On Saturday February 12, 2005, I attended a meeting of the South-Central Kansas Legislative Delegation. State Representative Judith Loganbill made remarks that included the fact that the maximum Kansas individual income tax rate becomes effective at taxable incomes of $30,000 for singles and $60,000 for married couples. A member of the audience spoke and expressed astonishment to learn this. I didn’t think about it at the time, but I now realize that Rep. Loganbill was advocating more tax brackets with higher rates.
Author: Bob Weeks
TABOR: not fair?
Mr. Gary Brunk, executive director of Kansas Action for Children, wrote a letter published in The Wichita Eagle on February 23, 2005, opposing a taxpayer bill of rights, or TABOR, in Kansas. As evidence of TABOR’s failure in Colorado, he cites the low rate of childhood immunization in that state.
It is unfortunate that so many Colorado children don’t receive immunizations. Mr. Brunk, however, presents no evidence that Colorado’s TABOR is the cause. It is tempting to conclude that when both x and y are present that x must be the cause of y, but this is not evidence of actual causation. It is possible that other factors are responsible.
Besides, we might ask this question: Why should the taxpayers of Colorado pay to immunize others’ children? I think the answer many might give is that if the state supplies relatively inexpensive immunizations, the state can avoid paying the substantial healthcare costs for children who become ill with diseases the immunizations prevent.
This is undeniably true, and leads to the even-larger question: Why have states become responsible for providing healthcare (and other services) for so many? Mr. Brunk makes a case for what he terms a “fair” tax system. I submit that a tax system that takes money from one group of people and gives it to another group to whom it does not belong, no matter how noble the intent, is not in any sense fair. That is, if by fair Mr. Brunk means moral.
The economist Walter E. Williams makes the case succinctly: “Can a moral case be made for taking the rightful property of one American and giving it to another to whom it does not belong? I think not. That’s why socialism is evil. It uses evil means (coercion) to achieve what are seen as good ends (helping people). We might also note that an act that is inherently evil does not become moral simply because there’s a majority consensus.”
It is the runaway growth in taxes and spending — the taking of one person’s property and giving it to another — that a TABOR seeks to stem. A TABOR does not tell legislators how they must allocate state funds; it merely places a limit on how much they can spend. Legislators can still make judgments each year as to which programs are most important. Spending will most likely keep growing, but slower than it has.
The forces that want to increase taxes and spending by increasing amounts are always working and must be restrained. For example, Mr. Brunk, in his letter, advocates legislation that will require “a biannual report on the proportion of their income that people in different income levels pay in taxes.” Reading this, I get the strong impression that Mr. Brunk believes we do not pay enough tax. But for those who believe that state government is already large enough, a TABOR is the best way to manage its growth.
Latest Federal School Finance Spending Revealed
Here is an article from the Kansas Taxpayers Network that reports on school spending: http://www.kansastaxpayers.com/editorial_fedschool.html.
On Saturday February 12, 2005 I attended a meeting of the South Central Kansas Legislative Delegation. Lynn Rogers, USD 259 School Board President, and Connie Dietz, Vice-President of the same body, attended. There has been a proposal to spend an additional $415 million over the next three years on schools. Asked if this would be enough to meet their needs, the Wichita school board members replied, “No.”
Missing From the Social Security Debate
This is what I haven’t seen mentioned in the debate over the future of social security.
Opponents of private accounts cite the risk inherent in investing in markets. Instead, they will rely on future generations of workers to pay the taxes necessary to pay promised social security benefits.
It seems to me, though, that investments in U.S. securities markets, both stocks and bonds, derive their value from the underlying strength of the U.S. economy. If the economy does well, in the long run, markets do well. If the economy does not do well, the investments will not do well, and social security recipients will need to rely on a future generation of workers to pay taxes that will pay benefits.
Where do these taxes come from? They come from workers, hopefully earning high salaries to pay the high taxes that will be needed. But if the economy does not do well, there will not be very many highly-paid workers, and the government may have trouble collecting enough taxes to pay social security benefits.
So we need to hope that the U.S. economy performs well, so that private accounts earn a high return, or there will be workers earning enough to pay high social security payroll taxes.
What is Not Good About Internet Search
The success of the Internet search engine Google is amazing. It has become a cultural phenomena, as “to Google” someone or a topic. The implication is that by using Google, you can find all there is to know about a person or subject.
In my opinion, this attitude can be deceptive. Relying exclusively on Google or any other search engine can lead to conclusions based on erroneous or incomplete sources. For example, The Wall Street Journal, one of the most important sources for research on current topics, is absent from Google. Its content does not appear in searches. That’s because the Wall Street Journal is a subscription service. Readers have to subscribe and pay to view its content. Other subscription services — and there are many, some being quite expensive — may not have their content indexed by Google.
Google has a new service called Google Scholar. Quoting from its “About” page: “Google Scholar enables you to search specifically for scholarly literature, including peer-reviewed papers, theses, books, preprints, abstracts and technical reports from all broad areas of research. Use Google Scholar to find articles from a wide variety of academic publishers, professional societies, preprint repositories and universities, as well as scholarly articles available across the web.” In my brief experience using Google Scholar, it finds some articles I would like to read, but many are expensive to purchase. For example, a search for “Wichita city council” returns an article titled “Searching for a Role for Citizens in the Budget Process.” The article costs $25.00 to read.
An obvious problem in using the Internet for research, and therefore for search engines as well, is the quality of the web pages that are returned in a search. Readers need to be careful in deciding which web pages and sites to trust. It is easy, and becoming easier, to create web sites that have a quality look and feel. That does not mean, however, that the information is reliable. It may have been created to deceive. A good page that can help judge the quality of a web page is here: Evaluating Web Pages: Techniques to Apply & Questions to Ask. Another good resource is Evaluating the Quality of Information on the Internet.
There are many other search engines. Some I have recently become aware of that seem interesting and have merit are Teoma, Alltheweb, Vivisimo, and SMEALSearch. There are also pay search services. These often include content that is not available on free websites. Some of these include HighBeam, Questia, Factiva, and Northern Light.
I don’t mean to pick exclusively on Google, as their search service is very good, and some of their more little-known services are amazing. The recently introduced Google Maps (link: http://maps.google.com ), for example, is a technical tour-de-force and different from other map services. But we must realize that the Internet is not quite like a library with the helpful and knowledgeable librarian there to help us.
Increase our awareness of taxes
As the annual tax season is upon us, we should take a moment to examine our level of awareness of the taxes we pay.
First, very many families don’t pay any federal income tax. According to a study by the Tax Foundation (link: http://www.taxfoundation.org/ff/zerotaxfilers.html) 58 million households, representing some 122 million people or 44 percent of the U.S. population, pay no federal income tax.
For those who do pay taxes, they often aren’t aware, on a continual basis, of just how much tax they pay. That’s because our taxes are conveniently withheld for us on our paychecks. Many people, I suspect, look at the bottom line — the amount they receive as a check or automatic bank deposit — and don’t really take notice of the taxes that were withheld. This makes paying taxes almost painless.
An alternative would be to eliminate the withholding of taxes from paychecks, and from monthly mortgage payments, too. Instead, each month or year the various taxing governments would send a bill to each taxpayer, and they would pay it just like the rest of their periodic bills. In this way, we would all be acutely aware of just how much tax we pay. I’m aware there is an obvious collection problem.
A further perversion is that many people are happy during tax season, because they get a refund. And they’re delighted to get that refund, so much so that many will pay high interest rates on a refund anticipation loan just to get the money a little earlier. The irony is that by adjusting their withholding, they could take possession of much of that money during the year as they earn it.
The other people happy during tax season are tax preparers. As a country we spend an enormous effort on tax recordkeeping and compliance. Another study by the Tax Foundation estimates that in 2002 we spent, as a nation, 5.8 billion hours and $194 billion complying with the federal tax code. (5.8 billion hours is equivalent to about 2,800,000 people working 40 hours per week, 52 weeks per year.) By simplifying our tax code, we could eliminate much of this effort, and return that effort to productive use.
Since tax withholding from paychecks and mortgages reduces our awareness of just how much tax we pay, it’s unlikely that governments will stop withholding and submit a bill to taxpayers. It’s left to ourselves to remain aware of how much we are paying.
SB 58 Testimony from Kansas Taxpayers Network
More testimony opposing SB 58, the bill to allow Sedgwick County to increase its sales tax to pay for the downtown arena.
Testimony Opposing SB 58
By Karl Peterjohn, Executive Director, Kansas Taxpayers NetworkSB 58 is a flawed bill that should either be re-drafted or defeated in its current form, Let me outline the major problems with this legislation.
1) This bill does not address the serious flaws already contained within KSA 12 187 that cry out for correction. This is a grossly non uniform statute that should be made, uniform covering all local government units. Today, cities may, and some already have, opt out of this statute using their home rule powers because of this statute’s non uniform condition. County home rule requires a change in statutes for the lid on local sales taxes (see KSA 19 101a). At some point in time the cities may opt out of this statute in a way that negates any requirement for voter approval at an election. It will be a sad day for Kansas government when the voter approval requirement within this statute gets voided within a municipality. This is only a matter of when, not a matter of if
It may surprise this committee that the Kansas Taxpayers Network (KTN) supports removing this local sales tax Ed under limited circumstances. The circumstances are straightforward. KTN strongly supports requiring voter approval before taxes are raised. KTN has repeatedly testified in front of both legislative tax committees in support of this principle. We strongly urge this committee to broaden this voter approval requirement to extend to city, county, and local property tax millage hikes. KTN would also like to see a requirement added to this statute that would extend this principle of voter approval of tax hikes to extend to all local taxes. Currently, Missouri, Colorado, and Oklahoma require voter approval before property taxes can be raised in those three states. In Colorado and Missouri this requirement for voter approval currently covers all local taxes.
This would correct the pro tax raising bias that exists in current law. Local sales tax hike proponents raise local sales taxes in a way I’ll describe ‘in three words: “carrot and stick.” The “carrot” approach to raising sales taxes is how Sedgwick County originally got their 1 cent local sales tax 20 years ago, “Vote for this local sales tax and we’ll lower your property tax.” That’s how Pottawatomie County got their local sales tax raised last year.
The “stick” approach was used by arena proponents in narrowly getting voter approval during the advisory vote November 2, 2004 in Sedgwick County. “If you don’t vote for this temporary sales tax hike we’ll raise your property taxes.” Arena proponents’ flyers and advertising said, “Vote No. And a 20 year property tax buys a facelift for the aging Kansas Coliseum… ” So it all comes down to: higher sales or higher property taxes would the condemned prefer to be hung or shot?
2) SB 58 is a slap in the face for taxpayers by making an advisory vote retroactively into a binding vote. This is an affront to the rule of law. The county knew they had no authority to raise the local sales tax under current state law. Now they want you to retroactively provide them with this approval. I wrote an editorial ‘in the Wichita Eagle last August that publicly informed them that they had no legal authority under Kansas law to impose this tax. They arrogantly proceeded anyway and now want the legislature to grant retroactive authorization.
Now I’m not saying that you can’t add retroactivity into Kansas tax law. That has occurred in the past nationally and fairly recently. In 1993 then President Clinton proposed adding retroactive provisions to federal tax code as part of his tax raising bill. This was enacted, it was litigated and the U.S. Supreme Court ruled that retroactive tax law was constitutional. This was bad federal tax law in 1993 and Kansas should not adopt this retroactively principle in 2005.
Now let me demonstrate how a taxpayer would be a second class citizen in Kansas if you enact SB 58 in its current form. If I decided as a citizen that I would no longer be bound by the portions of the tax law I’d like to see changed, and then proceeded to ignore the law, I would be in violation of the law and could be penalized under this law. Apparently, that is not a problem if the legal entity happens to be a local government, like Sedgwick County in Kansas. If I then had the arrogance to proceed to ask you as legislators to retroactively change state law to help me out of my own violation of state law, you would not take my request seriously. Today, you are taking the county’s request very seriously and if recent press reports are correct, a majority of you have already decided to vote for this bill. If this bill passes it will clearly establish the fact that taxpayers are second or perhaps even third class citizens behind local units of government in Kansas.
This bill would be a gross violation of the rule of law in this state. In fact, the legislature rarely provides retroactive provisions in state law and usually enacts statutes that only take effect at a future date.
3) Since the November 2 vote was advisory *in nature, the fact that arena opponents were outspent is an abuse of taxpayer funds but is not critical under current Kansas law. Arena opponents raised over $20,000 in private funds in the unsuccessful advisory election November 2, 2004. We were outspent by a greater than 2 to I margin by city, county, and state funded tax dollars spent by tax funded organizations.
This included city property taxes, city hotel/motel taxes, county tax funds, and state turnpike and regents tax dollars. This statute should be amended to ban the use of state and local tax funds in tax referendum elections. It is now clear that Kansas has already descended upon the slippery slope where tax dollars are being spent to promote higher taxes.
4) If the legislature does not act upon SB 58 or any similar legislation then one of two events will occur. The county could follow the usual practice and get KSA 12 187 changed so a binding election could occur. The city of Wichita, which also strongly backs this tax hike, could exercise their home rule option in this matter or also seek a change in this statute to hold a binding election in the future. The rule of law could be preserved even if this important principle is contained within this flawed and non uniform statute.
SB 58 is flawed and should be rejected by this committee. KTN has intentionally not discussed the merits of the downtown arena since that is an issue for a binding election and not for this committee or the legislature to consider. The legislature must make state law for all the citizens and all of the local units. SB 5 8 makes a bad statute worse.
A better approach would be to extend the principle of voter approval of local sales taxes to cover all local taxes in Kansas. Then you could remove the caps, terminate the “carrot and sticks,” tax raising strategy, delete the non uniformities, and allow the Kansas economy to begin to be able to compete with our neighboring states that have already empowered their citizens with mandatory tax referendums at the ballot box.
Legislative Delegation, Saturday February 5, 2005
On Saturday February 5, 2005 I attended the meeting of the local legislative delegation regarding the arena tax. Representative Tom Sawyer chaired the meeting. The audience wrote questions on notecards, and Representative Brenda Landwehr read them. To the best of my recollection, the people allowed to answer questions were Sedgwick County Commissioner Tom Winters, Sedgwick County Assistant County Manager Ron Holt, Sedgwick County Director of Finance Chris Chronis, Wichita Mayor Carlos Mayans, and Wichita Downtown Development Corporation President Ed Wolverton. All of these are arena supporters. No one with an opposing view was allowed to speak, except for near the end when Kansas Taxpayers Network Executive Director Karl Peterjohn spoke from the audience for a moment.
The news that was made during this event was that it was totally scripted by arena supporters, and except for Mr. Peterjohn’s brief remarks from the audience, there was no balance.
I created a handout for the legislators. A link to it is here.
From John Todd: Testimony regarding Senate Bill No. 58
February 3, 2005
Members
Senate Assessment and Taxation Committee
State Capitol
Topeka, Kansas 66612Subject: Testimony in OPPOSITION TO SENATE BILL #58 (Sales Tax Increase For The Proposed Wichita/Sedgwick County Arena).
My name is John Todd. I am a self-employed real estate broker from Wichita, and I come before you in opposition to the enabling legislation that would allow Sedgwick County to raise the local sales tax 1% to fund a new Downtown Arena.
The reason why I am here in opposition to this government driven plan is my basic belief that individuals know best how to spend their own money, and that they should be allowed the freedom to spend the fruit of their own labor as they wish, and not as government dictates, particularly when it involves mandatory spending for an elective entertainment venue like the proposed downtown arena.
If the need for a Downtown Arena were market driven, the private sector would already be building it, and the taxpayers would be left out of the loop. Obviously, it is not, and so the proponents want the taxpayers to build it and absorb the losses. I believe their plan calls for over $20 million in operational losses. This does not count the business property that will be taken off the tax rolls for a county owned facility. If the Wichita Eagle’s pre-election numbers of $40 million in property value was correct, those losses in real estate taxes could amount to $1 million more in lost taxes per year, and I would bet that that shortfall will be spread back over the other real estate property taxpayers.
How did we ever get the idea that the road to prosperity is built on government spending and the heavy taxation of our people? How far from the truth can this be?
Anyone who has read the Eagle in recent months can attest to the massive number of so called “economic development†projects in downtown Wichita that are losing money, and that the taxpayer is being asked to cover. One only needs to read of the $1.00 per year 99 year leases that are being awarded for the millions of dollars taxpayer owned land and the $7 million dollars needed to lure a second or third choice anchor retailer downtown to grow disenchanted with local government’s ability to “manage†anything, particularly if it is related to real estate development.
And why should anyone be concerned with these boondoggles? We can’t continue to take $184.5 million here and $140 million there, and $100 million yonder out of our economy and hope to favorably compete with other cities, counties, and states in our region.
There are numerous excellent examples of free market economics at work in our city. One only needs to look north and south on Rock Road in Wichita to observe the benefits of this privately funded system that expands the tax base, creates jobs, and is indeed true “economic growthâ€, and best of all, the taxpayer is not liable if any of these business ventures fail. Will a 1% sales tax that will remove $184.5 million from the Sedgwick County economy hurt these local businesses? Absolutely! And according to an article in the March 2001 issue of “FedGaxette,†published by the Federal Reserve Bank of Minneapolis entitled “Stadiums and convention centers as community loss leaders†contains this quote:
“Current research indicates that stadiums and arenas have a particularly bad track record when it comes to delivering on promises of community economic windfalls. University researchers Mark Rosentraub and Mark Swindell found that three decades worth of studies ‘lead to the inescapable conclusion that the direct and indirect economic impacts of sports teams and the facilities are quite small’ and do not create much in the way of new jobs or economic development.â€
The proponents of this Bill here today will tell you that 52% of the voters voted for the arena. That is true; however, they ignore the fact that our County elected officials were less than forthcoming in advising voters that the arena vote was an advisory election only, and is not binding. The County is not authorized to raise sales taxes without first obtaining legislative approval prior to any vote. Sedgwick County broke state law! The legislature is now faced with the dilemma of passing enabling legislating, and making it retroactive to the November 2, 2004 election and calling that election binding. This is wrong, and you should not let it happen. At the very least, if you pass the enabling legislation, a subsequent public vote should be required before allowing the County to raise the sales tax.
Before you pass this Bill into law, several matters need to be considered.
1. Is the $184.5 million dollar price tag excessive?
2. What is the real impact of taking $184.5 million dollars out of the private economy in terms of retailer profits and potential job losses?
3. The arena vote was won by a narrow margin. Rural Sedgwick County voters voted against the arena as did voters in the less affluent neighborhoods. Perhaps the sales tax should be optional at the check out stand. Those who want to pay the arena tax could and those who don’t could simply ‘opt out’.
4. What will happen to the Sedgwick County economy if the Legislature or the Supreme Court mandates a statewide sales tax to meet the Court’s requirements for school financing?
5. What is the specific location for the proposed arena? Who owns the land? Is the land going to cost $1.00 per square foot or $20.00 per square foot? And is the $20 million for land acquisition going to cover the actual cost, or will it be double or triple that amount? Would not an astute “private†investor already own the land or control the price under an option to purchase contract? If the Legislature allows the County to fill its checkbook, will not the price of land double or triple?
6. No one knows what the proposed arena will look like since it has not been designed. Should not the taxpayers have known what they are voting for?
7. Before you authorize giving the Sedgwick County Commission a blank check with $184.5 million of taxpayer money deposited in it, perhaps you need to consider placing some “controls†over how they spend the money?
8. Will the people who contributed to the pro arena campaign be allowed to bid on the construction work, participate in the design work, earn commissions for the sale/purchase of the land, or will these be considered a “conflict of interest�
9. Will the Sedgwick County commissioners be required to explain why they voted for a $55 million dollar renovation for the Kansas Coliseum and then decided that it was too expensive? What did they do with the long-term capital improvement fund(s) that should have been earmarked for this project? And how do they explain that only $25 million in private funds were needed to renovate a similar size arena at Wichita State University? Does it always cost the public sector twice the amount to do the work as the private sector? Perhaps we need to enlist the business acumen of the private sector to build the arena for half of the proposed cost?
10. Perhaps our voters need better information in order for them to make an informed decision regarding a new arena or a renovated Coliseum? Property taxes were made an issue in the arena campaign. Many votes expressed their frustration to me that they were not given the opportunity to vote for “none of the aboveâ€, and since they were more opposed to property taxes than sales taxes, they were forced to vote for the arena. Perhaps the legislature needs to enact legislation requiring a public vote before local governments can raise local property taxes?
11. Are not government directed projects like the arena the antitheses of the free market system? Does anyone else tire of working until April or May of each year to pay his or her taxes? Is government really the answer?
Too many questions need to be answered before you decide pass this Bill into law. A non-binding public vote for a downtown arena in 1993 failed to pass by a wide margin. Since the 1993 vote was ignored, you have the necessary precedence and current state law on your side to ignore this vote, and at the very least amend this Bill to require another public referendum.
Thank you for allowing me to speak. I would be glad to answer questions.
Sincerely,
John R. Todd