Voice For Liberty

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  • Economic competition isn’t like sports

    A while back USA Today carried an editorial by an Alexandria, Virginia school teacher that contains an unfortunate misunderstanding of the term competition as it applies to economics and education.

    In the article, Patrick Welsh makes one of the most inept analogies that I’ve ever seen. Here’s the heart of it:

    Being an English teacher, I prepared a little analogy to ask him about the rationale for labeling schools on the basis of Adequate Yearly Progress. Duncan’s biographies often mention that he was co-captain of the Harvard basketball team during the 1986-87 season, his senior year. I reminded him that that team won only seven games and lost 17. Such a record, I told Duncan, was the mark of a “persistently low achieving” team, which made no “annual yearly progress.” I meant the analogy to be humorous, but teachers sitting near Duncan said he didn’t seem to take it that way.

    I went on to say that I assumed Duncan and his teammates did the best they could with the talent they had, and that no matter what improvements they tried to make, it would be foolish to think their team could ever reach the highest benchmark in college basketball — the Final Four.

    The ineptness is this: A basketball game is a competition that is designed to produce a winner and a loser (or maybe a tie in some sports). By definition — except for ties — there can’t be two winners. Someone has to lose.

    But learning things in school is not a competition of the same type. When one student learns something (wins, in other words), it doesn’t mean that someone else doesn’t get to learn (loses). In fact, if all students master the lesson, then everyone wins, and there are no losers.

    But maybe Welsh isn’t writing about that type of competition. He might be speaking of market competition. An example of this might be schools competing with other schools for students.

    This type of competition doesn’t necessarily produce a winner and a loser. Explaining competition in the The Concise Encyclopedia of Economics, Wolfgang Kasper explains one of the benefits of market competition:

    Discovery. Human well-being can always be improved by new knowledge. Competitive rivalry among suppliers and buyers is a powerful incentive to search for knowledge. Self-interest motivates ceaseless, widespread, and often costly efforts to make the best use of one’s property and skills. Central planning by government and government provision are sometimes advocated as a better means of discovering new products and processes. However, experience has shown that central committees are not sufficiently motivated and simply cannot marshal all the complex, often petty, and widely dispersed knowledge needed for broad-based progress.

    Competition inspires people to improve, while central planning is the opposite.

    Applying this locally to Kansas: As Kansas has a very weak charter school law that requires charter school approval by local school boards, there are very few charter schools. Combined with the lack of school choice implemented through vouchers or tax credits in Kansas, local school districts face very little competition.

    This lack of market competition means that Kansas schools do not benefit from the dynamic discovery process that market competition fosters. The beneficiaries of this are those who favor the status quo in the Kansas education establishment and bureaucracy, including the Kansas National Education Association (KNEA, the teachers union) and the Kansas Association of School Boards (KASB). The losers are Kansas schoolchildren.

  • President Obama’s health care speech

    Speaking to a joint session of Congress and the American people, President Barack Obama laid out his latest vision for health care reform.

    The President said that he doesn’t want a radical shift. Instead, he wants to build on what works, and fix what doesn’t. He criticized those who use scare tactics that split people into unyielding idealogical camps.

    The time for bickering is over, he said. Now is the season for action.

    President Obama outlined three goals. The first is security and stability for those who have insurance, the second is to provide insurance for those who don’t have it, and the third is to slow the growth of costs.

    First, for those with insurance, including Medicare, Medicaid, and VA, nothing in this plan will require a change of coverage or doctors. Nothing, he repeated, requires you to change what you have.

    Also, insurance companies can’t deny coverage for pre-existing conditions, or drop coverage when people get sick. There will be no caps on coverage for a year or lifetime. There will be a limit on out-of-pocket expenses. At no extra charge, companies must cover exams like mammograms and colonoscopies.

    Second, for those without health insurance, he proposes to offer quality, affordable, choices. “You’ll be able to get coverage.” An insurance exchange, established and run by government, will let consumers shop for insurance at competitive rates. Insurance companies get to compete for millions of customers, which will cut prices.

    Tax credits will provide subsidy for those who still can’t afford insurance premiums. This will take effect in four years. Meantime, the government will immediately offer low-cost coverage.

    What about those who still don’t want coverage? Some companies may refuse to give coverage to their workers. This costs the rest of us money. So, individuals will be required to carry basic coverage. Also, businesses will be required to provide health care coverage, or to help their employees pay for it. Most small companies will be exempt, but large companies that can afford this will have to pay.

    The President said that misinformation has been spread, and this has made Americans nervous. He debunked the bogus claims spread by those want to kill reform, such as panels with power to kill off senior citizens. This charge is a lie, plain and simple, he said, to a standing ovation from Democrats.

    He said this plan will not insure illegal immigrants. No federal dollars will be used to fund abortions, and federal conscience laws will remain in place.

    What about those who criticize what they term a government takeover of health care? The President said his guiding principle is that consumers do better when there is choice and competition. He doesn’t want to put insurance companies out of business, he just wants to hold them accountable. A not-for-profit public option in the insurance exchange would provide this accountability. No one would be forced to choose it, as it would be available only for those who don’t have insurance.

    This public insurance option would have to be self-sufficient, but by avoiding costs, it could provide a good deal for consumers.

    The President insisted that this won’t result in a government takeover of health care, and that he won’t back down from providing a choice to those who can’t find insurance.

    He added that no bureaucrat, government or otherwise, will get between you and the care you need.

    Finally, he asked how to pay for this plan. He said that he will not sign a plan that adds to the deficit, now or in the future. To show he is serious, he said that spending cuts will be forced if savings don’t materialize.

    The source of payment for this plan is savings.

    The President gave a slight nod to tort reform, and directed Secretary of Health and Human Services Kathleen Sebelius to look into demonstration projects on this matter.

    Analysis

    The biggest criticism of the President’s plan is that coverage can be increased — in terms of the number of insured, the generosity of benefits, and ability to get insurance — without increasing costs. This goal of rooting out waste and inefficiency is elusive. Politicians at all levels claim to want to get rid of it, but little progress is ever made.

    The President refuses to recognize that employer-provided health insurance is a problem. He wants to create a co-op so that there will be a vigorous market for insurance. This market could be created very quickly, without government oversight, by simply ending the present system of employer-provided insurance.

    The President’s claim that illegal immigrants will not be covered can’t be believed. Illegals are not supposed to be able to work in America, and we don’t have the national will to vigorously enforce that law.

    His claim that he doesn’t want a government takeover of health care isn’t believable, either. Aspects of the plan such as the public option are the first step to the end of a private market in health insurance.

    The idea that there will be a mandate for everyone to be insured is a characteristic of the Swiss system, and it seems to work for them.

    I believe the President is mistaken in his belief that tort reform would provide only modest savings, saying that “defensive medicine may be contributing to unnecessary costs.” Directing Secretary of Health and Human Services Kathleen Sebelius to look into seeing if malpractice reform could help is not likely to produce results. She is, after all, the former lobbyist for the Kansas Trial Lawyers Association.

    Related on this site: Fact-checking the president on health insurance and In health care debate, can we trust the president?

    The complete text of the President’s speech is at Obama’s Health Care Speech to Congress.

  • What Boeing received from Wichita was better than cash

    What Boeing received from Wichita was better than cash

    Supporters of the proposed Wichita sales tax contend that the millions in incentives Boeing received were not cash. That’s true — they were more valuable than cash.

    At a forum on the proposed Wichita sales tax on September 9, 2014, “Yes Wichita” co-chair Jon Rolph told the audience “The Boeing incentive thing? The city never gave Boeing incentives. They didn’t take our incentive money and run.” As explained at Fact-checking Yes Wichita: Boeing incentives, the claim that the “city never gave Boeing incentives” must be astonishing news to the Wichita city officials who dished out over $600 million in subsidies and incentives to the company.

    "Yes Wichita" Facebook page.
    “Yes Wichita” Facebook page.
    In response, “Yes Wichita” posted this on its Facebook page: “Those who were at the event understand that the conversation was about cash incentives not about IRBs. Boeing never received cash incentives from the City.”

    First, it’s interesting that the person commenting on behalf of “Yes Wichita” was able to read the minds of the audience members. That’s a neat trick. But let’s talk about something more important — the confusion that often surrounds economic development incentives.

    “Yes Wichita” contends that although Boeing received an estimated $657,992,250 in property tax abatements over several decades, this doesn’t count as “cash incentives” because it wasn’t given to Boeing in the form of cash.

    “Yes Wichita” is correct, in a way. As a result of the City of Wichita’s issuance of industrial revenue bonds, Boeing didn’t receive cash from the city. Instead, the benefits the city initiated on Boeing’s behalf are more valuable to the company than receiving an equivalent amount of cash.

    Internal Revenue Service IRS logoAccording to IRS guidelines, “tax incentives, whether in the form of an abatement, credit, deduction, rate reduction or exemption, simply reduce the tax imposed by state or local governments.” The IRS says these incentives do not count as income. Therefore, Boeing did not pay income taxes on these benefits, as it would have if the city gave the company cash.

    The claim by the “Yes Wichita” group — that tax abatements don’t count as cash incentives — is characteristic of the way economic development incentives are justified. Instead of passing out cash, it’s more common that government uses abatements, credits, tax increment financing, investment in training and infrastructure, or exemptions. Many of these programs are confusing to citizens, and perhaps also to the elected officials who approve them. This allows government to shroud the economic realities of the transaction, and “Yes Wichita” is contributing to this confusion.

  • Kansas governor releases economic development plan

    Yesterday Kansas Governor Sam Brownback released his plan for economic growth and development in Kansas. Drawing on free market principles and relying less on government intervention, the plan calls for a departure from present practices, especially the heavy-handed methods cities like Wichita use.

    Brownback’s plan would transform Kansas’ approach to economic development. Currently the approach of the state and most of its cities and counties is to go after the “big deal.” This typically lures a large employer to Kansas through the use of various incentives. Or, as we have seen recently with the Hawker Beechcraft deal, incentives may be used to keep a company from leaving Kansas, even if that company is downsizing.

    This last deal is especially troubling for the state’s future. Wichita State University professor H. Edward Flentje recently sounded a note of caution on deals like Hawker Beechcraft: “The result diverts millions in limited taxpayer funds, primarily state income-tax revenues, from state coffers to a company’s benefit, simply to have an existing business stay put.” Flentje wrote that there are more than 500 Kansas businesses now eligible for state assistance just like Hawker.

    It is breaking this cycle of dependency on the “deal” that the governor’s plan calls for. Instead of the state targeting industries or specific companies, Kansas should seek to establish a strategy that is simple, fair, and of high capacity. I believe that for this strategy to work, Kansas cities and counties will need to follow the plan, too.

    Productivity and growth, not just jobs

    Right away the governor’s plan calls for prosperity through productivity: “A sound economic development process enhances prosperity through enhanced business-sector productivity.” This is in contrast to the economic development efforts of most governments, including that of the City of Wichita. There, the focus is on jobs, with capital investment a lesser factor.

    The plan identifies two fundamental roles for government to play. First, the state should create an environment that “motivates as much risk-taking and competition as possible in the context of a ‘level playing field.’” Second, it must do this effectively and efficiently, leaving as many resources in the private sector as possible.

    Key concepts in the plan are risk taking, economic competition, business experimentation, and trial and error. These activities are important, the plan says, because they will lead to increased economic productivity, which is what produces prosperity for Kansans. This is what the economic development policies of Kansas need to promote, says the plan: “The more that Kansas’ economic development environment motivates each entrepreneur and business to engage in the trial and error process, the more the Kansas economy will generate economic opportunity for Kansas families.”

    But the state’s policies don’t promote this environment: “Yet Kansas economic development policy tends to work as if only a small sub-set of entrepreneurs or businesses matter.” Current policies attempt to find the right technologies and companies for the state to invest economic development resources in. The criteria for determining winners are often job count and wage levels. Winners are rewarded at the expense of non-winners.

    Instead of this approach — which is common in most states and cities — the plan recommends a different policy: “Dedicate human and financial resources to promoting maximum experimentation through volume and diversity.” Also: “Establish stable policies that treat all investments and businesses equally, thereby liberating resources from the costly and economically dubious task of targeting.”

    The plan is critical of selective efforts and in favor of broad-based strategy, especially in taxation: “A more uniform business tax policy that treats all businesses equally rather than the current set of rules and laws that give great benefit to a few (through heavily bureaucratic programs) and zero benefit to many.”

    The plan emphasizes promoting as much diversity as possible. The current strategy of attracting large employers is not wise: “In fact, research indicates that economic development strategies based on the recruitment of large employers tends to have negative effects over the long run. One of the best predictors of future economic growth for metropolitan areas is the average employment size of business establishments: larger average sizes are typically associated with slower future growth.”

    Measures of success of economic development efforts include jobs, although the plan cautions that “job creation is a result that derives from profitable business births and expansions.” Other factors are income growth, population density and migration, productivity growth, capital investment, and gross business starts and expansions.

    The plan creates a council of economic advisers and coordinate the actions of seven different agencies that work in the field of economic development. It also calls for funding of certain university research programs.

    The plan is not totally free-market in its approach. It retains PEAK, which lets companies that meet criteria retain their employees’ withholding taxes. But are we certain we can identify which companies are worthy of this subsidy? There will also be a fund that can be used to “close a deal on a prime economic growth opportunity.” Brownback’s “rural opportunity zones” are also included, which offer income tax breaks and student loan paydowns for people moving into counties that have experienced large population decline.

    Cities like Wichita will need to change, adapt

    The governor’s plan calls for economic development strategies very different from what most cities and counties pursue. As an example, at the most recent meeting of the Wichita City Council, the council approved forgivable loan agreements for two companies that are adding jobs. These loans amount to grants of money, providing that the companies meet specified employment goals. The loans were not the only form of subsidy. One company is slated to receive forgiveness from paying property tax for up to ten years, and both received grants and tax credits from the state under existing economic development programs.

    At the meeting, Mayor Carl Brewer offered a defense of the city’s economic development policy (click here for video), saying that if Wichita doesn’t offer targeted incentives, other cities will. “If we don’t stay in the game and do whatever is necessary to be able to protect our jobs, protect our citizens, then we’re going to lose out on this entire thing. Times are changing. 20 years ago individuals weren’t even thinking about providing incentives to various different corporations. And now it appears that every place that we go, we seeing that everyone’s doing it. … That’s a reality of things. The dynamics and the field that we all have to play on is continuing to change.” He urged his critics to look at the larger picture, rather than just the action the council is taking today.

    Council member Janet Miller also defended the city’s policy, saying that companies either qualify for incentives or they don’t, based on established criteria. She cited Wichita State University figures that support the incentives as providing an economic return to the city.

    If cities continue to offer targeted incentives that are at odds with the governor’s plan, what will be the outcome? It doesn’t seem as though the two approaches are compatible. Many of the programs that cities use to offer targeted incentives — industrial revenue bonds (IRB), tax increment financing (TIF), community improvement districts (CID), and others — are creations of the legislature. It and the governor have the power to control their use — if there is political will to do so.

  • Pickens: It’s all about me, and MSNBC doesn’t notice

    Appearing on the MSNBC morning program Morning Joe, energy investor T. Boone Pickens let us know that despite his no-nonsense business-like approach to supporting what he believes to be in America’s best interests, it’s really all about him and what profits him. But program hosts Joe Scarborough and Mika Brzezinski didn’t catch that.

    Pickens appeared on the program to gain support for legislation he is seeking to pass through Congress. His bill is H.R. 1380: New Alternative Transportation to Give Americans Solutions Act of 2011, commonly referred to as the NAT GAS act. The bill would provide payments in the form of tax credits to encourage the use of natural gas as a transportation fuel.

    Host Scarborough said “It makes so much sense.” At the end of the segment, Brzezinski pleaded “Do us a favor. Please don’t give up.”

    Never once did either host bring up the facts that Daniel Indiviglio cites in his coverage for The Atlantic. Mike Barnicle was on the show but wasn’t helpful in this regard, either.

    The problem is this, according to Indiviglio: “At no point during the nine-minute interview on MSNBC did Pickens mention that he stands to make a significant financial gain if the bill he’s promoting succeeds and natural gas usage expands.”

    Pickens knows how to present his case in the best possible light, picking and choosing which fact to present, and which to stretch or ignore. He criticizes Koch Industries for its opposition to the bill. Koch has explained its opposition to subsidies for natural gas as a transportation fuel, just as it opposes all subsidies. In a statement on its Viewpoint website, Dr. Richard Fink, Executive Vice President of Koch Industries, explained the harm of government intervention, writing “Koch has consistently opposed subsidies that distort markets. We maintain that the marketplace, while not perfect, is the best mechanism for allocating resources to consumers. People deciding what fuels to purchase, instead of the government, is best for consumers and our country. Likewise, if natural gas vehicles are truly advantageous and economically efficient, then consumers will demand that they be developed without political mandates that exhaust more taxpayer dollars.”

    Pickens went on to criticize Koch for accepting subsides for ethanol production. Koch Industries, as a refiner of oil, blends ethanol with gasoline it produces in order to meet federal mandates on ethanol usage. Even though Koch opposes subsidies for ethanol, Koch accepts the subsidies. A company newsletter explains: “Once a law is enacted, we are not going to place our company and our employees at a competitive disadvantage by not participating in programs that are available to our competitors.”

    So the criticism of Koch by Pickens is unfounded. Now I wouldn’t really expect the program hosts to be aware of this, but they must have been aware that Pickens will profit, probably handsomely, if the NAT GAS act passes.

    In his coverage Indiviglio writes: “Essentially, Pickens criticizes Koch for preferring government subsidies to benefit Koch Industries. But is Pickens’ motivation for natural gas subsidies really any different?”

    It is different in an important way. Koch, as explained above, participates in a subsidy program that is available to all similarly situated companies. At the same time the company calls for its end for reasons of principle that the company and its owners have supported for many years. Pickens, on the other hand, wants to create a new program with new subsidies and new expansion of government intervention into free markets.

    Besides this, when you listen to Pickens, you realize it’s all about him and what he wants. “We have 250 million vehicles in America. So I’m going to take eight million heavy duty trucks — that’s it — and that will do it.” And then “I want a billion dollars a year for five years.”

    Large decisions about our country’s energy future shouldn’t be made by one person, or even by Congress and the president. We need to let the dynamic discovery process of markets harness and organize the tremendous diverse power of the human mind and reveal to us the best energy solutions.

  • Wichita Eagle Voter Guide Responses

    I am running for Republican precinct committeeman. The Wichita Eagle sent me a request to answer some questions to appear in a voter’s guide. These are the questions asked (to the best of my recollection; I didn’t record the text of the questions and now I can no longer log in to the system to see them) and my responses.

    1. What do you believe should be in the party’s platform?

    I believe the Republican party has strayed from its commitment to individual liberty, limited government, and free markets. The party should commit itself to nurturing economic prosperity by reducing government control of the economy. We should allow people to decide how to best spend and invest their time, money, and talents. By reducing the intrusiveness of government, we can create a laboratory of economic freedom in Wichita that would restore Wichita’s tradition of entrepreneurship.

    2. What is your position on social issues?

    Government should relinquish its monopoly on the financing of education by allowing school choice through tax credits. Parents would then have more control over the education of their children. Government’s ability to take private property through eminent domain should be severely restricted. All elected officials should be subject to term limits. Governments should respond to citizen requests for records in a reasonable way.

    3. What is your position on fiscal issues?

    Voter approval should be required for all tax increases. Governments should pledge to limit their increases in spending to the inflation rate plus population growth. The use of tax increment financing (TIF) districts and tax abatements should be eliminated. Giveaways such as the interest-free loan to the Old Town Warren Theater must be stopped. We should be careful that trading a higher sales tax rate for property tax relief doesn’t lead to more taxes overall.

  • Kansas and Wichita quick takes: Thursday March 23, 2011

    Owens still blocks judicial selection reform. Kansas Reporter writes that one man, Senator Tim Owens, an attorney and Republican from Overland Park, is still blocking judicial selection reform. But a move by the House gives Senate President Stephen Morris a chance to let Senators vote to concur with the reform measure passed by the House. Or, Morris could refer the measure to Owens’ Judiciary committee, where it will die. See New way of picking appeals judges gets second shot.

    Greed is killing Detroit. Greed is often portrayed as a negative quality of the rich. But Investor’s Business Daily tells what happens when union greed — yes, everyone can be greedy — runs wild in a city: “Census data released Tuesday show Detroit’s population has plunged 25% since 2000 to just 713,777 souls — the same as 100 years ago, before the auto industry’s heyday. As recently as the 1970s, Detroit had 1.8 million people. What’s happening is no secret: Detroiters are fleeing an economic disaster, the irreversible decline of the Big Three automakers. … Sure, a lot of the blame goes to a generation of bad management. But the main reason for Detroit’s decline is the greed of the industry’s main union, the UAW, which priced the Big Three out of the market.” … Having killed the goose with the golden egg once, union leadership seeks seek to do it again: “Even as Detroit collapses, new UAW chief Bob King promises to ‘pound’ the transplants into submission and force them to drink his union’s poison, too. Given what we know, every town that is now home to a foreign automaker should be very afraid. If King has his way, they’ll soon suffer Detroit’s fate.”

    Liberal Bias at NPR? Stephen Inskeep, co-host of the National Public Radio program Morning Edition, defends his network against charges of liberal bias. In The Wall Street Journal Inskeep writes that NPR draws an audience with diverse political views, including conservatives: “Millions of conservatives choose NPR, even with powerful conservative alternatives on the radio.” Which, I would say, is all the more reason why the network should stand on its own without government funding. … Inskeep also writes about the recent undercover video by James O’Keefe, who NPR claims, through a spokesperson, to have “inappropriately edited the videos with an intent to discredit” NPR. If true, shame on O’Keefe. The NPR spokesperson concedes that then-NPR chief fundraiser Ron Schiller made some “egregious statements.”

    Electric cars questioned. Margo Thorning writing in The Wall Street Journal, explains that the new crop of all-electric or near-all-electric cars not worthy of government support. She notes the Consumer Report opinion of the Chevrolet Volt: “isn’t particularly efficient as an electric vehicle and it’s not particularly good as a gas vehicle either in terms of fuel economy.” … Batteries remain a problem: “A battery for a small vehicle like the Nissan Leaf can cost about $20,000 and still only put out a range of 80 miles on a good day (range is affected by hot and cold weather) before requiring a recharge that takes eight to 10 hours. Even then, those batteries may only last six to eight years, leaving consumers with a vehicle that has little resale value. Home installation of a recharging unit costs between $900 and $2,100.” … Thorning notes that half of the electricity that powers America is generated by coal, so all-electric cars are still not free of greenhouse gas emissions. Also, “a substantial increase in the numbers of them on the road will require upgrading the nation’s electricity infrastructure.” … While electric cars are not ready to save the earth, the U.S. government insists on intervention: “Despite these significant flaws, the government is determined to jump-start sales for plug-ins by putting taxpayers on the hook. The $7,500 federal tax credit per PEV is nothing more than a federal subsidy that will add to the deficit. There are also federal tax credits for installing charging stations in homes and businesses and for building battery factories and upgrading the electric grid. The administration’s goal — one million PEVs on the road by 2015 — could cost taxpayers $7.5 billion.” And saddle Americans with expensive automobiles that do little to address the problem they’re designed to solve. Reading the Journal article requires a subscription, but it is also available at The American Council for Capital Formation, where Thorning is Senior Vice President and Chief Economist.

    Government as business. Yesterday’s reading from Robert P. Murphy’s book Lessons for the Young Economist explained the value of the profit-and-loss system in guiding resources to where they are most valued. For those who wan to “run government like a business” I offer today’s excerpt from the same book, which explains how lack of the ability to calculate profit means this can’t happen: [Regarding a capital investment made by Disney as compared to government:] The crucial difference is that the owners of Disneyland are operating in the voluntary market economy and so are subject to the profit and loss test. If they spend $100 million not on personal consumption (such as fancy houses and fast cars) but in an effort to make Disneyland more enjoyable to their customers, they get objective feedback. Their accountants can tell them soon enough whether they are getting more visitors (and hence more revenue) after the installation of a new ride or other investment projects. Remember it is the profit and loss test, relying on market prices, that guides entrepreneurs into careful stewardship of society’s scarce resources. In contrast, the government cannot rely on objective feedback from market prices, because the government operates (at least partially) outside of the market. Interventionism is admittedly a mixture of capitalism and socialism, and it therefore (partially) suffers from the defects of socialism. To the extent that the government buys its resources from private owner — rather than simply passing mandates requiring workers to spend time building bridges for no pay, or confiscating concrete and steel for the government’s purposes — the government’s budget provides a limit to how many resources it siphons out of the private sector. (Under pure socialism, all resources in the entire economy are subject to the political rulers’ directions.) However, because the government is not a business, it doesn’t raise its funds voluntarily from the “consumers” of its services. Therefore, even though the political authorities in an interventionist economy understand the relative importance of the resources they are using up in their program — because of the market prices attached to each unit they must purchase — they still don’t have any objective measure of how much their citizens benefit from these expenditures. Without such feedback, even if the authorities only want to help their people as much as possible, they are “flying blind” or at best, flying with only one eye.

  • Kansas Democratic Party income tax reckoning

    Kansas Democratic Party income tax reckoning

    A story told to generate sympathy for working mothers at the expense of Kansas Governor Sam Brownback is based on arithmetic that is not plausible.

    In the response to the State of the State Address, Senator Anthony Hensley told a tale of woe.

    He said, according to the printed remarks “Take for example the single mother who works full time and lives within her means, but still struggles to provide for her family.”

    That’s someone we can empathize with. And, someone who is a key Democratic Party constituent. Here’s the burden she faced under Brownback’s tax plan, according to Hensley:

    “She paid $4,000 more in income taxes due to the Governor’s plan,”

    When I heard him say that on television, I thought surely he had misread or misspoke. $4,000 in state income taxes is a lot of taxes. You have to have a pretty good income to have to pay $4,000 in Kansas state income taxes, much less to pay $4,000 more, as Hensely said. But $4,000 is in the prepared remarks as made available by the Kansas Democratic Party. You’d have to think that someone proofread and checked the senator’s arithmetic, wouldn’t you?

    Here’s the arithmetic. According to the Kansas income tax tables for 2013, in order to owe $4,000 in tax, a person filing as single or head of household would have to have “Kansas taxable income” of $87,451. That number is after subtracting $2,250 for each exemption. Let’s say there are three exemptions, allowing for the mother and two children. That means that the person’s “Federal adjusted gross income” would be $94,201. When computing this figure, there are some “above the line” deductions from total income on the federal form 1040, but the most common deductions are after this.

    So we can be quite sure that Hensley’s “single mother who works full time and lives within her means, but still struggles,” and who owes $4,000 in Kansas income tax, earns at least $94,201. In all likelihood she earned much more than that, because Hensley said she paid “$4,000 more” this year. If this fictional person saw her Kansas income tax bill rise to $6,000 from $2,000 — that’s an increase of $4,000 that Hensely used — her income would need to be $128,265. That’s before we increase it even more to account for deductions.

    Of note, a justice on the Kansas Supreme Court earns $135,905. The U.S. Census Bureau has a statistic named “Median household income, 2009-2013.” For Kansas, the value is $51,332.

    I’m not an income tax expert. I could be off by a little. But I’m pretty sure Anthony Hensley and the Kansas Democrats are way wrong on this.

  • Kansas Representative Joe Patton on Kansas school spending

    Following is a press release from Kansas Representative Joe Patton, a Republican who represents parts of southwest Topeka and Shawnee County. He touches on a wide range of Kansas school finance topics, including the level of spending, the amount of taxes Kansas businesses pay, the cost of a tax increase, and the amount of waste, fraud, and abuse in the system.

    Recently I received an email from a concerned young mother of grade school children about education. I called her and asked if I could sit down with her and her husband to listen to their concerns. I spent several hours one Sunday afternoon at their home as they shared their concerns about their children’s education. I listened and shared with them the budget facts we have to deal with this session. With this letter I invite you to become part of our conversation.

    I’m sure you have heard media accounts about the “budget crisis”. I want to provide you the very best information I can so I can get your input. I’m sure together we can get through these stormy waters. I fought to cut my own pay 10%, the final law cut it 5%. Still legislative cuts are part of the solution. I believe in working together in a reasonable way to solve these problems with bipartisan solutions. As your State Representative, I want to make sure everyone — parents, grandparents, teachers, principals, superintendents and school board members — are in the loop when it comes to the latest and most accurate budget information we have concerning the schools.

    (more…)

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