Kansas taxes, the debate

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Seal of the State of KansasKansans are not being helped by their stable of newspaper editorial boards. We’ve seen this before (Kansas editorial writers aren’t helping), and the conclusion of the legislative session provides more examples.

An example is the editorial Why are these Kansas politicians celebrating? in the Kansas City Star. A quote is this: “Lawmakers had to go into overtime in the 2013 session trying to figure out how to climb out of the ditch they created last year when they gave away $3.7 billion in income tax cuts without figuring out how to offset them.”

This quotation serves to illustrate much of what’s wrong with Kansas newspaper editorial writing, and also with a large group of Kansas politicians.

A first problem is ideological. When you read words like they gave away income tax cuts, you know the writer believes that a certain portion of your income belongs not to you, but to the state. If the portion going to the state is reduced, the state is giving away something. What the state is giving away must be offset or paid for in some way, according to this ideology.

Private sector job growth, Kansas and selected states

A second problem is the presumption that the Kansas economy has been humming along smoothly, and that efforts to reduce taxes (and therefore government spending) are a change for the worse — the “ditch” that the Star referred to. But I would ask anyone who believes Kansas has been doing well to acquaint themselves with the facts about our economy. An example is the nearby chart (click for larger version) of private sector job growth in Kansas and surrounding states for the past two decades. For most of this period Kansas government has been in the hands of “moderates,” both Republican and Democratic. How would you say cumulative job growth in Kansas compares to our peer states?

Anyone who defends the recent decades of moderation must confront this and similar statistics. If private sector job growth doesn’t convince you, how about personal income growth? An interactive visualization of data from the U.S. Bureau of Economic Analysis is here. The pre-configured view shows income in Kansas growing slower than our peer states, the Plains states, and the United States.

If people are not aware of the dismal performance of the Kansas economy, ask them why they don’t know the facts. If they know the facts, ask them why they defend the status quo. Ask them why they want to deny Kansans the level of economic opportunity that people in, say, Oklahoma have.

But, editorial writers would rather complain about what the legislature did to “pay for Brownback’s perilous tax experiment.” (H. Edward Flentje : Is Kansas on the right track? Wichita Eagle)

Echoing the sentiment of the left-wing editorial boards, Flentje, a professor at Wichita State University with much practical experience in state and local government, also wrote that the legislature had to “clean up the mess” created by last year’s “financial debacle,” that being the income tax cuts. He also used the “pay for” line of thinking — several times for good measure — as well as tossing in “perilous tax experiment.” (I think I mentioned that earlier, but it bears repeating.)

This left-wing ideology is the prevailing breeze that propels Kansas newspaper editorial boards, along with others like Flentje who ought to know better. For those who disagree, I ask them to defend the record of the Kansas economy under the leadership of coalition of moderate Republicans and Democrats. (For more background, see Kansas traditional Republicans: The record.)

While it’s good that Kansas reduced income tax rates, it’s bad that on the balance, more tax revenue will flow to Topeka. In particular, raising the sales tax (or preventing its reduction, whichever you prefer) was a bad move, and particularly the sales tax on food. Writing in the Wichita Eagle, Kansas Senate President Susan Wagle wrote that Kansas has moved towards more of a “FairTax” model Susan Wagle : Kansas is on the path to prosperity. That’s true in some respects. But an important part of the FairTax model is the “prebate.” This is a monthly advance refund of sales tax on necessities up to the poverty level. Its purpose is to mitigate the regressive nature of consumption, or sales, taxes.

Kansas, however, taxes the sale of food. Furthermore, on July 1 the sales tax on food will be higher than it would be under current law. The new tax law restores a portion of the food sales tax credit program, but this is a clunky measure that will benefit very few people.

The biggest failure of the Kansas legislature this year was that little or nothing was done to reduce spending. In 2011 three bills passed the House that would take a long-term approach to reducing the cost of Kansas government. None of these bills were considered this year. (See In Kansas, there are ways to reduce the cost of government.)

Kansas Policy Institute has also prepared ways that Kansas can save money. See Kansas can cut spending, if we want.

Cutting government spending is important if we want to grow Kansas. See States that Spend Less, Tax Less — and Grow More and To boost jobs and prosperity, Kansas should cut spending.

Comments

2 responses to “Kansas taxes, the debate”

  1. Cybex

    Bob, you made some excellent points. Flentje has a huge ego. He believes that his analysis of issues are always the most sensible. Flentje enjoys attention and if Gov. Brownback called him tomorrow and asked him for his input or to join the administration, he would jump at the opportunity.

  2. Joe Aistrup

    Hello Bob,
    I always enjoy your commentary.

    From the outset, let me state that I think we all attach way more significance to state tax policy than we really should.

    Interestingly enough, you begin your negative critique with the Graves administration. Remember Bob, the first couple of years of the Graves administration were dominated by the first group of social conservatives to come to power led by Tim Shallenberger and Phill Kline in the Kansas State House. They ran the place, passing tax cuts and other policies far more conservative than those advocated by Bill Graves. It took Graves a couple of years to figure out that there was no placating this group. No matter how much he moved to the right, and he did, the social conservatives, often led by then GOP party chair David Miller, were never satisfied. Graves was a RINO, and these elephants were not going to let him forget it!

    If you go to the Kansas Secretary of Revenue’s web site, the secretary has tracked the cumulative stimulus that has been added and subtracted to the Kansas economy due to the changes in Kansas tax code since 1995. On an annual basis, the amount of money is substantial. In FY 2012, before Sam Brownback, it was $1.2 billion in taxes not collected compared to what we’ve would have collected if the 1995 tax code was still in place. If one converts this to real dollars (1991-92), it’s about $600 million annually. This ain’t chump change. Between 1995 and 2012, the total amount of hard cash that the state did not collect was over $14 billion. More than enough to have addressed the KPERS issue and to not have issued any debt to pay for the two Kansas highway programs.

    The point is fairly straight forward. We’ve been cutting state taxes for a long time. Where are the results from the taxes that we’ve already cut? Your analysis, ironically enough, seems to be saying that none of this has mattered thus far for improving the state’s economy. And that is why I say, it’s not just about cutting taxes.

    If one would subtract from Texas all of the coastal counties and the scenic hill country counties and create a new state, call it Xas, I think we’d find a state very similar to Kansas. Growth areas around Dallas (similar to JOCO), but many rural counties with declining and aging populations; largely dependent on ag and natural resource extraction. I haven’t done a formal analysis, but, $10 says I’m right.

    Bob, I know, your answer is that we just haven’t cut taxes enough. That we need to cut taxes more and sprinkle in a more favorable business regulation scheme (we’ve done this too since 1995). But, let me ask you the same question that you have essentially asked. If it hasn’t produced the results we’ve wanted thus far, then why would more of the same all of sudden work?

    We all need to ask if this is the type of state that we want to live in?

    I personally don’t think its good public policy to always ask the poorest among us to bear the brunt of many of these policies through an increasingly regressive tax structure and reduced public benefits.

    If you would allow me, I would be happy to post on your site a couple of graphs of the Department of Revenue’s estimates.

    Thanks,
    Joe Aistrup

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