Voice For Liberty

Tag: Progressives

  • In Wichita, three Community Improvement Districts to be considered

    In Wichita, three Community Improvement Districts to be considered

    In Community Improvement Districts (CID), merchants charge additional sales tax for the benefit of the property owners, instead of the general public. Wichita may have an additional three, contributing to the problem of CID sprawl.

    This week the Wichita City Council will hold public hearings considering the formation of three Community Improvement Districts. In Kansas Community Improvement Districts, merchants charge additional sales tax for the benefit of the property owners, instead of the general public. 1

    Each of these CIDs will charge customers additional sales tax, with a cap on the amount that may be raised, and a separate cap on the length of the CID. For the three projects this week, here are the details: 2

    Delano Catalyst CID: 2% additional tax, raising up to $3,000,000, up to 22 years
    Spaghetti Works CID: 2% additional tax, raising up to $3,118,504, up to 22 years
    Chicken N Pickle CID: 1.5% additional tax, raising up to $2,300,000, up to 15 years

    All these CIDs are of the pay-as-you-go type, which means the city is not borrowing money that would be repaid by the CID tax proceeds. Instead, the CID tax proceeds are periodically sent to the landowners as they are collected. The city retains a 5% administrative fee.

    Additionally, two of these CIDs earmark 10% of the CID tax collections for public benefits, which are extra park maintenance for the Spaghetti Works CID, and street improvements for the Chicken N Pickle CID. While these earmarks may seem magnanimous gestures, they directly work to the developers’ benefit. For Spaghetti Works, Naftzger Park is, in effect, becoming the front yard to a development. It will be of great benefit for it to be maintained well, especially considering that the developers will be able to close the park for private events. For the Chicken N Pickle CID, the street improvements the CID will fund are usually paid for by special tax assessments on the nearby landowners, which in this case is the Chicken N Pickle. This is a large savings.

    By the way, none of the applications for these economic development incentives pleads economic necessity. They simply want more money, and are willing to let government take the blame when customers notice they’re paying 9% or 9.5% sales tax in these districts.

    Of additional note: The Delano and Spaghetti Works developments are receiving many millions of taxpayer-provided subsidy from other economic development incentive programs. 3 4

    It will be interesting to see how the council’s two new members, Brandon Johnson (district 1, northeast Wichita) and Cindy Claycomb (district 6, north central Wichita), will vote in these matters. As Progressives, we might expect them to be opposed to higher sales taxes, which affect low-income households disproportionally. We also might expect them to be opposed to targeted tax incentives for the “wealthy,” such as the now-defunct exemption on pass-through business income in Kansas. Here, they are asked to vote on a highly targeted tax incentive that will benefit identifiable wealthy parties.

    Issues regarding CID

    Perhaps the most important public policy issue regarding CIDs is this: If merchants feel they need to collect additional revenue from their customers, why don’t they simply raise their prices? But the premise of this question is not accurate, as it is not the merchants who receive CID funds. The more accurate question is why don’t landlords raise their rents? That puts them at a competitive disadvantage with property owners that are not within CIDs. Better for us, they rationalize, that unwitting customers pay higher sales taxes for our benefit.

    Consumer protection
    Customers of merchants in CIDS ought to know in advance that an extra CID tax is charged. Some have recommended warning signage that protects customers from unknowingly shopping in stores, restaurants, and hotels that will be adding extra sales tax to purchases. Developers who want to benefit from CID money say that merchants object to signage, fearing it will drive away customers.

    State law is silent on this. The City of Wichita requires a sign indicating that CID financing made the project possible, with no hint that customers will pay additional tax, or how much extra tax. The city also maintains a website showing CIDs. This form of notification is so weak as to be meaningless. See Wichita community improvement districts should have warning signs and In Wichita, two large community improvement districts proposed. In the latter, future Wichita Mayor Jeff Longwell argued that signs showing different tax rates for different merchants would be confusing. Council Member Sue Schlapp said she supported transparency in government, but informing consumers of extra taxes would make the program “useless.”

    Eligible costs
    One of the follies in government economic development policy is the categorization of costs into eligible and non-eligible costs. The proceeds from programs like CIDs and tax increment financing may be used only for costs in the “eligible” category. I suggest that we stop arbitrarily distinguishing between “eligible costs” and other costs. When city bureaucrats and politicians use a term like “eligible costs” it makes this process seem benign. It makes it seem as though we’re not really supplying corporate welfare and subsidy.

    As long as the developer has to spend money on what we call “eligible costs,” the fact that the city subsidy is restricted to these costs has no economic meaning. Suppose I gave you $10 with the stipulation that you could spend it only on next Monday. Would you deny that I had enriched you by $10? Of course not. As long as you were planning to spend $10 next Monday, or could shift your spending from some other day to Monday, this restriction has no economic meaning.

    Notification and withdrawal
    If a merchant moves into an existing CID, how might they know beforehand that they will have to charge the extra sales tax? It’s a simple matter to learn the property taxes a piece of property must pay. But if a retail store moves into a vacant storefront in a CID, how would this store know that it will have to charge the extra CID sales tax? This is an important matter, as the extra tax could place the store at a competitive disadvantage, and the prospective retailer needs to know of the district’s existence and its terms.

    Then, if a business tires of being in a CID — perhaps because it realizes it has put itself at a competitive disadvantage — how can the district be dissolved?

    The nature of taxation
    CIDs allow property owners to establish their own private taxing district for their exclusive benefit. This goes against the grain of the way taxes are usually thought of. Generally, we use taxation as a way to pay for services that everyone benefits from, and from which we can’t exclude people. An example would be police protection. Everyone benefits from being safe, and we can’t exclude people from participating in — and benefiting from — police protection.

    But CIDs allow taxes to be collected for the benefit of one specific entity. This goes against the principle of broad-based taxation to pay for an array of services for everyone. But in this case, the people who benefit from the CID are quite easy to identify: the property owners in the district.

    —
    Notes

    1. Weeks, Bob. Community improvement districts in Kansas. Available at https://wichitaliberty.org/kansas-government/community-improvement-districts-kansas/. ↩
    2. Wichita City Council Agenda Packet for January 9, 2018. Agenda items IV-1, IV-2, and IV-3. ↩
    3. Weeks, Bob. Naftzger Park project details. Available at https://wichitaliberty.org/wichita-government/naftzger-park-project-details/. ↩
    4. Weeks, Bob. Delano catalyst site. https://wichitaliberty.org/wichita-government/delano-catalyst-site/. ↩
  • Decoding Duane Goossen

    Decoding Duane Goossen

    The writing of Duane Goossen, a former Kansas budget director, requires decoding and explanation. This time, his vehicle is “Rise Up, Kansas.”

    Duane Goossen was Kansas budget director from 1998 to 2010.1 He is critical of the administration of Kansas Governor Sam Brownback and recent sessions of the Kansas Legislature. It’s useful to examine his writings so that Kansans may become aware of the ramifications of his recommendations, and how during his years as budget director he was unable to adhere to the principles he now advocates. Following, some language from his recent article Rise Up, Kansas.

    Goossen: “This marks the beginning of a hopeful new chapter in the Kansas story. It also presents a desperately needed opening for comprehensive tax reform.”

    Comprehensive tax reform. That sounds good, as “reform” has a positive connotation. It means change for the better. But in this case reform means raising taxes, and by a lot. In fact, advocates of tax increases generally won’t say by how much they want to raise taxes.

    As an example, in May a coalition of spending groups called for what they termed “Option 4.” It would eliminate all tax cuts enacted since 2012. This action would reinstate the tax on pass-through business income — the so-called “LLC loophole.” But this would also raise income taxes wage income, as those tax rates also were reduced in 2012. For example, income tax rates for a married family earning up to $30,000 would rise to 3.50 percent from the current 2.70 percent. That’s an increase of 30 percent in the income tax rate. For other income levels the increase is greater.2

    A spokesperson for the Option 4 coalition argued that rolling back the tax cuts could increase revenue to the state by $1 billion. By the way, the Option 4 coalition did not call for the rollback of the sales tax increase passed in 2015. I should qualify that with apparently, as no handouts explaining Option 4 can be found. In addition, an audio recording of the press conference has been removed.

    Members of the Option 4 coalition included Shannon Cotsoradis of Kansas Action for Children, Bob Totten from the Kansas Contractors Association, Rebecca Proctor of the Kansas Organization of State Employees, and Mark Desetti from the Kansas National Education Association.3

    With the exception of the pass-through business income tax, failing to be specific about whose taxes will be raised by how much is characteristic of spending groups. In fact, these spending groups generally shy away from using the term tax. Look at these examples of language from Goossen’s article:

    • damage to state finances
    • hemorrhage revenue
    • can’t start healing while still in triage mode
    • fix our structural revenue imbalance
    • broaden the tax base
    • means reviewing our entire tax code
    • modernizing all revenue sources
    • get our fiscal house back in order
    • begin with commonsense basics
    • new priorities
    • recover the opportunities we lost
    • senseless era of crisis
    • begin restoring those opportunities
    • rise above the political fray
    • find courage to make difficult decisions
    • imagine the possibilities

    Commonsense basics. Who could be against that? Yet each of these terms is a call for more and higher taxes.

    Goossen: “Three credit rating downgrades”

    The Kansas credit rating has declined. In making this decision, Moody’s mentioned “revenue reductions (resulting from tax cuts) which have not been fully offset by recurring spending cuts.4 So Kansas has a decision: Offset revenue reductions with higher taxes or spending cuts. Moody’s doesn’t care which is chosen, but Goossen and the spending coalition does.

    KPERS funded ratio through 2014Of note, Moody’s mentions another problem: “an underfunded retirement system for which the state is not making actuarially required contributions.” This is an ongoing problem, as the nearby chart illustrates. The funding ratio of the Kansas retirement plan has deteriorated for many years, including the years when Duane Goossen was Kansas budget director. (Recently Kansas has improved the funding ratio of KPERS, but it did that by borrowing funds, which was an unwise decision. Because of the borrowing, Kansas has delayed schedule KPERS contributions, which effectively pays for current spending with long-term debt.5)

    Moody’s also mentioned “In recent years the state has appropriated funds from or shifted costs to the State Highway Fund to help balance the general fund budget.” This too, is an ongoing problem.6 “Raiding the Bank of KDOT” has been a problem for many years, including the years when Duane Goossen was Kansas budget director.

    Goossen: “It will likely take a generation to fully recover from this horrible experiment.”

    Spending in Kansas. Click for larger.
    Spending in Kansas. Click for larger.
    Goossen is not specific as to the nature of the damage. Generally, a claim of slashed state spending is made. But it’s difficult to see the purported decline. Some programs may have been cut, but overall, spending is level or climbing, as can be seen in the nearby chart.7 Additionally, in comparison to other states Kansas spends a lot, and continues to.8

    Goossen: “lifting the burden the Brownback plan forced onto our lowest-earning Kansans.”

    Yes, we should sharply reduce or eliminate the sales tax on groceries. It affects low-income households most severly.9

    Goossen: “And it means establishing a responsible state savings account.”

    Kansas General Funding ending balance. Click for larger.
    Kansas General Funding ending balance. Click for larger.
    Kansas doesn’t have what some states have, which is a true rainy day fund that is governed by statute as to when contributions must be made and when the fund may be used. Instead, Kansas has a simple requirement for an ending balance of 7.5 percent, which the state has regularly ignored for decades. Low ending balances are a hallmark of Kansas government, including the years when Duane Goossen was Kansas budget director. In fact, in one year his budget had a negative ending balance.10

    —
    Notes

    1. Goossen, Duane. Kansas Budget Blog. http://www.kansasbudget.com/. ↩
    2. Kansas Policy Institute. *Option 4: Soak the poor. https://kansaspolicy.org/option-4-soak-poor/. ↩
    3. Hancock, Peter. Session resumes with call for total repeal of Brownback tax cuts. Lawrence Journal-World, April 27, 2016. http://www2.ljworld.com/news/2016/apr/27/session-resumes-call-total-repeal-brownback-tax-cu/. ↩
    4. Moody’s Investors Service, Inc. Moody’s downgrades Kansas issuer rating to Aa2 from Aa1, notched ratings to Aa3 from Aa2 and KDOT highway revenue bonds to Aa2 from Aa1; outlook stable. April 30, 2014. https://www.moodys.com/research/Moodys-downgrades-Kansas-issuer-rating-to-Aa2-from-Aa1-notched–PR_298383. ↩
    5. Weeks, Bob. This is why we must eliminate defined-benefit public pensions. http://wichitaliberty.org/kansas-government/we-must-eliminate-defined-benefit-public-pensions/. ↩
    6. Weeks, Bob. Kansas transportation bonds economics worse than told. http://wichitaliberty.org/kansas-government/kansas-transportation-bonds-economics-worse-than-told/. ↩
    7. Weeks, Bob. Kansas government spending. http://wichitaliberty.org/kansas-government/kansas-government-spending-2/. ↩
    8. Weeks, Bob. Spending in the states, per capita. Interactive visualization. http://wichitaliberty.org/economics/spending-states-per-capita-2/. ↩
    9. Weeks, Bob. Kansas sales tax has disproportionate harmful effects. http://wichitaliberty.org/taxation/kansas-sales-tax-has-disproportionate-harmful-effects/. ↩
    10. Weeks, Bob. Kansas General Fund. http://wichitaliberty.org/kansas-government/kansas-general-fund-2/. ↩
  • How would higher Kansas taxes help?

    How would higher Kansas taxes help?

    Candidates in Kansas who promise more spending ought to explain just how higher taxes will — purportedly — help the Kansas economy.

    Are low taxes important to an economy, especially a state economy? When the Tax Foundation looked at the issue, it concluded this: “In this review of the literature, I find twenty-six such studies going back to 1983, and all but three of those studies, and every study in the last fifteen years, find a negative effect of taxes on growth.”1

    Per-capita tax collections, Kansas and nearby states. Click for larger.
    Per-capita tax collections, Kansas and nearby states. Click for larger.
    Many of these studies concerned the national economy and taxes, but some looked at state taxes. When we look at Kansas, we see that Kansas already taxes and spends quite a lot, compared to other states. Nearby is a chart showing per-capita state tax collections in Kansas and Colorado.2

    State and Local Government Employee and Payroll. Click for larger.
    State and Local Government Employee and Payroll. Click for larger.
    Looking at other data, I found that considering all state and local government employees in proportion to population, Kansas has many, compared to other states, and especially so in education.3

    State and local government employment and costs, selected states. Click for larger.
    State and local government employment and costs, selected states. Click for larger.
    From another source of data, I found this: “In the visualization, you can see that Kansas spends quite a bit more than nearby states. Of special interest is Minnesota, which is often used as an example of a high-tax state, and a state with excellent schools and services. But Minnesota spends barely more than Kansas, on a per-person basis. What about Colorado? It seems that Kansans often look to Colorado as a state full of bounty. But Kansas outspends Colorado. Same for New Mexico, Wisconsin, Texas, and — especially — Missouri.”4

    Please don’t argue that the economic health of a state is determined by its budget, that is, whether it is balanced or not. And if you want to argue that Kansas has borrowed money through the highway fund and spent it in the general fund: That’s true, and we should not do that. But that action allowed Kansas to keep spending, much like borrowing allows the federal government to keep spending more that it raises through taxes.

    Some argue that if the state taxes more, it can spend more, and therefore the economy expands. But: The money taken from Kansans is money that they can’t spend. And if one wants to argue that government spends more carefully and efficiently than do private individuals spending their own money — well, give it a try. Empirically, not many people believe this.

    And isn’t government spending the purpose of taxation? Nearby are figures showing Kansas general fund spending. You can see that for two years Kansas spent much more than it collected in revenue, using a large ending balance as the source of funds. If one believes in the Keynesian theory of fiscal effects — which most liberals and progressives do — this “deficit” spending spared spending cuts and therefore boosted the Kansas economy.

    Kansas General Fund spending, showing large deficits of revenue compared to spending in 2014 and 2015.
    Kansas General Fund spending, showing large deficits of revenue compared to spending in 2014 and 2015.

    Regarding the spending cuts that some claim: Have there been severe spending cuts in Kansas? While some programs have been trimmed, overall state spending continues on a largely upward trend (for all funds spending) or remains mostly flat (for general fund spending), after accounting for population and inflation.5

    kansas-per-capita-spending-adjusted-for-cpi-2016-10

    Kansas revenue estimate errors. Click for larger.
    Kansas revenue estimate errors. Click for larger.
    We also hear that the Kansas economy is in bad shape because tax revenue has fallen short of estimates. This is not a good indicator of economic health. Instead, it illustrates the difficulty of economic forecasting. Moreover, the negative estimate variances — revenue shortfalls, in other words — in 2002 to 2003 and 2009 to 2010 were generally much larger in magnitude than those of recent years.6 Remember how the Obama administration told us that without the 2009 stimulus package unemployment would rise to a certain level? Well, the stimulus bill passed, we spent the money, and unemployment was higher than what the administration said it would be without the stimulus. And for a long time, too.7

    We also hear that transfers from KDOT — the highway fund — have hurt Kansas, especially in construction jobs. Our state’s two largest newspapers recently editorialized on this matter.8 They correctly reported that Kansas construction jobs were down. But it wasn’t highway construction jobs that caused the loss of jobs, except for a very small portion.

    KDOT spending on major road programs. Click for larger version.
    KDOT spending on major road programs. Click for larger version.
    Furthermore, the state has continued to spend on highway programs, without regard to transfers from the highway fund. When we look at actual spending on roads, we see something different from what is often told. KDOT’s Comprehensive Annual Financial Report shows spending in the categories “Preservation” and “Expansion and Enhancement” has grown rapidly over the past five years. Spending in the category “Maintenance” has been level, while spending on “Modernization” has declined. For these four categories — which represent the major share of KDOT spending on roads — spending in fiscal 2015 totaled $932,666 million, up from a low of $698,770 in fiscal 2010.

    We should not borrow money, place it in the highway fund, and then transfer the funds to the general fund, as the state has done for many years. But actual spending on highways has risen, nonetheless.

    So: Just how will higher taxes help the Kansas economy?

    —
    Notes

    1. McBride, William. What Is the Evidence on Taxes and Growth? Tax Foundation, 2012. http://taxfoundation.org/article/what-evidence-taxes-and-growth. ↩
    2. Weeks, Bob. Tax collections by the states. Interactive visualization. http://wichitaliberty.org/economics/tax-collections-states-2/. ↩
    3. Weeks, Bob. State and local government employee and payroll. Interactive visualization. http://wichitaliberty.org/economics/state-local-government-employee-payroll/. ↩
    4. Weeks, Bob. Kansas, a frugal state? Interactive visualization. http://wichitaliberty.org/economics/kansas-frugal-state/ ↩
    5. Weeks, Bob. Kansas government spending. http://wichitaliberty.org/kansas-government/kansas-government-spending-2/. ↩
    6. Weeks, Bob. Kansas revenue estimates. http://wichitaliberty.org/kansas-government/kansas-revenue-estimates/. ↩
    7. Weeks, Bob. Brownback and Obama stimulus plans. http://wichitaliberty.org/economics/brownback-and-obama-stimulus-plans/. ↩
    8. Weeks, Bob. Topeka Capital-Journal falls for a story. http://wichitaliberty.org/kansas-news-media/topeka-capital-journal-falls-story/. ↩
  • They really are government schools

    They really are government schools

    What’s wrong with the term “government schools?”

    A recent op-ed in the Wichita Eagle read: “Some have begun to call public schools ‘government schools,’ a calculated pejorative scorning both education and anything related to government.”1

    This is not the only time people have objected to the term “government schools.” Public schools bristle at use of the term. In a 2008 email from Wichita School Interim Superintendent Martin Libhart to Wichita school employees, he took issue with those who, using his words, “openly refer to public education as ‘government schools.’”2 “Openly refer,” he writes, as though it should be kept a secret.

    It’s surprising that liberals and progressives object to the term “government schools.” They like government, don’t they? They want more taxation and government spending, don’t they?

    When we think about public schools, we find they have all the characteristics of government programs.

    Public schools are owned by government.

    Their funding comes almost totally from governmental sources, which is to say taxes. (Isn’t it strange that few will donate to public schools?) If you can’t use the services of public schools and don’t want to pay for them — even if you are also paying for other schools that meet your needs — the full weight of the government will come crashing down on you.

    Through laws passed by government, public schools are guaranteed a stream of customers.

    Public schools are regulated — heavily — by government.

    The members of their “board of directors” (the local school board) are chosen through a governmental process — elections.

    Public schools are welcoming to labor unions at the time the private sector is becoming less unionized. In fact, labor unions are becoming a hallmark of government, and government only.3

    Accountability of public schools, like other forms of government, is weak.

    In sum, public schools have all the negative attributes of government institutions and few or none of the positive characteristics that make markets the source of continuous improvement and innovation. So I guess it isn’t surprising that public school advocates like Merritt object to being lumped in with government in general. But public schools share all the characteristics of government, and government is the worst way to supply services except in a few special instances.

    What’s also troubling is how Merritt equates using the term “government schools” with scorn for education. Turning over education to government — with its litany of troubles as listed above — is scornful for children.

    Merritt and others want to have the benefits of governmental institutions without accepting the reality of what government means. That’s a shame for Kansas schoolchildren.

    —
    Notes

    1. Merritt, Davis. Can traditional conservatism save Kansas schools? Wichita Eagle, May 17, 2016. Available at www.kansas.com/opinion/opn-columns-blogs/article77969617.html. ↩
    2. Weeks, Bob. Wichita School Superintendent Martin Libhart: What’s Wrong With “Government Schools?” Available at wichitaliberty.org/wichita-kansas-schools/wichita-school-superintendent-martin-libhart-whats-wrong-with-government-schools/. ↩
    3. Bureau of Labor Statistics. Union Members Summary. January 28, 2016. Available at www.bls.gov/news.release/union2.nr0.htm. ↩
  • Intellectuals vs. the rest of us

    Intellectuals vs. the rest of us

    Why are so many opposed to private property and free exchange — capitalism, in other words — in favor of large-scale government interventionism? Lack of knowledge, or ignorance, is one answer, but there is another. From August 2013.

    brain-diagram-cartoonAt a recent educational meeting I attended, someone asked the question: Why doesn’t everyone believe what we (most of the people attending) believe: that private property and free exchange — capitalism, in other words — are superior to government intervention and control over the economy?

    It’s question that I’ve asked at conferences I’ve attended. The most hopeful answer is ignorance. While that may seem a harsh word to use, ignorance is simply a “state of being uninformed.” That can be cured by education. This is the reason for this website. This is the reason why I and others testify in favor of free markets and against government intervention. It is the reason why John Todd gives out hundreds of copies of I, Pencil, purchased at his own expense.

    But there is another explanation, and one that is less hopeful. There is an intellectual class in our society that benefits mightily from government. This class also believes that their cause is moral, that they are anointed, as Thomas Sowell explains in The vision of the anointed: self-congratulation as a basis for social policy: “What all these highly disparate crusades have in common is their moral exaltation of the anointed above others, who are to have their very different views nullified and superseded by the views of the anointed, imposed via the power of government.”

    Murray N. Rothbard explains further the role of the intellectual class in the first chapter of For a New Liberty: The Libertarian Manifesto, titled “The Libertarian Heritage: The American Revolution and Classical Liberalism.” Since most intellectuals favor government over a market economy and work towards that end, what do the intellectuals get? “In exchange for spreading this message to the public, the new breed of intellectuals was rewarded with jobs and prestige as apologists for the New Order and as planners and regulators of the newly cartelized economy and society.”

    There it is: Planners and regulators. We have plenty of these at all levels of government, and these are prime examples of the intellectual class. Is it any wonder that the locus of centralized planning in south-central Kansas — sustainable communities — is at a government university?

    As Rothbard explains, intellectuals have cleverly altered the very meaning of words to suit their needs:

    One of the ways that the new statist intellectuals did their work was to change the meaning of old labels, and therefore to manipulate in the minds of the public the emotional connotations attached to such labels. For example, the laissez-faire libertarians had long been known as “liberals,” and the purest and most militant of them as “radicals”; they had also been known as “progressives” because they were the ones in tune with industrial progress, the spread of liberty, and the rise in living standards of consumers. The new breed of statist academics and intellectuals appropriated to themselves the words “liberal” and “progressive,” and successfully managed to tar their laissez- faire opponents with the charge of being old-fashioned, “Neanderthal,” and “reactionary.” Even the name “conservative” was pinned on the classical liberals. And, as we have seen, the new statists were able to appropriate the concept of “reason” as well.

    We see this at work in Wichita, where those who advocate for capitalism and free markets instead of government intervention are called, in the case of Wichita Mayor Carl Brewer and Wichita Eagle editorial writer Rhonda Holman, “naysayers.”

    The sad realization is that as government has extended its reach into so many areas of our lives, to advocate for liberty instead of government intervention is to oppose many things that people have accepted as commonplace or inevitable. To advocate that free people should trade voluntarily with other free people — instead of forming a plan for them — is to be dismissed as “not serious.”

    Rothbard further explains the role of intellectuals in promoting what they see as the goodness of expansive government:

    Throughout the ages, the emperor has had a series of pseudo-clothes provided for him by the nation’s intellectual caste. In past centuries, the intellectuals informed the public that the State or its rulers were divine, or at least clothed in divine authority, and therefore what might look to the naive and untutored eye as despotism, mass murder, and theft on a grand scale was only the divine working its benign and mysterious ways in the body politic. In recent decades, as the divine sanction has worn a bit threadbare, the emperor’s “court intellectuals” have spun ever more sophisticated apologia: informing the public that what the government does is for the “common good” and the “public welfare,” that the process of taxation-and-spending works through the mysterious process of the “multiplier” to keep the economy on an even keel, and that, in any case, a wide variety of governmental “services” could not possibly be performed by citizens acting voluntarily on the market or in society. All of this the libertarian denies: he sees the various apologia as fraudulent means of obtaining public support for the State’s rule, and he insists that whatever services the government actually performs could be supplied far more efficiently and far more morally by private and cooperative enterprise.

    The libertarian therefore considers one of his prime educational tasks is to spread the demystification and desanctification of the State among its hapless subjects. His task is to demonstrate repeatedly and in depth that not only the emperor but even the “democratic” State has no clothes; that all governments subsist by exploitive rule over the public; and that such rule is the reverse of objective necessity. He strives to show that the very existence of taxation and the State necessarily sets up a class division between the exploiting rulers and the exploited ruled. He seeks to show that the task of the court intellectuals who have always supported the State has ever been to weave mystification in order to induce the public to accept State rule, and that these intellectuals obtain, in return, a share in the power and pelf extracted by the rulers from their deluded subjects.

    And so the alliance between state and intellectual is formed. The intellectuals are usually rewarded quite handsomely by the state for their subservience, writes Rothbard:

    The alliance is based on a quid pro quo: on the one hand, the intellectuals spread among the masses the idea that the State and its rulers are wise, good, sometimes divine, and at the very least inevitable and better than any conceivable alternatives. In return for this panoply of ideology, the State incorporates the intellectuals as part of the ruling elite, granting them power, status, prestige, and material security. Furthermore, intellectuals are needed to staff the bureaucracy and to “plan” the economy and society.

    The “material security,” measured in dollars, can be pretty good, as shown by these examples: The Wichita city manager is paid $185,000, the Sedgwick county manager is paid $175,095, and the superintendent of the Wichita school district is paid $224,910.

  • Wichita Eagle editorial board on county budget

    Wichita Eagle editorial board on county budget

    When someone invokes “ideology” in their criticism of you, you know that they’ve either run short of actual arguments based on fact, or they don’t know what ideological means.

    In its op-ed this Sunday, the Wichita Eagle editorial board blasts the Sedgwick County Commission for cuts to various programs, mentioning “Sedgwick County Zoo, Exploration Place, the Arts Council and Greater Wichita Economic Development Coalition” specifically.

    I might invite the Eagle editorialists to revisit the county’s recommended budget for 2013, prepared under the leadership of then-chairman Tim Norton, the body’s sole Democrat, both then and now. According to county documents, Norton’s recommended budget made these cuts:

    Zoo: $255,889
    Exploration Place: $112,405
    Arts Council: $0
    GWEDC: $0

    So this is not the first time the zoo and Exploration Place have been cut.

    Additionally, Norton’s recommended budget cut 113.80 employees from the county payroll. Of these, 60.75 were from the closure of the Judge Riddel Boys Ranch Juvenile Detention Program, leaving 53.05 in cuts from other county programs. The 2016 recommended budget calls for cuts of 10.00 employees.

    I wonder: Did the Eagle editorial writers rail against commissioners Norton, Unruh, and Skelton for the cuts in the 2013 recommended budget? Yes, there was criticism of budget cuts then, but no ideological bashing.

    This year the Eagle editorial board also criticizes the commission majority for its plan to eliminate routing borrowing for county roads and bridges. Last year the Eagle recommended Wichitans vote in favor of a sales tax. One of its components, viewed favorably by the city and the Eagle, was the avoidance of borrowing for a large public works project.

    But now that conservatives on the county commission propose avoiding debt — some debt, not all debt — the Eagle is opposed.

    The shifting sands underlying the Eagle editorial board’s criticism is evidence of an ideology, and a rather shallow one. Cuts made by conservatives? Bad. There will be damage, says the headline.

    Much larger cuts made by progressives? The editorial board acknowledges “the county needs to tighten its belt and prioritize its services.”

    That’s quite a contrast.

    Here are excerpts from the 2013 and 2016 Sedgwick County recommended budgets showing recommended cuts.

  • Tax rates and taxes paid

    Tax rates and taxes paid

    Those who call for a return to 90 percent tax rates should be aware that few people actually paid tax at those rates.

    Progressives are calling for higher income tax rates on the rich. The top marginal tax rate — that’s the rate that applies to high income earners on most of their income — was above 90 percent during most of the 1950s. From 2003 to 2012 it was 35 percent, and is now 39.6 percent. Some see that as a lost opportunity. If we could return to the tax rates of the 1950s, they say, we could generate much more revenue for government.

    The top marginal tax rate is the rate that applies to income. It’s not the same as what is actually paid. This fact is unknown or ignored by those who clamor for higher taxes on the rich.

    The mistake the progressives make is equating tax rates with the tax actually paid. For many people, there is a direct relationship. For workers who earn a paycheck, there’s not much they can do to change the timing of their income, find tax shelters, or shift income to capital gains. When income tax rates rise, they have to pay more. But people with high incomes can use these and other strategies to reduce the taxes they pay. In fact, there is an entire industry of accountants and lawyers to help people reduce their tax. Often — particularly in the past — investments and transactions were made solely for the purpose of avoiding taxes, not for any other economic benefit.

    But: High tax rates make the middle class feel better about paying their own taxes. With top tax rates of 90 percent, they may believe that the rich are paying a lot of tax. The middle class may take comfort in the fact that someone else is worse off. But that is based on the misconception that high tax rates mean rich people actually pay correspondingly higher tax.

    Top tax rates and taxes actually paid

    Figure 1. The top marginal income tax rate has varied widely, but since World War II, tax revenue collected as a percent of GDP is remarkably constant.
    Figure 1. The top marginal income tax rate has varied widely, but since World War II, tax revenue collected as a percent of GDP is remarkably constant.
    A series of charts illustrate the lack of a relationship between the top marginal income tax rate and the income taxes actually paid. (Click charts for larger versions.)

    Figure 1 shows that that top marginal tax rate has varied widely. But since World War II, the taxes actually collected, expressed as a percentage of gross domestic product, has been fairly constant. In 1952 the top tax rate was 92.0 percent, and income taxes paid as a percent of GDP was 13.5 percent. In 2012 the top rate was 35.0 percent, and income taxes paid as a percent of GDP was 11.2 percent.

    Figure 2. The top marginal income tax rate has varied widely, but the average federal tax rates paid by top earners has varied less.
    Figure 2. The top marginal income tax rate has varied widely, but the average federal tax rates paid by top earners has varied less.
    Figure 2 shows how the top marginal income tax rate has varied widely, but the average federal tax rates paid by top earners has varied less. Data for this series is available only back to 1979.

    Figure 3. The top marginal income tax rate has varied widely and has mostly fallen, and the share of federal taxes paid by top income earners has risen.
    Figure 3. The top marginal income tax rate has varied widely and has mostly fallen, and the share of federal taxes paid by top income earners has risen.
    Figure 3 shows how the top marginal income tax rate has varied widely and has mostly fallen, and the share of federal taxes paid by top income earners has risen.

    Sources of data for these charts are the Internal Revenue Service, Bureau of Economic Analysis, and Congressional Budget Office.

    Hauser’s Law

    In 2010 W. Kurt Hauser explained in The Wall Street Journal: “Even amoebas learn by trial and error, but some economists and politicians do not. The Obama administration’s budget projections claim that raising taxes on the top 2% of taxpayers, those individuals earning more than $200,000 and couples earning $250,000 or more, will increase revenues to the U.S. Treasury. The empirical evidence suggests otherwise. None of the personal income tax or capital gains tax increases enacted in the post-World War II period has raised the projected tax revenues. Over the past six decades, tax revenues as a percentage of GDP have averaged just under 19% regardless of the top marginal personal income tax rate. The top marginal rate has been as high as 92% (1952-53) and as low as 28% (1988-90). This observation was first reported in an op-ed I wrote for this newspaper in March 1993. A wit later dubbed this ‘Hauser’s Law.’”

    Incentives matter, economists tell us. People react to changes in tax law. As tax rates rise, people seek to reduce their taxable income. A common strategy is to make investments in economically unproductive tax shelters. There is less incentive to work, to save and build up capital stocks, and invest. These are some of the reasons why tax rate hikes usually don’t generate the promised revenue.

    The subtitle to Hauser’s article is “Tax revenues as a share of GDP have averaged just under 19%, whether tax rates are cut or raised. Better to cut rates and get 19% of a larger pie.” Figure 1 illustrates. The top line, the top marginal tax rate in effect for each year, varies widely. The other two lines show total taxes and federal income taxes as a percent of gross domestic product. Since World War II, these lines are fairly constant, even as the top marginal tax rate varies.

  • The purpose of high tax rates

    From February 2014.

    “The purpose of high taxes on the rich is not to get the rich to pay money, it’s to get the middle class to feel better about paying high taxes.”

    Numbers And Finance, CalculatorThis is what Jim Pinkerton, the journalist, Fox News contributor, and co-founder of the RATE (Reforming America’s Taxes Equitably) Coalition told an audience at a conference titled “The Tax & Regulatory Impact on Industry, Jobs & The Economy, and Consumers” produced by the Franklin Center for Government and Public Integrity.

    Pinkerton was referring to the economist F.A. Hayek. Others have also noted that changes to marginal tax rates often have little impact on the amount of taxes actually paid. The top marginal tax rate — that’s the rate that applies to high income earners on most of their income — was above 90 percent during most of the 1950s. From 2003 to 2012 it was 35 percent, and is now 39.6 percent.

    The top marginal tax rate is the rate that applies to income. It’s not the same as what is actually paid. This fact is unknown or ignored by those who clamor for higher taxes on the rich. They often cite the rising prosperity of the 1950s as caused by the high marginal tax rate in effect at the time.

    The mistake the progressives make is equating tax rates with the tax actually paid. For many people, there is a direct relationship. For workers who earn a paycheck, there’s not much they can do to change the timing of their income, find tax shelters, or shift income to capital gains. When income tax rates rise, they have to pay more. But rich people can use these and other strategies to reduce the taxes they pay.

    But as Pinkerton told the conference attendees, the high tax rates make the middle class feel better about paying their own taxes. They may take comfort in the fact that someone else is worse off, at least based on the misconception that high tax rates mean rich people actually pay correspondingly higher tax.

    In 2010 W. Kurt Hauser explained in The Wall Street Journal: “Even amoebas learn by trial and error, but some economists and politicians do not. The Obama administration’s budget projections claim that raising taxes on the top 2% of taxpayers, those individuals earning more than $200,000 and couples earning $250,000 or more, will increase revenues to the U.S. Treasury. The empirical evidence suggests otherwise. None of the personal income tax or capital gains tax increases enacted in the post-World War II period has raised the projected tax revenues. Over the past six decades, tax revenues as a percentage of GDP have averaged just under 19% regardless of the top marginal personal income tax rate. The top marginal rate has been as high as 92% (1952-53) and as low as 28% (1988-90). This observation was first reported in an op-ed I wrote for this newspaper in March 1993. A wit later dubbed this ‘Hauser’s Law.’”

    Incentives matter, economists tell us. People react to changes in tax law. As tax rates rise, people seek to reduce their taxable income. A common strategy is to make investments in economically unproductive tax shelters. There is less incentive to work, to save and build up capital stocks, and invest. These are some of the reasons why tax rate hikes usually don’t generate the promised revenue.

    Click image for larger version
    Click image for larger version

    The subtitle to Hauser’s article is “Tax revenues as a share of GDP have averaged just under 19%, whether tax rates are cut or raised. Better to cut rates and get 19% of a larger pie.” The nearby chart illustrates. The top line, the top marginal tax rate in effect for year year, varies widely. The other two lines show total taxes and federal income taxes as a percent of gross domestic product. Since World War II, these lines are fairly constant, even as the top marginal tax rate varies.

    Data is from Bureau of Economic Analysis (part of the U.S. Department of Commerce) along with my calculations.

  • Blubaugh, Mayor vote for licenses for undocumented workers to drive to their illegal jobs

    The Wichita city council voted to recommend that the Kansas Legislature create drivers permits for undocumented workers so they could drive to their jobs.

    In December the Wichita City Council voted to include drivers permits for undocumented workers in its legislative agenda. The item as presented to council members read: “RECOMMEND: The Wichita City Council supports legislation that provides a driver’s permit to undocumented workers for the sole purpose of obtaining vehicle insurance for work-related transportation.”

    In his remarks, as presented in the meeting minutes, Wichita Mayor Carl Brewer stated “he has given this a lot of thought and he is the one who has asked for it because he believes it is the right thing to do.”

    Wichita City Council Member Jeff Blubaugh
    Wichita City Council Member Jeff Blubaugh
    The measure passed four to three, with Council Member Jeff Blubaugh (district 4, south and southwest Wichita) voting along with the council’s progressive members.

    No matter what one believes about our immigration laws, it is illegal for undocumented workers to hold their jobs. Yet, the city wants to make it legal for them to drive to their illegal jobs.

    This also illustrates the problem with resolving our nation’s issues with immigration. We’ve shown that we’re not willing to enforce the laws we have. Here, the Wichita City Council takes steps to help illegal immigrants break our laws. Why do we expect people to respect and obey them?