While Kansas ranks in the middle of the states in total tax burden, the state’s take is getting larger, compared to other states.
This finding is important as Kansas and its largest city are increasingly using favorable tax treatment to centrally plan and manage economic development. When the state allows a company’s employee withholding taxes to be used for its own exclusive benefit — as outgoing Governor Mark Parkinson recently granted to Wichita’s Bombardier Learjet — it increases the cost of government for everyone else.
The Kansas PEAK bill that the legislature passed this year allows this practice to be extended to more and smaller companies.
In cities like Wichita, the city council routinely grants tax abatements and other favorable tax treatment to companies that it believes are deserving.
The result of all this intervention is that the tax base is narrowed, and the high cost of government is born by a smaller group of taxpayers.
To top it off, the result of this centralized planning and management of economic development is: pretty much zero.
In 2008 the Kansas Legislative Division of Post Audit looked at the use of economic development incentives in Kansas, examining some $1.3 billion in spending over five years. In examining the literature, the auditors found: “Most studies of traditional economic development incentives suggest these incentives don’t have a significant impact on economic growth.”
It also found: “The majority of research concludes there is a lack of demonstrated impact from the typical types of economic development assistance, and that incentives aren’t cost-effective.” The audit can be read at Economic Development: Determining the Amounts the State Has Spent on Economic Development Programs and the Economic Impacts on Kansas Counties. The document has an executive summary.
The concentrating of the cost of government on a shrinking tax base spells trouble. One solution that I proposed to the Wichita city council is that when tax incentives are given, the city reduce its spending by the cost of the incentive: “The harmful effect of this tax abatement is this: When someone escapes paying taxes, someone else has to make up the difference. … As long as this body is willing to grant tax abatements and other special tax favors, I propose this simple pledge: that when the City of Wichita allows a company to escape paying taxes, that it reduce city spending by the same amount. By following this simple rule, the City can be reminded of the cost of granting special tax favors, and the rest of us won’t have to pay for them.”
Kansas tax burdens getting heavier, studies show
By Gene Meyer, Kansas Reporter
(KansasReporter) TOPEKA, Kan. – Kansans’ state and local sales taxes are now 12th highest in the nation, though their total tax burden is nearer the middle of the pack in 24th place, say two new reports released Thursday.
But, as investment companies always remind us when pitching their new products, your actual results may vary.
“Even within a state, it can be difficult to know what the average tax rate is when there can be hundreds of different jurisdictions charging different rates,” said Kail Padgitt, an economist at the Washington, D.C. based Tax Foundation, which calculates Kansas’ 7.95 percent average state and local sales taxes are 12th highest in the nation.
Within that average, though, actual local rates in some 790 different county, local and special tax districts across Kansas vary from 6.3 percent where only the basic state rate is charged to more than 10.5 percent in a few special taxing districts.
The ranking, one of the first nationally to include Kansas’ recently raised 6.3 percent statewide sales tax that became effective July 1, puts the 12th ranked Sunflower state higher than its neighbors in 15th ranked Missouri, 25th ranked Colorado and 29th ranked Nebraska. Only Oklahoma, where an average 8.33 percent sales tax burden clocks in at seventh highest in the nation, comes in higher.
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