Voice For Liberty

Tag: Government spending

  • Kansas taxes and spending debated

    Should Kansas increase taxes or control spending in order to balance its budget? On the editorial page of the Wichita Eagle yesterday, three editorials discussed the Kansas budget, taxes, and spending.

    Rhonda Holman’s editorial featured Kansas Governor Mark Parkinson and his claims that the temporary one-cent sales tax used to fund the Intrust Bank Arena in downtown Wichita wasn’t noticed, and therefore didn’t harm the economy. The governor’s reasoning is incorrect, as taxes do indeed harm the economy.

    When it was proposed in Wichita in 2002 to have a sales tax increase of one-half cent per dollar to build an arena, Wichita car dealers claimed that it would place them at a competitive disadvantage. So people and business do notice the effect of sales taxes.

    While the geography is different — the proposed Wichita sales tax was to be only for one city, while the governor’s sales tax is for the entire state — the principle is the same: Higher taxes in Kansas will place our state at a competitive disadvantage.

    This editorial also mentions “painful cuts to education” that have been made. More about that in a moment.

    A second editorial was written by Bernie Koch, who is Executive Director of the Kansas Economic Progress Council. He takes the position that we can’t make additional cuts, concluding that “To simply rely on cuts will damage the institutions and systems needed to survive the Great Recession and pursue economic recovery.”

    Referring to a SurveyUSA poll from last month, Koch wrote: “86 percent [of Kansans] said they were somewhat or very concerned about cuts to education.”

    The problem with this poll is that the people of Kansas are very uninformed about school spending and cuts. First, there are plenty of cuts to be made, cuts that don’t affect the classroom. Recently the Wichita school district was able to find $2.5 million annual savings by adjusting transportation schedules at a small number of schools. Now that district is looking at savings that can be had in administration.

    So when the Eagle editorial board and the governor claim that “painful cuts” have been made to schools, were those painful cuts made before transportation schedules were adjusted? Kansans should ask where these priorities are set.

    Second, Kansans are simply uninformed — perhaps deliberately misinformed — about the level of school spending, as a poll conducted by the Kansas Policy Institute found. This poll, released last week, found that “fewer than one Kansan in 10 has a clear idea how much money schools actually receive — or spend — to educate elementary, middle and high school students across the state.”

    Further, when informed about the true level of spending and the increase over the past five years, 81 percent of Kansans oppose tax increases for school spending. Only 11 percent were willing to pay increased taxes.

    The third editorial was written by Kent Beisner, who is interim president and CEO of the Kansas Chamber of Commerce.

    Beisner accurately diagnoses the cause of the problem: “The governor and his allies in the Legislature actually have the audacity to claim that recent tax cuts are to blame for the state’s budget deficit. But when the Legislature cut taxes earlier this decade, revenues to the state skyrocketed. The problem occurred when the state showed zero fiscal restraint and committed to spending more than it was taking in, erasing more than a $950 million budget surplus in just two years. Kansas most definitely does not have a tax-cutting or revenue problem.”

    The way to get out of this problem is to control spending so that taxes don’t have to be raised. A low-tax environment is the best tool Kansas can use to attract and keep business, Beisner added: “If the Legislature adopts what will amount to the largest tax increase in the state’s history, states more competitive than Kansas will no doubt take advantage of our resulting anti-growth climate and lure our employers and workers out of the state.”

  • Obama not first with trillion dollar deficit

    A Wall Street Journal column from last year highlights the lack of honesty in government accounting. The column speaks of fiscal year 2008. That period of time ended on September 30, 2008.

    It has been widely noted that 2009 will have the first “trillion-dollar deficit” in American history. Actually it’s the second. In fiscal 2008, the national debt increased from $9 trillion to slightly over $10 trillion. Yet the budget deficit in the last fiscal year was officially reported as being $455 billion. How could the national debt have increased by considerably more than twice the “deficit”? Simple. Just call the money borrowed from the Social Security trust fund an “intragovernmental transfer” and exclude it from the calculation of the deficit.

    Corporate managers have gone to jail for less book cooking than that.

    More about the fictional Social Security trust fund is at Social security trust fund needed now.

  • Kansas Economic Freedom Index launched

    The purpose of the Kansas Economic Freedom Index is to identify Kansas legislators who vote in favor of economic freedom — and those who don’t. Financial issues like taxes and spending will be important, but I will include issues like smoking bans and seat belt laws.

    This is the first version of the index. As I become aware of votes that should be included, and as new votes are taken, I’ll update the index.

    In the index, each bill has a weight. This is a number from 1 to 10, with 10 meaning the bill is of greatest importance. When I calculate the index value for a legislator, I add up the weights for the bills being considered, and add up the weights the legislator “earned” based on their votes, and that’s the basis of the calculation.

    As this is a new project that I just started, I welcome feedback. Please write to bob.weeks@gmail.com or call me at 316-708-1837, day or evening.

    The permanent page for the index is Kansas Economic Freedom Index.

    Links to current versions of the Kansas Economic Freedom Index:

    Kansas Economic Freedom Index, Senate
    Kansas Economic Freedom Index, House of Representatives

  • The bamboozled public

    The intellectual arguments used by the State throughout history to “engineer consent” by the public can be classified into two parts: (1) that rule by the existing government is inevitable, absolutely necessary, and far better than the indescribable evils that would ensue upon its downfall; and (2) that the State rulers are especially great, wise, and altruistic men — far greater, wiser, and better than their simple subjects. In former times, the latter argument took the form of rule by “divine right’ or by the “divine ruler” himself, or by an “aristocracy” of men. In modern times, as we indicated earlier, this argument stresses not so much divine approval as rule by a wise guild of “scientific experts” especially endowed in knowledge of statesmanship and the arcane facts of the world. The increasing use of scientific jargon, especially in the social sciences, has permitted intellectuals to weave apologia for State rule which rival the ancient priestcraft in obscurantism. For example, a thief who presumed to justify his theft by saying that he was really helping his victims by his spending, thus giving retail trade a needed boost, would be hooted down without delay. But when this same theory is clothed in Keynesian mathematical equations and impressive references to the “multiplier effect,” it carries far more conviction with a bamboozled public.

    From Murray N. Rothbard, For a New Liberty: The Libertarian Manifesto, pages 59 – 60

  • Kansas tax increases promoted, even by Republicans

    Last week Kansas Senator John Vratil, a Leawood Republican who is Vice-President of the Senate, sent a letter to constituents asking for feedback on how to generate more revenue for Kansas state government.

    The letter states “The Senate Ways and Means Committee has worked hard to cut ‘the fat’ out of state government while striving to hold education harmless.” The letter notes that the Kansas general fund budget is now $5.4 billion, and that education and required social services amount to $4.6 billion of that.

    Vratil promotes the tax on drinks sweetened with sugar, which would add about ten cents to the cost of a 12 ounce can of pop. Vratil says the tax would raise an estimated $90 million in revenue per year.

    The Senate leadership — Vratil being part of that — has already announced plans to push for a tax increase.

    Other Republican senators may be jumping on the tax bandwagon, too. Last week Senator Les Donovan, a Wichita Republican and chairman of the Assessment and Taxation Committee, said during a committee hearing: “We have to do something on the revenue side. … We don’t know if we can cut enough spending.” He said that if we can’t cut spending, “we’re going to do something to raise some revenue, some way.”

    (Today Donovan proposed increasing the state sales tax rate by 0.7 percentage points, removing the sales tax from food in three years. He will also propose increases on taxes for cigarettes, alcoholic beverages, and soft drinks sweetened with sugar. The increase in the sales tax is a 13.2% increase in the rate.)

    On a Kansas conservative message board, one poster expressed support for a soda tax, saying that people could avoid the tax by not purchasing soda. Another poster disagreed, calling the soda tax “another area of government encroachment on our decisions,” concluding that “Unfortunately, the senators are not looking out for the health of Kansans as much as looking to get more of the wealth of Kansans.”

    Another poster contended that Vratil’s assertion of Kansas already “cutting the agencies to the bone” is an overstatement of the cuts, and that there’s plenty of slack in state employment and management practices. Specifically,

    The false premise being presented by Sen. Vratil is that all the agencies and departments that are recipients of government money are cut to the “bone.” Really? What these folks consider a “bone” many of us would still see as filet mignon.

    We have to start here. There is no doubt that on any budget your employees are your greatest cost, but the real question is is there a necessity for all those employees? We have layers of bureaucracy that are costing us a fortune. We have managers managing managers and departments created as political payback for years of campaign support. Public service unions are dictating the state budget rather than “best business” practices. Now before I have all the folks who are state employees cursing me, let me stress that my comments are not directed at those who are working hard every day and giving their best to their employers. I am making my assertions on personal information and experience that I have observed for years. The public service unions handcuff managers from releasing poor performers on a daily basis. I can’t tell you how many times I’ve heard that departments could run with 80% less staff and not a single tax payer would know the difference. I am sympathetic to folks losing their jobs, but when did it become the taxpayers responsibility to ensure employment for our neighbors? I would rather ensure that they have job opportunities from the private sector. Those opportunities will continue to diminish with the type of tax-and-spend practices that are currently directing the state budget.

    Another poster wondered how a tax on soda would decrease consumption of what’s deemed an “undesirable” product, while a general sales tax would not produce the same effect on all goods:

    Has anyone ever asked Mr. Morris or Vratil or any other tax hike supporter how they can claim a tax on soda will make us all healthier because we’ll stop buying as much, but then claim an across the board 1% sales tax isn’t supposed to hurt the economy at all? If a tax on soda or cigarettes or alcohol is enough to decrease consumption, doesn’t it stand to reason that an across the board sales tax increase would have the same effect? Have these legislators ever been challenged about this blatant contradiction?

    With moderate and even some conservative Republicans proposing tax increases, it’s going to be a tough battle for senate Republicans to hold the line on taxes.

  • Kansas general fund spending

    Kansas general fund spending per person, in both actual dollars and inflation-adjusted dollars.

    Kansas general fund spending per person

  • Kansas employment trends

    From the Bureau of Labor Statistics, the trend in Kansas private sector employment and government employment.

    Kansas private sector and government employment

    Related content is at Kansas Loses Private Sector Jobs as Government Grows , Government employees thrive, Governor Claims Growth While Jobs Disappear, Kansas continues to suffer from job growth deficit, and Kansas Governor Kathleen Sebelius and Kansas jobs.

  • Kansas can have fast, achievable savings

    Kansas Senator Chris Steineger (Democrat from Kansas City) has formulated a list of items that he says could lead to “fast, achievable savings” for the state of Kansas. This list is titled the “$100 million list.” Some of the items have cost savings given, and some don’t.

    In particular, the idea of selling state-owned office buildings is appealing. Steineger showed me preliminary research that showed that the “rent” the state charges agencies is more expensive than private office space in downtown Topeka. The revenue from selling the buildings is a one-time boost, but the reduced operating expense is ongoing.

    Here’s Steineger’s list:

    1. Sell and lease-back of State office buildings: Docking, Landon, Eisenhower, Curtis, and Dillon House could be sold to professional real estate companies who can perform renovations
      cheaper and faster than the State. Sale and lease back offers four advantages:

      • immediate cash payment for buildings;
      • any remodeling can be done by private owner FASTER and CHEAPER than the State;
      • most office buildings in USA are privately owned; and
      • sale could generate $100 million.
    2. Eliminate $5 million state-subsidy for air fares in Wichita. Let free market work!
    3. Eliminate State purchases of water rights in government owned reservoirs.
    4. Eliminate construction of more “weather monitoring” stations.
    5. Eliminate state owned buffalo herds. ($50,000)
    6. Eliminate state aid to cities and counties which will incentivize unification.
    7. Eliminate transfer of state alcohol tax to cities’ general fund and recreation fund. ($18 million)
    8. Eliminate all future state aid for school bond and interest and technology.
    9. Reduce Leadership pay by one-half for one year & limit voucher days to 12. ($100,000)
    10. Eliminate Leadership office budget surplus carryover.
      ($138,000)

    11. Reduce by one-half the Leadership Office budget for one year. ($710,000)
    12. Reduce Leadership mail franking to same as rank and file legislator.
    13. Reduce funding for Kansas Bio-Science Authority.
    14. Reduce by one-half funding for KU Cancer Center and order Legislative Post Audit of expenditures since inception.
    15. Renegotiate State building and property insurance for lower rates.
    16. Consolidate all functions of probation and parole in Kansas. A computer tracking system currently in the design stage will greatly facilitate such an efficiency merger.
    17. Consolidate all regulatory and licensing functions of racing, gaming, and bingo.
    18. Consolidate and simplify all alcohol regulation, including cereal malt beverage.
    19. Consolidate into the Department of Agriculture: Livestock Commission, Conservation Commission, Water Office, and Geological Survey. A 2007 Post Audit concludes this will save $700,000 year: www.kslegislature.org/postaudit/audits perform/Q8pa23.pdf.
    20. Consolidate into one agency: Bank Commission, Credit Union Office, and Securities Commissioner. A 2008 Post Audit concludes this will save $500,000 year: www.kslegislature.org/postaudit/audits perform/08pa22.pdf.
    21. Go another step further and consolidate all of the above with Insurance Dept. and create one, streamlined financial regulatory agency.
    22. Consolidate all state housing programs into Kansas Housing Resources Corporation.
    23. Consolidate all early childhood programs (Tiny-K, Head Start, Early Head Start, Parents as Teachers, Smart Start, Healthy Start, Kansas Preschool Program) at State Board of Education.
    24. Consolidate KTEC, MAMTC, KS Inc, per Post Audit.
    25. Consolidate Kansas Turnpike Authority and KDOT.
    26. Capitol restoration — exempt from sales tax. ($8 million)
    27. Capitol restoration — delay build out of basement level visitors’ center. Install doors and lights only to make it a minimally functional space. It would be like an unfinished basement under someone’s home: dry, lighted and usable, but bare concrete.
    28. Auction Governor’s silver Chevy Suburban, which is parked in lower level of parking garage and seldom driven. ($25,000)
    29. Increase premiums and co-pays for state employee health insurance AND create large discounts for those who choose healthy living habits such as tobacco avoidance, healthy weight, and annual checkups.
    30. Allow Kansas Department of Corrections to pay hospitals at Medicaid rates.
    31. Obtain fair market value of the state owned business known as KU Hospital. If the Legislature is a board of directors for the state, then we have a fiduciary duty to have some idea of what our assets are worth.

  • Kansas historic preservation tax credits: the hearing

    On Wednesday, the Taxation Committee of the Kansas House of Representatives heard testimony on HB 2496, which would expand the historic preservation tax credit program. This program provides tax credits to qualified historic preservation projects. I testified at the hearing, and my written testimony is at Kansas historic preservation tax credits should not be expanded.

    The idea of tax credits confuses some people. Some may confuse credits with a tax deduction. Some may believe that tax credits are given out at no cost to the state. But in fact, the tax credits are quite costly. As I told the committee members, if the state grants a tax credit, and then does not reduce state spending by the amount of the tax credit, other taxpayers in Kansas have to make up the difference.

    That’s one of my core reasons for opposing the tax credits. Since the state does not — and is not likely to — reduce spending by the amount of credits granted, the result is a transfer of money from Kansas taxpayers to the recipients of the credits. But even if the state did reduce its spending, the result would still be a implied decision by the state that it can better decide how to spend money than its citizens can.

    Besides this, the arguments of those in favor of the historic preservation tax credits are self-serving and in some cases misleading. Some of the conferees are involved in projects that were to receive tax credits. They are not happy now that they may not get them.

    Other conferees were local units of government such as Dale Goter, lobbyist for the City of Wichita. Wichita has a big stake in the tax credits, as the renovation of the Broadview Hotel is on hold because the developers may not receive the tax credits. The developers and the city claim that the project is not economically feasible without the tax credits. We don’t really know whether this is true. When government subsidy is available, people have a way of designing project budgets in a way the requires the subsidy. Why would someone turn down free money?

    It should also be noted that the tax credits the Broadview developers are seeking — perhaps $3 million to $4 million — are on top of many millions in subsidy the city has already approved.

    The arguments of other conferees must be questioned. Brenda Spencer of Wamego, who owns a preservation consulting business, told of a project in Leavenworth that will house a company employing 400 people. This results, she said, in an annual payroll of $26 million, with resultant tax dollars flowing to the state and local government.

    The problems with this illustration of the purported success of the historic preservation tax credit program are these: Would the jobs not have been created unless there was a historic property to house the workers? Could the workers work somewhere that wouldn’t require tax credits? These jobs: are they new jobs? Were the workers formerly unemployed, or did they leave other jobs to work in the historic building? To the extent that happened, the jobs, with their tax payments to the state, can’t be counted as new.

    Christy Davis, owner of another preservation consulting firm, testified that since 2001, the tax credit program has leveraged $264 million in private dollars, which she said is a 400% return on investment for the state. The problem with this analysis (it was made by others, too) is that it assumes that none of the projects would have proceeded if not for the tax credits. It credits the program as being the only reason why this activity took place. This is undoubtedly false.

    Further, this analysis treats the state as though it were the owner of these properties. That isn’t true, either.

    Davis also testified that since work on historic buildings is 50% more labor intensive than new construction, the tax credit program has the effect of a jobs creation program. I doubt that the developers of historic preservation projects see creating a lot of jobs as a benefit. To business, workers are a cost to be controlled, not a benefit to be expanded. If the state wants to view historic preservation as a jobs creation program — meaning that more jobs are better than fewer jobs — let the state mandate that, say, power tools can’t be used on these projects. Then even more workers will be needed.

    Can we also agree that owners of firms that profit from a government program qualify as a special interest?

    Goter, Wichita’s lobbyist, also stated in his written testimony: “The return on investment for the public dollar spent on historic renovation is totally recovered in a 10 year span from increased property taxes alone. That return is shared by local and state governments through their respective mill levies.”

    This statement reveals the flaw in the reckoning used by government in making economic development calculations. To government, the return is in the form of increased tax revenue. Many citizens don’t view things the same way. For government to make an investment of taxpayer funds just so it can receive even more tax revenue is appealing to government bureaucrats and politicians who want to expand their sphere of influence and control. But not so much for everyone else.

    For me a lesson I learned from the hearing is how easily those who consider themselves fiscal conservatives can become derailed by programs like this. Olathe Representative Arlen Siegfreid, a member of the Taxation Committee as well as Speaker Pro Tem of the Kansas House of Representatives, offered written and oral testimony in favor of this bill.

    Support of this bill is at odds with his stated positions. On his personal website, under the heading “Fiscal Responsibility” appears this sentence: “However, particularly in times of economic peril, sometimes the ‘wants’ we’ve fertilized with ample resources grow to become ‘needs’ and our well intentioned investments in promising ideas and programs become the dangerous government growth that each candidate swears to defend against at all costs on the campaign trail.”

    The historic preservation tax credit program, as reported in an audit recently completed by the Legislative Division of Post Audit, has grown tremendously from its initial cost. The audit, titled Kansas Tax Revenues, Part I: Reviewing Tax Credits, identifies the historic preservation tax credit as a program that the legislature may want to re-evaluate, as the program is significantly more expensive than originally planned. The fiscal note that accompanied the tax credit legislation when passed in 2001 and revised in 2002 reported an estimated annual cost of $1 million. In 2007, the actual cost was $8.5 million.

    This is an example of a government spending program growing out of control — the type of “dangerous government growth” Siegfreid mentioned above.

    Siegfreid’s website also states: “My subsequent re-elections affirm that notion, and I’m now more committed than ever to reducing the strain government and it’s [sic] failed policies are placing on individual taxpayers — and our local businesses.”

    As mentioned above, when the state grants tax credits, other Kansas taxpayers have to pay more taxes to make up the shortfall in revenue. This is an example of the type of strain Siegfreid says he is against.

    Finally, Siegfreid has authored a tax simplification bill, stating that “Kansas tax policy is too complicated.” Tax credits are an example of increasing complexity of the state’s tax code.