but there does not seem to be any breaks for the average taxpayer. In fact, the opposite is true as spending proposals for “universal health care,” a $700 million regents building request, and the rest of the K-12 spending on public schools in the wake of the Kansas Supreme Court’s spending edicts each have the potential to easily exceed the $300 million growth.

Do any of these folks remember the children’s tale about the goose that laid the golden eggs?

The Kansas economy is growing, although nowhere near the almost 10 percent growth enjoyed by 2006 revenues. The fastest growing tax is the state’s corporate income tax that grew over 54 percent in 2006. The tax on financial institutions saw revenue growth in excess of 40 percent. Both of these rates are highly dependent upon the underlying economy and these increases are based on relatively weak state tax revenues in the previous few years.

Another fast growing tax was the severance tax on oil and gas. That rose over 29 percent last year. High energy prices are good for the high state energy taxes. These are all reasons explaining the growth in tax revenues.

State Senator Jim Barnett was unsuccessful in convincing voters that high Kansas taxes place this state’s economic future in jeopardy. While Barnett may have failed at convincing a majority of voters, he apparently succeeded in convincing his opponent, Governor Sebelius, that there is a real problem here. She has now proposed reductions in the state’s business franchise, corporate income, and unemployment tax placed on business in her 2007 State of the State speech.

Several recent national fiscal surveys have pointed out that Kansas’ fiscal climate is not conducive to economic growth and we rank poorly with most of our neighboring states. There is tremendous tax uncertainty that is reflected in both the high level of property taxes in Kansas but the sizable property tax increases that occur through the appraisal process as well as higher mill levies.

All Kansas property taxes grew 7.45 percent according to these state figures. That’s bad news for property owning taxpayers whose incomes were not able to grow that fast. Sadly, that covers a large number of Kansans. If the bulk of the state’s $300 million windfall gets spent on growing Kansas government, the fundamental economic problems will remain.


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