Change in personal income, 2016 to 2017. Click for a larger version and the BEA press release.That is an increase of 1.0 percent from 2016, when personal income was $137,305 million. These are current dollars, not adjusted for inflation. 1
The growth for Kansas — 1.0 percent — ranked 47th among the states. For the nation, personal income rose by 3.1 percent, and for the Plains states, it rose by 1.7 percent.
BEA gives the population of Kansas as 2,913,000, with per capita personal income at $47,603. That ranks 24th among the states, and is 94 percent of the value of personal income for the entire nation, which is $50,392.
Personal income, according to BEA, is “the income received by, or on behalf of, all persons from all sources: from participation as laborers in production, from owning a home or business, from the ownership of financial assets, and from government and business in the form of transfers. It includes income from domestic sources as well as the rest of world. It does not include realized or unrealized capital gains or losses.” 2
For Kansas, there were these notable changes in earnings:
Farm: Down by 0.66 percent
Non-durable goods manufacturing: Up by 0.23 percent
Wholesale trade: Up by 0.11 percent
Transportation and warehousing: Up by 0.15 percent
Management of companies and enterprise: Up by 0.15 percent
Health care and social assistance: Up by 0.23 percent
State and local government: Up by 0.21 percent
There is a movement to increase the transparency of government in Kansas, but there’s much to be done, starting with attitudes.
One of the major economic development programs in Kansas is PEAK, or Promoting Employment Across Kansas. 1 It provides benefits to companies when they expand their operations in Kansas, or sometimes when they merely threaten to leave. The recent expansion by Spirit AeroSystems is reported to benefit from $23.5 million in PEAK cash. 2
But finding out how much PEAK benefits are awarded each year is difficult, even though the state relies heavily on this program. It also appears that the Kansas Department of Commerce, the agency that awards and administers PEAK, isn’t aware of how many programs, and at what cost, have been authorized.
At one time a summary of PEAK data was readily available from the state. It covered fiscal years 2010 through 2015. 3 My inquiries late last year to the PEAK program manager for updated information were fruitless, despite many email and telephone messages. None were returned.
But a request to the interim director was answered. The answer is that the data through 2015 was a one-time effort, and there are no reports similar to that with recent data.
The fact that there is no recent data is remarkable. We must wonder if the Department of Commerce cares about things like this, because collecting this data as projects are awarded is not difficult. There aren’t many projects awarded. For the period 2010 through 2015, there were 68 PEAK projects awarded. And just a handful of data items need recording for each project.
But this isn’t done.
I made a request for recent data on PEAK awards, asking for the same data in the previous report: Company Name, Effective Date, Location (County), Proposed Annual Benefit, Benefit Term (Yrs), New or Retained Jobs, Project Payroll, and Additional Project Capital Investment. The response confirmed there is no simple report with the relevant data. I was offered the opportunity to purchase copes of all recent PEAK agreements, estimated to cost $750 to $1,200. Further, these documents would not contain all the data I asked for.
Who is managing?
As part of four initiatives to increase government transparency in Kansas, Governor Jeff Colyer told the legislature, “Third, I will implement performance metrics for Cabinet Agencies so Kansans can see how we perform.” 4 My experience with the Department of Commerce indicates there’s a long way to go. Agencies are not capturing and recording basic data.
Even if the Department of Commerce was capturing this data, there’s still much more analysis to perform. The data I asked for was simply the project parameters at the time PEAK benefits are awarded. The real question is this: Are the projected benefits actually realized?
There ought to be a law
There is a bill this year that would require several state agencies to report on the many programs they administer. It’s titled “HB 2753: An act concerning taxation; relating to income tax credits and sales tax exemptions; periodic review, reports to certain legislative committees.” 5
Kansas taxpayers might have thought this basic management of our tax-funded programs we already in place. It’s especially troubling in that the cost of this management is small. The fiscal note for the bill tells us these agencies already have the capacity to perform this work: “The Insurance Department, Department of Commerce, and Department of Revenue indicate that the administrative costs associated with implementing the provisions of HB 2753 would be negligible and could be absorbed within existing resources. Each agency would be responsible to collect and organize information regarding certain tax credits, incentives, and exemptions on a yearly basis.”
Local governments in Kansas are again seeking expanded power to seize property.
In Kansas, officials of many city governments feel they don’t have enough power to deal with blight. This year, as in years past, there is legislation to expand the power of cities to seize property. 12
John Todd, along with Paul Soutar, made a video to explain the bill and the surrounding issues. It’s just five minutes in length. View it below, or click here to view at YouTube. Todd’s written testimony to the Kansas Legisalture has photographs and examples. It may be viewed here.
Background
Presently, tools are in place. Cities already have much power to deal with blight and related problems. Last year Todd and I, along with others, had a luncheon meeting with a Kansas Senator who voted in favor of expanding cities’ powers. When we told him of our opposition, he asked questions like, “Well, don’t you want to fight blight? What will cities do to fight blight without this bill?” When we listed and explained the many tools cities already have, he said that he hadn’t been told of these. This is evidence that this bill is not needed. It’s also evidence of the ways cities try to increase their powers at the expense of the rights of people. 3
The Governor’s veto. A similar bill passed the legislature in 2016. Governor Brownback vetoed that bill, explaining, “The right to private property serves as a central pillar of the American constitutional tradition.” 4
The Governor’s veto provoked a response from Wichita government officials. It let us know that they are not as respectful of fundamental rights as was Brownback. 5
For example, in remarks from the bench, Wichita City Council Member Pete Meitzner (district 2, east Wichita) said there is no intent to be “aggressive in taking people’s property.” 6 But expanding the power of government — aggression, in other word — is what the bill does. Otherwise, why the need for the bill with its new methods and powers of taking property?
And once government is granted new powers, government nearly always finds ways to expand the power and put it to new uses. Even if we believe Meitzner — and we should not — he will not always be in office. Others will follow him who may not claim to be so wise and restrained in the use of government power.
Government expands and liberty recedes. Government continuously seeks new ways to expand its powers through enabling concepts like blight. Did you know the entire suburban town of Andover is blighted? 7 Across the country, when governments find they can take property with novel and creative interpretations of blight, they do so. 8
It’s easy to sense the frustration of government officials like Wichita Mayor Jeff Longwell. In his remarks, he asked opponents of SB 338 “what they would do” when confronted with blight. That is a weak argument, but is advanced nonetheless. Everyone has the right — the duty — to oppose bad legislation even if they do not have an alternate solution. Just because someone doesn’t have a solution, that doesn’t mean their criticism is not valid. This is especially true in this matter, as cities already have many tools to deal with blight.
What Was Really the Matter with the Kansas Tax Plan
New Book Outlines Tax Lessons from Kansas “Experiment”
Tax relief opponents have repeatedly pointed to the 2012 Kansas tax plan as their primary example of why tax cuts do not work. But, other states like North Carolina, Indiana, and Tennessee contemporaneously, and successfully, cut taxes. What was different about the Kansas experience?
The answer to that question is multi-dimensional according to a new book from Kansas Policy Institute, entitled What Was Really the Matter with the Kansas Tax Plan — The Undoing of a Good Idea. The book covers the six years between the conception of Brownback’s tax cuts in 2011, the tax package being signed into law in 2012 and later repealed with the largest tax hike in state history in 2017. It documents the many mistakes that occurred, a toxic political undercurrent, and several unrelated economic circumstances that negatively impacted the budget and multiple misconceptions along the way.
Author and KPI president Dave Trabert says, “Much of what went wrong was avoidable. We hope citizens and legislators across the nation can learn from the mistakes made in Kansas as they strive to create the best path forward for everyone to achieve prosperity with lower taxes.”
The final chapter of the book is “Lessons Learned” and includes these big lessons:
Don’t cut revenue and increase spending.
Explain why tax relief is necessary (i.e., what are the consequences of not reducing the tax burden).
Develop a comprehensive plan to balance the budget on less tax revenue, with room for the unpredictable but inevitable misfortunes (like plummeting oil and farm commodity prices).
Have the right systems in place, including performance-based budgeting and a reliable revenue estimating process.
To ensure that lawmakers have this information as they work in statehouses around the country, nearly 8,000 complimentary copies are being distributed to every state legislator across the country in partnership with The Heartland Institute.
Danedri Herbert, an experienced journalist currently writing for the online publication “The Sentinel,” co-authored the book and former U.S. Senator Tom Coburn of Oklahoma wrote the Foreword. Coburn writes, “This is a very important book, not only for state and national legislators who try to represent citizens instead of special interests, but also for taxing and spending watchdogs in the press and those involved with good government citizen activist groups.”
What Was Really the Matter with the Kansas Tax Plan is published by Jameson Books, Inc. and copies will be available on Amazon.
Trabert concludes, “Kansas could have successfully cut taxes as other states have done. The undoing of a very good idea—allowing citizens to keep more of their hard-earned money—gets to the crux of the serious state and national challenges we face: policy takes a back seat to politics. The efforts of many elected officials are not on solving problems in ways that create the best path forward for all Americans to achieve prosperity, but on maintaining and consolidating power.”
New Kansas Governor Jeff Colyer proudly cites the low Kansas unemployment rate, but there is more to the story.
In his recent speech to the legislature, Kansas Governor Jeff Colyer said, “There’s some good news to report here. According to the most recent data, the Kansas unemployment rate is 3.4%. That’s one of the lowest in the country, and the lowest our state has seen in more than seventeen years!”
Data from the Bureau of Labor Statistics, part of the United States Department of Labor shows changes to Kansas employment. The recent peak of the unemployment rate in Kansas was in 2009, when the rate reached 7.3 percent, averaging 6.9 percent for the entire year. In December 2017 it was 3.4 percent, just as the governor said. But since the unemployment rate is a ratio of two numbers, it can change for several reasons, and not all reasons are good news.
As shown in the nearby table, the unemployment rate since 2009 is down, and down a lot. Similarly, the number of unemployed persons is down, too, by nearly half. Good news.
But the number of employed persons has barely changed since 2009, rising by just one percent. At the same time, the labor force has fallen by 2.4 percent. The contracting labor force is the largest factor in the declining Kansas unemployment rate, and that is not good news.
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December 1, 2017
Tax receipts show promise of improved economy
TOPEKA–The state has collected $258.75 million over last fiscal year at this time, totaling over 11 percent growth in collections according to data from the latest revenue report released Friday.
So far this fiscal year that started in July, the state has collected $1.09 billion in total individual income tax, which amounts to $176.74 million over last year. In the same time, sales tax collections total $985.71 million, putting it $41.64 million over last year or over 4 percent growth. Corporate income tax continues the multi month trend of outperforming the previous year, hitting a value of $30.51 million over last year’s cumulative collections.
“Sales tax receipts have reached what appears to be stable growth above last year’s collections,” Revenue Secretary Sam Williams said. “Individual income tax collections are also above last year by a wide margin, but it’s difficult to distinguish the impact of the recent tax increase versus economic growth, and we won’t be able to discern that until April.
November tax receipts totaled $463.50 million, which is $62.23 million over November last year. Individual income tax collections totaled $207.62 million for the month, while sales tax revenue came in at $192.63 million. Corporate income tax totaled $379,518.
The use of PEAK, a Kansas economic development incentive program, varies widely among counties.
An economic development incentive program in Kansas is PEAK, or Promoting Employment Across Kansas. This program allows companies to retain 95 percent of the payroll withholding tax of employees. 1
Data is available for fiscal years 2010 through 2015. For this period, we can see that the application or use of PEAK varies widely among counties. Here is data for the two largest counties in Kansas:
Johnson County: 135 projects, 17,643 new or retained jobs, $36,085,527 cumulative annual benefits.
Sedgwick County: 8 projects, 1,113 new or retained jobs, $1,858,516 cumulative annual benefits.
According to the U.S. Census Bureau American Fact Finder, the 2016 population of Sedgwick County was 511,995. Johnson County population was 584,451. So Johnson County has 1.14 times the population of Sedgwick County, but it receives some 16 to 19 times the PEAK benefits as Sedgwick County.
Of note, this data is available on Kanview, the state’s data download portal. The data is from a spreadsheet compiled in August 2015. It contains data through fiscal year 2015, which ended on June 30, 2015. Upon my inquiry, it appears no similar data compilations were created in August 2016 or August 2017. I have asked for the data and it is taking some time to prepare it, which leads us to wonder how diligently the state collects data regarding economic development programs.
You can access an interactive visualization of PEAK data here.
PEAK, a Kansas economic development incentive program, redirects employee income taxes back to the employing company.
An economic development incentive program in Kansas is PEAK, or Promoting Employment Across Kansas. This program allows companies to retain 95 percent of the payroll withholding tax of employees.
Flow of tax dollars under normal circumstances, and under PEAK.PEAK incentive payments can be a substantial sum. Tables available at the Kansas Department of Revenue indicate that for a single person with no exemptions who earns $40,000 annually, the withholding would be $27 per week (for weekly payroll), or $1,404 annually. For a married person with two children earning the same salary, withholding would be $676 annually. Under PEAK, the company retains 95 percent of these values. (These illustrations are based on 2016 tax rates.)
There are requirements regarding the minimum number of jobs to be created or retained. Also, companies must pay wages greater than or equal to the median county wage. 1
Then, the Secretary of Commerce has “discretion to approve applications of qualified companies and determine the benefit period.”
Legislators and public officials like programs like PEAK partly because they can promote these programs as self-financing. That is, the state isn’t subsidizing a company. Instead, the company is paying its own way with its own taxes (actually, its employees’ taxes). PEAK supporters say the state is not sending money to the company. Instead, the company is just holding on to 95 percent of its employees’ withholding taxes instead of sending the funds to the state.
Schemes like PEAK call into question one of the fundamental principles of taxation: That tax funds be used to fund the operations of government, not to enrich one particular person or company. But continually, states and local government use programs like PEAK — and others like tax increment financing (TIF) districts, Community Improvement Districts (CIDs), Industrial Revenue Bonds, and others — that turn over a public function to private interests.
Illustration of a shortfall under PEAKHere’s another consideration regarding the PEAK program. The amount of money withheld from a worker’s paycheck is not the same as the amount of tax the worker actually owes the state. Withholding is only an approximation, and one that is biased in favor of the state. Many Kansas workers receive an income tax refund from the state. This is in recognition that the sum of the withholding taxes paid by a worker is larger than the actual tax liability. Therefore, the state is returning money that the state was not entitled to.
Now, what about workers who are employed at a company that is in the PEAK program and who receive a state income tax refund? Their withholding taxes — 95 percent, anyway — have already been given back to their employer.
So: What is the source of the money used to pay these refunds? How much money is paid in refunds to employees working at PEAK-participating companies?
We should note that the funds don’t come from the PEAK company’s employees, as the employees receive credit for all their withholding taxes, even though 95 percent never contributed to the state treasury.
Inquiry to the Department of Revenue revealed that there are no statistics on actual income tax liability of PEAK employees vs. the amount of withholding tax credited to that employee that was retained or refunded to the PEAK employer. The Department of Commerce referred inquiries to the Department of Revenue.
If we wanted to know how much money was paid in refunds to PEAK-company employees, I believe we would need to examine the account of each affected employee. I’m sure it’s not possible to come up with an answer by making assumptions, because the circumstances of each taxpayer vary widely.
Whatever the amount, it represents state tax revenue being used to fund an economic development incentive program that is pitched as being self-funded.
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Notes
“PEAK requires the qualified company to commit to creating five new jobs in non-metropolitan counties or ten (10) new jobs in the metropolitan counties of Shawnee, Douglas, Wyandotte, Johnson, Leavenworth and Sedgwick over a two-year period. The qualified company must also pay wages to the PEAK jobs/employees, that when aggregated, meet or exceed the county median wage or North American Industry Classification System (NAICS) average wage for their industry.” Kansas Department of Commerce. Promoting Employment Across Kansas (PEAK) Program. Available at http://kansascommerce.gov/141/Promoting-Employment-Across-Kansas-Progr. ↩
Kansas Senate President Susan Wagle addressed members and guests of the Wichita Pachyderm Club on November 10, 2017. School finance and the Kansas Supreme Court was a prominent topic.
Kansas Senate President