Voice For Liberty

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  • Jim Anderson stump speech received enthusiastically

    To an appreciative Saturday evening audience, candidate for the Republican party nomination for United States House of Representatives from the fourth district of Kansas Jim Anderson laid out in detail his political positions and his plans for Congress.

    Anderson spoke as part of a series of events featuring Alan Keyes, who spoke after Anderson.

    Anderson told the audience that he is “working hard to earn your support to become your representative, not a politician.” He said that he is “a man of the people, a Reagan conservative, who possesses the God-given gift of plain old common sense, which is clearly absent in Washington today.”

    Tracing some of the history of the United States, Anderson expressed his concern that our country is moving towards socialism, a system that he said is “intrinsically bad” and immoral. 2010, he said, is our time to change the direction of the country.

    Originally, individuals were empowered, but that has changed. Anderson’s conservative platform includes liberty, freedom, free markets, limited taxation through the Fair Tax, limited government with rights retained at the local level by states and citizens, strong national defense, and family values. These are the same values of the founding fathers, he said, and he supports legislation restoring these.

    A strong economy is needed, Anderson said. This includes a complete overhaul of the tax system, a return to federal spending discipline, balancing the budget, and reducing the size of government. Entitlements need to be brought under control, and eventually privatized.

    Taxes, he said, drive a wedge between those who wish to transact, and therefore reduces economic activity. The cost of complying with our present tax system is huge, too. The progressive income tax system places a large burden on high earners, while 50% don’t pay any income taxes.

    Anderson said that he will fight to lower taxes, and that tax reform is needed now. He supports the Fair Tax, which would replace the income tax with a consumption tax. He would also eliminate the death or inheritance tax, and taxes on capital gains.

    Another tax Anderson said must be defeated is climate change legislation. Man-made global warming is not a foregone conclusion, he said, and the radical left uses global warming to reduce the prosperity of global economic powers. Cap-and-trade would be a huge tax increase that would kill jobs across the country and in our district.

    Anderson said that our national debt is a problem, leaving a burden on future generations. The present national debt is $120,000 per family, with the debt forecast to increase over the next decade. “We should not expect future generations to live under a shadow of debt through socialism,” he said.

    Concerning the federal stimulus efforts, Anderson criticized the high cost of each job saved or created, and the high per-cost of the cash for clunkers program, which has been estimated at as much as $24,000 per car sold, when considering marginal effects.

    Anderson said he would oppose new government spending that isn’t offset by spending cuts elsewhere, and he would eliminate all earmarks.

    The Federal Reserve, Anderson said, has “been running the printing presses at record levels” to enable government overspending, and mask the structural problems in our country. He supports H.R. 1207, which calls for an audit of the Federal Reserve.

    Existing entitlement programs are ticking time bombs, Anderson said, and must be made solvent. For those nearing retirement age, he would keep the existing benefits, but for others, the benefits would be gradually reduced.

    Anderson said that free markets are the “most efficient mechanism,” and can provide the answer to several problem areas. On health care, he said we need to enable consumer choice, enact tort reform, and reject a government-run health care system. The move towards a government-run system is more about “control of every facet of our lives” rather than health. More freedom and markets is the solution to health care, he said.

    On education, Anderson said that we spend more money on education than any other nation, but we continue to fall farther behind. He supports less federal and state control over education, and also the voucher system. Competition will improve performance by giving parents a choice. Good teachers have not received the compensation they deserve, and markets will allow good teachers to earn what they deserve. Standards need to be strengthened, too.

    On energy issues, Anderson said that renewable energy sources such as solar and wind power are not consistent, and we’re going to be relying on hydrocarbons as a source of energy for some time to come. Taxpayers should not continue to subsidize energy sources with no viable economic future. We need to expand our use of coal and nuclear power, and increase our drilling efforts, he said.

    It makes no sense to pay farmers not to grow, so agriculture subsidies should be eliminated, Anderson said. Farmers should be able to farm the way they see best.

    Progressive liberals, Anderson said, have an agenda to fully transform our society. Their attack on capitalism — capitalism being the source of improvement in our living standards, he said — leads them to criticize those who purchase private airplanes at the expense of local communities like Wichita.

    Anderson said he would defend our morality, “which is core to the goodness of our society.” Progressives say that conservatives are not compassionate, but conservatives are the ones who care most about real America as did the founding fathers. Conservatives want to “remove the handcuffs of dependence” in exchange for freedom, liberty, and opportunity.

    Anderson spoke of his admiration for Ronald Reagan, quoting him saying “We the people, not the government, make this country great.”

    Our problems, Anderson said, come from drifting away from the constitution, capitalism, and individualism. Quoting Reagan again, he said that “Freedom is never more than one generation away from extinction.”

    Although the outlook may be bleak, there have been movements such as the tea parties and town hall meetings, by ordinary men and women, that have sent a message to Washington that “enough is enough, and we will not be fooled again.”

    The 2010 elections are possibly the most important Congressional elections, he said, as we may not have another opportunity to take back our country. He said it’s become too hard to tell the Democrats from the Republicans. Too many Republicans have become more interested in reelection and party loyalty than representing their constituents. Being seen as bi-partisan, he said, is more important to them than upholding the conservative principles that were established by the founding fathers. “I am one of you, not one of them,” he said.

    Anderson said he would sign the proposed term limits amendment. He said he would hold regular town hall meetings with his constituents.

    He said would fight to keep government out of our homes, to protect the sanctity of life and the rights of the unborn, and keep marriage between one man and women.

    Analysis

    Anderson’s conservative message based on free markets, limited government, and Christian conservatism played well to the audience of about 200, being interrupted many times by applause. His grassroots-style campaign, staffed by volunteers in red shirts, should appeal to those who desire a candidate from outside the usual political establishment, although he is not the only candidate in the race from outside that realm.

    His criticism of Washington politics and the Republican Party may not earn him the support of the party regulars and establishment, but he seems to have the ability to tap into the frustration expressed by the tea party movement. Republicans in the Kansas fourth district have several conservative candidates to select from. Many have overlapping positions that make it difficult for candidates to distinguish themselves.

  • Cessna, another Wichita company asking for tax relief

    Wichita City HallThis week the Wichita City Council will consider granting economic development incentives to Cessna Aircraft Company. The incentives are in the form of property (ad valorem) tax relief, implemented through the city’s Industrial Revenue Bond program, as described by city documents:

    Since 1991, the City Council has approved issuance of Industrial Revenue Bonds (“IRBs”) totaling $1.2 billion to finance expansion and modernization of Cessna Aircraft Company (“Cessna”) facilities in Wichita. The City Council also authorized 100% ad valorem tax exemptions for all bond-financed property for periods of up to ten years.

    The city does this for economic development, which in the eyes of politicians and bureaucrats, means jobs. Highly visible jobs, hopefully, that voters will be grateful for. So we might want to examine the record of job creation by Wichita’s economic development machinery. (We should note that Cessna is not the only aircraft company that Wichita has been generous to with subsidy.)

    The Bureau of Economic Analysis, which is part of the U.S. Chamber of Commerce, provides economic data for metropolitan areas. One of the measures that Visioneering Wichita uses as a benchmark of performance is personal income growth. Specifically, per capita personal income growth. There are some issues related to per capita measures that require caution; see Wichita and peer GDP growth for an explanation.

    personal-income-compound-growth-visioneering-peers-2012-11

    Considering personal income growth, here is what Wichita looks like compared to our Visioneering peer cities, based on data from BEA (click on charts for larger versions).

    This chart shows the compound annual growth rate in job creation. Note that Wichita, the violet line, is in last place. But it wasn’t always that way. It was during the decade of the 1990s that Wichita started to slip to last place. Coincidentally, that is the decade in which Wichita started offering economic development incentives to Cessna.

    per-capita-personal-income-compound-growth-visioneering-peers-2012-11

    Since Visioneering uses per capita personal income, I also present it. This time, I start the chart with 1990 data. It’s much the same story as the previous chart: Wichita is in last place.

    Another benchmark Visioneering uses (but won’t present to the council) is job growth. Wichita does poorly here too, ranking in last place among our Visioneering peer cities except in one area: Government jobs. See Wichita job growth and Visioneering peers for details and a video. We should note that to the extent the government sector grows faster than the private sector, we become poorer.

    We might ask the mayor and council members how this proposed action will help Wichita catch up to its self-identified peers. After all, city documents state that we’ve granted IRBs to Cessna in the past: $1,200,000,000 worth, according to city documents. The action contemplated this week is for up to $40,200,000 in bonds, or about three percent of the total granted to Cessna. These amounts are not loans to Cessna from the city, but instead represent the value of property that Cessna may have exempted from taxation: property and possibly sales taxes both.

    Other companies have received similar treatment, and not always with good results. After the announcement of Boeing leaving in 2012, a news report contained this: “‘They weren’t totally honest with us,’ said [Wichita Mayor Carl] Brewer of Boeing, which has benefited from about $4 billion of municipal bonds and hundreds of millions of dollars in tax relief. ‘We thought the relationship was a lot stronger.’”

    The problem with this action

    A major reason why this action is harmful to the Wichita economy is its strangling effect on entrepreneurship and young companies. As Cessna and other similarly-situated companies escape paying taxes, others have to pay. This increases the burden of the cost of government on everyone else — in particular on the companies we need to nurture. This is being brought into sharp relief as the council considers asking Wichita voters to approve a sales tax increase.

    Last month the Wichita Metro Chamber of Commerce featured a speaker who stressed the importance of entrepreneurship, as evidenced by the headline in the Wichita Eagle: Gallup CEO tells Wichita Chamber: Treat entrepreneurs like star athletes.

    There’s plenty of other evidence that entrepreneurship, in particular young business firms, are the key to economic growth. But Wichita’s economic development policies, as evidenced by this action the council is considering, are definitely stacked against the entrepreneur. As Wichita props up its established industries, it makes it more difficult for young firms to thrive. Wichita relies on targeted investment in our future. Our elected officials and bureaucrats believe they have the ability to select which companies are worthy of public investment, and which are not. It’s a form of centralized planning by the state that shapes the future direction of the Wichita economy.

    These targeted economic development efforts fail for several reasons. First is the knowledge problem, in that government simply does not know which companies are worthy of public investment. This lack of knowledge, however, does not stop governments from creating policies for the awarding of incentives. This “active investor” approach to economic development is what has led to companies receiving grants or escaping hundreds of millions in taxes — taxes that others have to pay. That has a harmful effect on other business, both existing and those that wish to form. Young entrepreneurial companies are particularly vulnerable.

    Embracing Dynamism: The Next Phase in Kansas Economic Development Policy

    Professor Art Hall of the Center for Applied Economics at the Kansas University School of Business is critical of this approach to economic development. In his paper Embracing Dynamism: The Next Phase in Kansas Economic Development Policy, Hall quotes Alan Peters and Peter Fisher: “The most fundamental problem is that many public officials appear to believe that they can influence the course of their state and local economies through incentives and subsidies to a degree far beyond anything supported by even the most optimistic evidence. We need to begin by lowering expectations about their ability to micro-manage economic growth and making the case for a more sensible view of the role of government — providing foundations for growth through sound fiscal practices, quality public infrastructure, and good education systems — and then letting the economy take care of itself.”

    In the same paper, Hall writes this regarding “benchmarking” — the bidding wars for large employers: “Kansas can break out of the benchmarking race by developing a strategy built on embracing dynamism. Such a strategy, far from losing opportunity, can distinguish itself by building unique capabilities that create a different mix of value that can enhance the probability of long-term economic success through enhanced opportunity. Embracing dynamism can change how Kansas plays the game.”

    In making his argument, Hall cites research on the futility of chasing large employers as an economic development strategy: “Large-employer businesses have no measurable net economic effect on local economies when properly measured. To quote from the most comprehensive study: ‘The primary finding is that the location of a large firm has no measurable net economic effect on local economies when the entire dynamic of location effects is taken into account. Thus, the siting of large firms that are the target of aggressive recruitment efforts fails to create positive private sector gains and likely does not generate significant public revenue gains either.’”

    (For a summary of the peer-reviewed academic research that examines the local impact of targeted tax incentives from an empirical point of view, see Research on economic development incentives. A sample finding is “General fiscal policy found to be mildly effective, while targeted incentives reduced economic performance (as measured by per capita income).”

    There is also substantial research that is it young firms — distinguished from small business in general — that are the engine of economic growth for the future. We can’t detect which of the young firms will blossom into major success — or even small-scale successes. The only way to nurture them is through economic policies that all companies can benefit from. Reducing tax rates for everyone is an example of such a policy. Abating taxes for specific companies through programs like the Wichita city council is considering for Cessna is an example of precisely the wrong policy.

    In explaining the importance of dynamism, Hall wrote: “Generally speaking, dynamism represents persistent, annual change in about one-third of Kansas jobs. Job creation may be a key goal of economic development policy but job creation is a residual economic outcome of business dynamism. The policy challenge centers on promoting dynamism by establishing a business environment that induces business birth and expansion without bias related to the size or type of business.”

    We need to move away from economic development based on this active investor approach, especially the policies that prop up our established companies to the detriment of dynamism. We need to advocate for policies — at Wichita City Hall, at the Sedgwick County Commission, and at the Kansas Statehouse — that lead to sustainable economic development. We need political leaders who have the wisdom to realize this, and the courage to act appropriately. Which is to say, to not act in most circumstances.

  • State taxes and charitable giving

    State taxes and charitable giving

    States with higher rates of economic growth grow total charitable giving at a faster rate than states with low rates of economic growth, finds a new report by American Legislative Exchange Council.

    From ALEC: Charity is a crucial component of efforts to address societal challenges and help individuals thrive. From religious organizations to community charities, philanthropic donations drive the institutions of civil society and enable communities to develop around a greater sense of shared purpose. Despite this important role, charitable giving is rarely addressed in discussions around public policy — especially state tax policy.

    ALEC State factor charitable giving cover imageThe report uses data collected from the Internal Revenue Service (IRS) and focuses on both the levels of charitable giving and the growth of charitable giving throughout the states. We examined these trends over two different time periods. First, the IRS data begins in 1997 and is available through 2012. Second, we measured state charitable giving from 2008 to 2012 to understand how states fared during the recession.

    Here are some of the most significant findings from our report:

    • States with higher taxes generally experienced lower levels and lower rates of growth in charitable giving compared with their lower tax counterparts
    • A one percent increase in a state’s total tax burden is associated with a 1.16 percent decrease in the state’s rate of charitable giving
    • A one percent increase in a state’s personal income tax burden is associated with a 0.35 percent decrease in the state’s rate of charitable giving as a percent of total state income
    • In every category, over each time period, the nine states without income taxes grew their rates of charitable giving more than the nine states with the highest income taxes

    The report is available to download and read at The Effect of State Taxes on Charitable Giving. Following is material from the report’s executive summary:

    An often overlooked aspect of public policy is the role that charitable organizations have in addressing some of society’s most pressing concerns. Because of this important role and since charitable organizations are funded privately through donations, understanding how state policies interact with charitable organizations is crucial for a robust discussion about public policy. This State Factor examines state tax policies that encourage charitable giving, apart from the charitable giving deduction.

    While many factors certainly influence an individual’s choice about donating to charity, there are broad policy choices that can encourage higher rates of growth in charitable giving. By examining various tax burdens and tax rates with rigorous economic analysis, this paper’s research findings show that a 1 percent increase in the personal income tax burden is associated with 0.35 percent decrease in charitable giving per dollar of state income. Similarly, this State Factor found that an increase in personal income tax burden of roughly 1 percentage point of total state income results in a roughly 0.10 percentage point decrease in the level of measured charitable donations as a percent of income.

    When all state taxes are considered, a 1 percentage point increase in the total tax burden is associated with a 1.16 percent drop in charitable giving per dollar of state income. Similarly, this State Factor found that an increase in total tax burden of roughly 1 percentage point of total state income results in a roughly 0.09 percentage point decrease in the level measured charitable donations as a percent of income.

    According to the new report, The Effect of State Taxes on Charitable Giving the following states donated the most to charity as a percent of total income between 1997 and 2012, in order from 1st to 10th: Utah, Wyoming, Georgia, Alabama, Oklahoma, South Carolina, Maryland, Idaho, North Carolina and Mississippi. The report examines patterns of philanthropic contributions in the states over time and uses rigorous economic analyses to draw significant conclusions about charitable giving in the United States.

    The report is written by Jonathan Williams, William Freeland, research analyst for the ALEC Center for State Fiscal Reform, and Ben Wilterdink, research manager for the ALEC Center for State Fiscal Reform. The report reveals that states with higher rates of economic growth grow total charitable giving at a faster rate than states with low rates of economic growth.

  • Wichita property tax delinquency problem not solved

    Wichita property tax delinquency problem not solved

    Despite a government tax giveaway program, problems with delinquent special assessment taxes in Wichita have become worse.

    It’s surprising to read reporting in the Wichita Eagle that the city is owed millions in delinquent special assessment taxes. (City of Wichita owed $4.8 million in delinquent special assessments, August 15, 2015)

    That’s because in 2012 the city adopted a program that rebated property taxes to buyers of new homes. The goal of the program was twofold: To help builders sell homes, and to help the city collect delinquent special assessment taxes.

    In February of that year, according to city documents, “Current delinquent specials on vacant lots within the City of Wichita are an estimated $3.3 million.”

    Now the delinquent taxes have risen to $4.8 million.

    This wasn’t supposed to happen. At the council meeting Wes Galyon, president of the Wichita Area Builders Association, told the council, according to meeting minutes: “This program will also aid in eliminating current delinquencies on lots and new home subdivisions in the City and contribute to the developers and builders being able to keep taxes and specials current on buildable lots that they own and plan to build on.”

    The city manager told the council, according to meeting minutes: “The other issue was the ability to collect on delinquent taxes and special assessments. Stated that is becoming a growing problem for us as we look at what is happening with the economy and home builders.”

    A program that should not have been adopted

    In his remarks to city council members in February 2012, Wichita city manager Robert Layton told the council, according to meeting minutes: “Stated they took a businesslike approach as they went through this and designed the program. Stated they consulted Wichita State University and the report references a 1.48 return on our investment just in terms of the present value of the direct and indirect jobs that are created as well as the construction expenditures, which was important to them.”

    The manager was referring to an analysis prepared by Wichita State University Center for Economic Development and Business Research, titled Economic Impact of Proposed WABA Incentives, February 1, 2012.

    In these analyses, the city attempts to estimate costs and benefits of a program, and adopt only those programs that have a positive ratio of benefits over costs. (Generally the city requires that the ratio be 1.3 to 1 or greater.) Benefits are, according to the study, “sales tax revenues, from construction worker spending and construction material purchases, and property tax revenues.” The costs are the lost revenue due to the tax rebates. Following is an excerpt from a table that presents the results of analysis.

                       No Incentives    Incentives
Public Benefits       $2,364,429    $3,004,315
Public Costs                  $0    $2,032,312
Net Public Benefits   $2,364,429      $730,457
Return on Investment      N/A           1.48

    Some, like the Wichita city manager, focused on the return on investment (ROI) ratio of 1.48 if the tax rebate incentive is used. (There is no such ratio if there are no incentives, as there is no investment.) The study explained the ratio this way: “For every dollar invested, the city will receive the initial dollar plus an additional 48 cents in return.”

    That sounds like a good deal, and the ratios like this that are calculated by CEDBR are often used by the city to justify incentives.

    But there is another way to look at this deal: the net value to the city. In this case, if the city did not offer the incentives, the benefits to the city would be $2,364,429. If incentives were used, the benefits would be $730,457. This means that if the city does nothing, it is $1,633,972 to the better.

    That’s right: Even though the city had an opportunity to make an investment with a purportedly high ROI, it would be better off, dollar-wise, if it did not make the investment.

    This illustrates the caveats of working with ratios. They are simply “the relation between two similar magnitudes with respect to the number of times the first contains the second.” A ratio says nothing about the absolute magnitude of the numbers.

    For more about the problems CEDBR study found with the program, see Wichita new home tax rebate program: The analysis.

  • Kansas news digest

    News from alternative media around Kansas for January 25, 2010.

    Kansas Republicans and Democrats agree Massachusetts upset could benefit Kansans

    (Kansas Liberty) “Republican Senatorial candidate Scott Brown made history last night when he defeated Democratic candidate Martha Coakley in the election for Sen. Ted Kennedy’s Massachusetts seat. Kansas Republicans are lining up to proclaim how this victory could signal a change in the tide for the Democratic Party and for the Democrats health care plans.”

    Rally members frustrated by mainstream media coverage

    (Kansas Liberty) “Last Friday, approximately 400 liberty-minded Kansans flocked to the Statehouse to support a Senate Concurrent Resolution that claims state sovereignty under the Tenth Amendment in the U.S. Constitution. The resolution serves notice to the federal government to cease and desist certain mandates, provides that certain federal legislation should be prohibited or repealed, and it directs distribution of the resolution to Congress and the President. … According to legislators and organization members who were present at the rally, the grassroots support for the amendment was substantial, but many of the mainstream media outlets painted a watered down picture of the outpouring of support. Several reports also focused in on the sole opponent who testified during the hearing, an educator at Wichita Collegiate School, which is a private K-12 school.”

    New coalition plotting to lobby legislators for tax increases

    (Kansas Liberty) “Roughly a dozen tax-increase advocacy groups have banned together to form the Kansans for Quality Communities Coalition. According to its mission statement the organization’s key goal is to ‘ensure the prosperity of Kansas communities through the responsible investment of taxpayer dollars.’ To achieve this goal the group is heavily lobbying for tax increases, an action already sanctioned by Democratic leaders, including Gov. Mark Parkinson.”

    AG Six requests Kansas Supreme Court to refrain from reopening Montoy case

    (Kansas Liberty) “Attorney General Steve Six has asked the Kansas Supreme Court to deny the Schools for Fair Funding coalition’s request to reopen the Montoy v. State of Kansas lawsuit. “The Court in 2006 issued its mandate directing the district court to dismiss the case, and on the stipulation of all parties, the district court did so,’ Six said in a statement issued to the Kansas Supreme Court yesterday. ‘This case is over.’ Six referred to the request as ‘unprecedented’ and said that it ‘achieves no efficiencies, and is merely an attempt to circumvent the procedures for initiating new cases.’”

    Kansas Senator Chris Steiniger on County Consolidation and His New Campaign

    (State of the State KS) “Kansas Senator Chris Steiniger (D) talks about county consolidation and his recent announcement to run for Secretary of State.”

    Legislators Speak at Energy Conference in Wichita

    (State of the State KS) “House Assistant Minority Leader Jim Ward (D) and Kansas Senator Carolyn McGinn (R) spoke at an energy panel hosted by City of Wichita’s Dale Goter.” Full video of the conference is at Wichita Energy Conference Legislative Panel .

    ProPublica predicts insolvency for Kansas’ unemployment insurance fund

    (Kansas Watchdog) “Propublica, a national independent non-profit investigative journalism organization, on Wednesday reported that two dozen states have unemployment funds in the red, with nine more to be in the red within six months.”

    U.S. Supreme Court ruling on campaign finance won’t affect Kansas much

    (Kansas Watchdog) “The U.S. Supreme Court ruled today that businesses and unions may spend freely on political campaigns, but this ruling only affects federal races in Kansas. ‘It won’t affect us at all’ was the response from Carol Williams, the executive director of the Kansas Governmental Ethics Commission. Williams said that 24 states had corporate and union contribution bans but Kansas did not.”

    Wichita Chamber Will Lobby Against Income Tax

    (Kansas Watchdog) “The Wichita Business Journal reported in today’s edition that the Wichita Chamber of Commerce is beginning what will likely be a multi-year effort to repeal the personal and business income taxes in Kansas.”

    Furlough idea for legislators is dropped

    (Kansas Reporter) “TOPEKA, Kan. – Furloughs for the Kansas Legislature are off the table until late in the legislative session, at the earliest, state Senate President Stephen Morris said.”

    More budget cuts would hurt Kansas for years, tax backers say

    (Kansas Reporter) “TOPEKA, Kan. – Kansas school children, the state’s elderly and its most fragile citizens simply cannot afford any more state budget cuts, proponents of a proposed one-percent sales tax increase told a Kansas House tax policy committee Thursday.”

    School’s reserves total at least $1.4 billion

    (Kansas Reporter) “TOPEKA, Kan. – In the fight over school funding, both sides agree that school districts in Kansas are sitting on at least $1.4 billion in cash reserves. The battle over whether that money is available to spend played out during two competing presentations Thursday morning in front of the House Appropriations Committee.”

    Kansans speculate on future of federal health reform

    (Kansas Health Institute News Service) “TOPEKA – The shockwaves emanating from Republican Scott Brown’s U.S. Senate victory in Massachusetts on Tuesday are being felt beyond the Bay state and Washington, D.C. They’re registering in state capitals across the country, including Topeka.”

    Senate GOP leaders say some tax increases will be necessary

    (Kansas Health Institute News Service) “TOPEKA – Senate leaders today said a combination of tax increases and spending cuts would be the best way to balance the state budget. Senate President Steve Morris, R-Hugoton, said he thought a plan to close sales tax exemptions and increase the tobacco tax could win legislative approval as lawmakers try to close a projected $400 million budget gap. Senate Vice President John Vratil, R-Leawood, said balancing the budget solely with more spending cuts would be ‘catastrophic.’”

  • Kansas fourth district candidates on spending and deficit reduction

    In a June 22nd forum of candidates for the Republican Party nomination for United States Congress from the fourth district of Kansas sponsored by the Wichita Metro Chamber of Commerce, candidates were asked about their plans to reduce the federal deficit and national debt.

    The candidates and their campaign websites are Wichita businessman Jim Anderson, Wichita businessman Wink Hartman, Wichita businessman Mike Pompeo, Latham engineer Paij Rutschman, and Kansas Senator Jean Schodorf.

    A question by moderator Steve McIntosh recited the current large debt and deficit figures, noted that Medicare and Social Security are headed down an unsustainable path, and said that Americans are worried about the negative effects of letting the Bush tax cuts expire. What is your plan for reducing the deficit and debt, while keeping taxes low enough to allow for economic growth?

    Answering first, Rutschman said we need to look at our government agencies and make sure they are operating effectively and efficiently. She said we should start balancing the federal budget. She told the audience that we should look at Social Security and Medicare to see where we can start reducing these programs, and develop a long-term plan for handling the upcoming retiring generation.

    Next, Schodorf said she had a plan for national economic development and growth, saying first that we need a balanced budget amendment. She said that the bipartisan commission on deficit reduction is really just a paper tiger, and what we really need are experts in different fields to work together to recommend how to reduce the deficit. She said the federal government needs to reduce its spending, recommending a 5% across-the-board cut if possible. She said we need to keep the Bush tax cuts in place.

    Anderson told the audience that we need to reduce the size of government, starting with an overhaul of the tax system by replacing their current income tax with the FairTax. The fair tax, he said, is the best way to generate revenue for limited government, noting that the current tax code is the source of many of our problems. States should take care of their own needs, he added, and we should eliminate the system of earmark spending. He also said we need to look at each federal program, and if it is not constitutional, it should be eliminated.

    Hartman said we need to get control of our government, and that one way to get started immediately would be a balanced budget amendment. He also believes in the FairTax. He said that 41 cents of every dollar government spends is borrowed and must be repaid at some time. The Bush tax cuts should be continued, he said, as they worked well once. He said he is also concerned about estate taxes, especially their impact on family farms. He said that a larger federal government has never — and will never — create jobs.

    Pompeo said that growing the economy, creating a tax base that is broader and larger, is the first way that we can reduce the deficit. The second way is to reduce spending. He told the audience he supports eliminating earmarks, but noted that earmarks are a relatively small part of the budget. Entitlements, he said, are the real problem, and that we should start by repealing the recently enacted healthcare entitlement. On Social Security, Pompeo said he supports a plan developed by Wisconsin Congressman Paul Ryan. For people 55 years of age and over, there would be no impact, he said, but benefits for younger people would be reduced, adding that the promised benefits may really be a false promise. On the federal Department of Education, Pompeo said it is incomprehensible to him that send a dollar to Washington, only to get $.64 back along with instructions on how to run our schools. He also said we should reduce capital gains taxes by at least 50%, to create an incentive for capital.

    Analysis

    Schodorf’s concern for spending and taxes must be balanced against her record in the Kansas Senate, which is a very liberal voting record. She voted for the big-spending budget this year, and voted to raise the statewide sales tax by one cent per dollar.

    The FairTax, which many of these candidates support, is probably a better tax system than the system currently in place, but it does not address the issue of spending. According to FairTax.org, “Bottom line is that the 23% rate works it replaces the revenue generated by the repealed taxes, and maintains the real value of federal spending.” In other words, the FairTax is calibrated to provide the same revenue to government. For those looking to reduce the amount government takes in taxes — no matter what form — and to reduce government spending, the FairTax is not the solution.

    The idea of eliminating federal programs that are not constitutional is also appealing to limited government advocates. The reality, however, is that every spending program that’s in place — with the exception of newly-passed legislation that hasn’t yet been challenged in the courts — has passed constitutional muster. The Constitution means what the Supreme Court says it means, after all.

    Hartman’s concern for federal estate taxes is well-placed, especially, as he noted, in Kansas, where many families’ assets are in the form of land and other agriculture assets.

    Pompeo, as he has in other forums, said he supports the Paul Ryan plan, known as the Roadmap for America’s Future. This is a specific set of proposals promoted by Ryan, the ranking member of the House Budget Committee and a rising star among conservatives. The plan goes farther than Pompeo did regarding taxes on capital gains, recommending eliminating the tax on capital gains entirely.

  • In Wichita, revision of water history

    In Wichita, revision of water history

    In 2014 Wichita voters rejected a sales tax which would have provided $250 million to spend on a water project. What were the city’s concerns?

    A recent Wichita Eagle article has ignited some revising of history regarding Wichita’s water infrastructure. 1 The article is grim, starting with, “Next time water comes out of your tap, don’t take it for granted. Wichita’s only water treatment plant could fail at any moment.” The article reports on the poor condition of Wichita’s existing water infrastructure, particularly the central water plant.

    Wichita recently dealt with spending on a water project. That was in 2014, when the city asked voters to decide on a one cent per dollar sales tax for five years. Of the estimated $400 million the tax would raise, $250 million was earmarked towards water infrastructure. Since voters did not endorse the tax, some have blamed voters for the city’s current problems regarding water infrastructure.

    Here, for example, is a social media exchange on Monday. The first person wrote, referring to Wichita Public Works Director Alan King, “Mr King is only now sounding a warning when he knew 8 years ago there was a problem?”

    A second person responded: “Wrong Wrong Wrong. King has been yelling about this since he got here. Remember the temporary sales tax for the water where the citizens obeyed the Billionaire and his million dollars that said we can take the risk?”

    To understand the errors in the second person’s comment, we need to understand the meaning of “for the water” and “the risk.” City documents have the answer.

    A Wichita city white paper from May 2014 cites a community survey, concluding, “Wichitans have ranked a reliable water supply as their most important priority.” 2 The city interpreted citizens’ concerns are requiring protection from drought: “Protecting water sources during periods of drought is an important part of long-term water supply planning.” The paper presented “two options meet the goal of providing water for community growth and drought protection.” One option was using water from El Dorado Reservoir, and the second was expanding the ASR system. This paper does not mention the condition of existing water infrastructure.

    On May 27, 2014 City Manager Robert Layton presented to the city council a “Strategic Plan Follow Up,” providing information about the possible uses of the proposed city sales tax. 3 For water issues, the only consideration was drought protection.

    In July 2014, the city prepared a document titled “Strategic Plan Implementation Timetable.” 4 Regarding water, the activity needed was:

    1. Develop a plan that addresses:
    A. New water sources
    B. Conservation strategies
    C. Reuse opportunities for industry
    D. Emphasize water as a priority with the State and Congressional delegation
    E. Work with area communities to ensure water is also a priority for them

    The long-term objective for water was: “Secure sufficient capacity from two identified options to provide water that supports the long-term growth of Wichita while protecting water users from future droughts. Implement cost-effective conservation strategies that complement water source capacity.”

    Under measurements of success there were these items:

    Year of final protection in a 1% drought without additional conservation efforts (target is 2030).
    Variance in firm yield compared to demand in 2060 (target is 0%).
    Volume of water treated (target is 20.8 billion gallons per year).
    Annual water reductions from conservation programs (target is 0.35%).
    Water conservation program cost to achieve water reduction goal (target is $300,000 annually).

    None of this material mentions the condition of existing water infrastructure.

    In September 2014 the city published a document titled “Water Supply Plan: The Proposed 1-cent Sales Tax.” 5 under “Plan Summary,” the document states: “Sales tax revenue would fund a new water supply, through Aquifer Storage and Recovery (ASR) improvements. This new supply would reduce the impact of any future drought and would support job growth.”

    Later, the document says the plan does the following:

    Pulls more water from the Little Arkansas River
    Constructs new storage basins
    Further utilizes existing treatment plant capacity
    Stores treated water underground where it doesn’t evaporate
    Builds an additional pipeline

    The document clarifies that the “additional pipeline” is a “parallel pipeline” from the ASR plant to the central water plant.

    Information from the City of Wichita. Click for larger.

    An information sheet prepared for citizens said the same and warned of the costs of borrowing to pay for these facilities. 6

    A lengthier presentation prepared for voters by the city held this:

    THE NEED
    Demand for water is expected to increase by more than seven billion gallons per year by 2060. A new water supply is needed to meet this demand. If the community should experience a significant drought, residents would face severe water restrictions.” 7

    From these city documents, we can understand the error in the second commenter’s remarks. In the context of 2014, taxing and spending “for the water” meant expansion of supply, not maintenance of existing assets.

    Further, in 2014 “the risk” that was to be addressed was the risk of water use restrictions in case of an extended drought. The risk of basic water plant infrastructure failing was not considered or addressed in the city’s plan for spending $250 million on a water project.

    —
    Notes

    1. Swaim, Chance. Wichita’s water plant: ‘Every hour that thing is running, it could fail.’ Wichita Eagle, July 21, 2019. Available at https://www.kansas.com/news/politics-government/article232826482.html. ↩
    2. City of Wichita. Water Supply Planning. May 13, 2014. Archived on Google Drive here. ↩
    3. Layton, Robert. Strategic Plan Follow Up. May 27, 2014. Archived on Google Drive here. ↩
    4. City of Wichita. Strategic Plan Implementation Timetable. July 22, 2014. Archived on Google Drive here. ↩
    5. City of Wichita. Water Supply Plan: The Proposed 1-cent Sales Tax. September 2014. Archived on Google Drive here. ↩
    6. City of Wichita. Proposed 1 cent sales tax. Archived on Google drive here. ↩
    7. City of Wichita. Plans & Background on Proposed 1 cent Sales Tax. Archived on Google Drive here. ↩

  • Tax increment financing (TIF) and economic growth

    Regarding the effect of tax increment financing (TIF) districts on economic development, economists Richard F. Dye and David F. Merriman have studied tax increment financing extensively. Their paper The Effects of Tax Increment Financing on Economic Development bluntly states the overall impact of TIF: “We find clear and consistent evidence that municipalities that adopt TIF grow more slowly after adoption than those that do not.”

    Later in the same paper the authors conclude: “These findings suggest that TIF trades off higher growth in the TIF district for lower growth elsewhere. This hypothesis is bolstered by other empirical findings.”

    Summarizing, the authors write:

    In summary, the empirical evidence suggests that TIF adoption has a real cost for municipal growth rates. Municipalities that elect to adopt TIF stimulate the growth of blighted areas at the expense of the larger town. We doubt that most municipal decision-makers are aware of this tradeoff or that they would willingly sacrifice significant municipal growth to create TIF districts. Our results present an opportunity to ponder the issue of whether, and how much, overall municipal growth should be sacrificed to encourage the development of blighted areas.

    In their later article Tax Increment Financing: A Tool for Local Economic Development, Dye and Merriman further explain the results of their research:

    TIF districts grow much faster than other areas in their host municipalities. TIF boosters or naive analysts might point to this as evidence of the success of tax increment financing, but they would be wrong. Observing high growth in an area targeted for development is unremarkable.

    So TIFs are good for the favored development that receives the subsidy — not a surprising finding. It’s what elected officials, bureaucrats, and newspaper editorial writers can see and focus on. But what about the rest of the city? Continuing from the same study:

    If the use of tax increment financing stimulates economic development, there should be a positive relationship between TIF adoption and overall growth in municipalities. This did not occur. If, on the other hand, TIF merely moves capital around within a municipality, there should be no relationship between TIF adoption and growth. What we find, however, is a negative relationship. Municipalities that use TIF do worse.

    We find evidence that the non-TIF areas of municipalities that use TIF grow no more rapidly, and perhaps more slowly, than similar municipalities that do not use TIF. (emphasis added)

    So if we are concerned about overall growth in Wichita, we need to realize that TIF simply shifts development from one place to another. The overall impact, according to uncontroverted research, is negative: less growth, not more.

  • Tax funds finance Kansas school finance lawsuit

    Contributed by Kansas Taxpayers Network

    By Karl Peterjohn

    There might not be funds for public school classrooms but for 15 Kansas school districts there is money for financing lawsuits. Since the 1998-99 school year, $2,095,020 has been spent in public funds to pay for the school finance litigation and lawsuit.

    This outrage is a classic case of the school districts biting the state’s hand that fed the 300 Kansas school districts with over $2.7 billion in state funds. Of course, the state does not have any money that it has not taken from taxpayers so you and I pay our taxes to the schools and to the state paying for both the plaintiffs and defendants in this legal battle.

    A portion of that money is taken by these school districts and then used to sue for more spending that will require higher taxes. Sadly, Kansas already has the highest property taxes on business in our five state region as well as the second highest taxes on homeowners too so this litigation worsens our tax climate.

    This is not a new event. The school finance lawsuits stretch back into the late 1980’s. The lead attorney on the most recent lawsuit, Alan Rupe, has been involved in all of these cases going back to the 1980’s. The 15 school districts misusing their tax funds to finance these lawsuits are led by the Salina and Dodge City public schools. The other school districts financing this litigation are: Arkansas City, Augusta, Derby, El Dorado, Emporia, Fort Scott, Great Bend, Hays, Independence, Leavenworth, Manhattan, Newton, and Winfield (For a listing of the tax dollars spent for these lawsuits between 1998-to-2005 see www.kansastaxpayers.com).

    If the legislative conservatives were serious about addressing the litigation crisis in Kansas public schools these expenditures would be stopped. This misuse of tax funds for trial attorneys should stop immediately. Any school finance legislation passed by the Kansas legislature that does not address this abuse of taxpayer funds is a disgrace.

    Last year the Topeka public schools faced a financial scandal when it was revealed that roughly $1/2 million had been paid to pay fraudulent checks in central Asia. The schools had such lax financial controls that numerous bogus checks got paid. The schools continued to operate despite this long distance financial flim-flam. Sadly, the mainstream Kansas press outside of Topeka has largely ignored this scandal and treated it as an isolated event.

    This is another indication that there are plenty of funds available for financing Kansas public schools. The latest federal data indicate that Kansans, despite having lower than average incomes, are paying substantially more than the national average for our public schools. Kansans are paying more per pupil than for public schools in our neighboring states too. Higher expenditures mean higher taxes. Being a high tax state is one of the reasons that Kansas has suffered the largest reduction in private sector jobs during this century according to federal data.

    If the school districts can continue to litigate their way to higher taxes and spending by misusing tax dollars, the future of this state will be grim. Lawsuits promoting higher government spending and higher taxes will drive jobs and businesses to taxpayer friendlier states.

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