Tag Archives: Proposition K

Rep. Steve Brunk on Kansas taxes and spending

Speaking to the Wichita Pachyderm Club on Friday, Kansas Representative Steve Brunk (Republican from Bel Aire) addressed taxation and spending in Kansas government.

Brunk said “We need more taxpayers, not more and higher taxes.” In evaluating legislation, he said he asks these questions: Does this help the state of Kansas bring companies to the state, and does it offer encouragement to companies already here?

Kansas is usually just about in the middle of all states in ability to attract companies to the state. We should be able to better than that, and a way to do better is to reform our taxing environment.

Some of our taxes should go away. The franchise tax is in the process of being phased out. That money is now available to make capital investment and create more jobs.

The corporate income tax should be eliminated, he said. The death tax or inheritance tax is inherently unfair, as people should be able to pass their estates to heirs without being tax.

Also, the capital gains tax is punitive, he said. It should be reduced or eliminated.

“We need a low and predictable tax base, so that we can attract businesses to Kansas to provide jobs without having to offer special and unique incentives.”

When revenues have increased in Kansas, we spent it rather than setting some aside in a rainy day fund. When revenues have not increased as quickly, it causes problems with the budget. Today, we’re probably facing a period of slow growth.

Brunk showed a chart of Kansas spending as compared to the inflation rate. Spending increased much faster, almost four times faster, he said, adding that this is unsustainable.

So Brunk has proposed what he termed a “speed limit.”

The spending problem is due to Republicans and Democrats alike, although Brunk said Republicans are amateurs at spending compared to Democrats. Without Republican help, budgets could be passed. There is a core of about 55 or so conservatives in the Kansas House of Representatives. The rest of the House Republicans are willing to spend along with the Democrats.

To this end, Brunk has proposed a constitutional amendment that he calls the REAL Act: Revenue and Expenditure and Assessment Limitations.

One thing this act does, he says, is to limit the rate of growth of spending to the rate of inflation. This would force the state to prioritize what it spends on, and to take a look at finding excess spending. Existing programs would be reviewed.

The REAL act would also limit the ability to increase taxes or start new taxes by requiring a two-thirds majority in the legislature.

The REAL act also provides for a rainy day fund, sometimes called a budget stabilization fund. The money in this fund could be used only to stabilize the budget when revenue drops below the rate of inflation growth. After this fund is full, an emergency fund would be created and funded for dealing with disasters such as the Greensburg tornado or the southeast Kansas floods.

We also need to avoid download state spending to counties, he said. There could be no mandates with accompanying funding.

Turning to property taxes, Brunk mentioned Proposition K, an effort to stabilize property taxes. Introduced in this year’s legislative session, the measure was referred to a tax subcommittee that didn’t do much to advance the proposal. Based on feedback and concerns, he’s going to adjust Proposition K and introduce it again.

Responding to a question from the audience, Brunk said that he conceptually likes the idea of a Fair Tax, a tax based on consumption rather than income or property ownership. Later, someone else asked, in jest, if an exemption for cigars could be part of a consumption tax law.

Answering another question, Brunk said that a problem with Kansas budgeting is that we have “add-on” budgeting instead of zero-based budgeting. Each year agencies must justify not their entire budget, but only the additional amount that they’re asking for this year.

Analysis

The REAL Act, as described on The Kansas Real Act page, is much like the Taxpayer Bill of Rights proposals, in that it limits spending to inflation plus population growth. These measures are universally and vigorously attacked by government spending advocates such as teachers unions and public employee unions, as they, amongst others, live off of ever-increasing government spending.

In my opinion, the components of the REAL act — limits on tax increases, the requirement of a supermajority to increase taxes, and a rainy day fund — are eminently sensible. Whether these measures can be passed as a package as a constitutional amendment is difficult to answer. In Kansas, such amendments require passage by two-thirds of the Kansas House and Senate, and then by a majority vote of the people. Action by the governor is not required, not can the governor block an amendment, except through persuasion of the legislature or the people.

An amendment to the constitution is required for any laws of this type to be truly effective. Kansas law already requires that the state hold ending balances of 7.5% in its funds. But each year the legislature decides to waive or ignore this law. That can’t be done, to my knowledge, to measures that exist in the constitution. Similarly, the Kansas Supreme Court can’t overrule the constitution and order the legislature to take action, as it has done with K-12 school spending.

The difficulty in passing clear and coherent laws was illustrated by the question about the exemption for cigars. Although proposed in jest, there will be constituencies that will be quite serious about exemptions to nearly any law that is passed.

Articles of Interest

Electric cars, Obama and education reform, Kansas online records, Proposition K

Could the Volt Jump-Start GM? (Washington Post) The Volt is Chevrolet’s plug-in hybrid, meaning it has no gasoline engine, running solely on electricity. The problem is that the car’s price may be $40,000. My question is where will we get the electricity to charge these cars on calm days if we don’t build more baseline electricity generation capacity?

No Picnic for Me Either (David Brooks in the New York Times) An overview of President Obama’s attitudes towards public schools in America. Can the president successfully challenge the government school lobby and its entrenched interests, those often at odds with the interests of schoolchildren? Brooks doesn’t seem hopeful: “The problem is that as our ability to get data has improved, the education establishment’s ability to evade the consequences of data has improved, too. Most districts don’t use data to reward good teachers. States have watered down their proficiency standards so parents think their own schools are much better than they are.”

Online records convenient, but cost more (Deb Gruver in the Wichita Eagle). Contains an overview of some of the sites in Kansas where you can look at government records. Kansas charges for many records that other states provide at no cost.

State tax change sought (Tim Carpenter in the Topeka Capital-Journal) “It has been denounced by state and county officials and greeted with skepticism by Democratic lawmakers.” That’s Proposition K, of course. I would say that when lobbyists for local governments are worried about their sources of revenue, that’s good for everyone else.

More support for Proposition K in Kansas

About the only people who don’t like Proposition K are people dependent on government for their revenues. Here, a press release from the Flint Hills Center for Public Policy tells of two organizations who have endorsed Proposition K. There may be some who note that these two organizations, being involved in the real estate business, benefit from lower property taxes. Two things: First Proposition K doesn’t necessarily mean lower property taxes. Instead, it means more predicable taxes, with decisions to increase the tax rate being made in the open and with public input. Presently, property taxes increase by stealth, as the appraiser drives by and decides your property is worth more.

Second, many businesses, especially commercial landlords, are able to pass on increased property taxes directly to their tenants, which increases their costs and the prices they must charge consumers.

Wichita Associations Endorse Proposition K

(WICHITA) — Proposition K, the initiative to replace the Kansas system for assessing property taxes on real estate, continues to gain momentum as it is being studied by the Legislature. The Wichita Area Builders Association (WABA) and the Kansas chapter of Certified Commercial Investment Members (CCIM) have formally endorsed the proposed legislation.

“The proposed Prop K legislation is long overdue,” according to Wess Galyon, President/CEO of WABA, “and should be supported by anyone who has a desire to see a methodology put in place that promotes predictability in terms of what a person can expect their property taxes to be in subsequent years, greater transparency and elected official accountability in relation to decisions made to increase taxes beyond the annual 2% that would be allowed by the legislation, and can provide a benchmark in relation to efforts to curb excessive and wasteful government spending.”

Brent Stewart, President of the Kansas CCIM chapter, also cites serious problems with the current system. “We have long recognized the inequities in our present system of property taxation. Proposition K is a serious attempt to correct the problems of our present system and establish a system that is both predictable and provides that political leadership be more accountable to the voters when raising property taxes.”

Proposition K, introduced this legislative session by Rep. Steve Brunk (R-Bel Aire) seeks to stabilize property taxes in Kansas and make local government budgeting more transparent for taxpayers. Yet Proposition K places no limits on the ability of elected officials to raise revenue or balance budgets.

Dave Trabert, President of Flint Hills Center for Public Policy, a leading proponent of Proposition K, is “very pleased with the growing public support for Proposition K, not only from organizations like the Wichita Area Builders and Kansas CCIM but also from individuals who are visiting www.PropositionK.org and attending public forums. Most taxpayers want more predictability and transparency in their property tax system and we will continue our grassroots education efforts to explain how Proposition K can satisfy their demands.”

Over the last 10 years (1997 to 2007), property taxes statewide have increased 83%. Residential property taxes are even worse, with a 119% increase in total collections. There simply is no good reason for these outrageous increases. It’s not driven by a need to serve more people; Kansas’ population has only grown 7% over that same period. It’s not inflation; the Consumer Price Index increased about 2.5% per year. It’s the appraisal process.

The statewide average mill rate has increased 10% over the last ten years, but appraised values (on all property) have jumped 66%. These two moving parts of the current system have generated an 83% tax increase. Proposition K offers a viable alternative to the appraisal process that drives unpredictable property taxes.

It’s a simple plan that will apply to all classes of real estate except agricultural land, which has its own set of rules under the Kansas Constitution. “Proposition K: A Better Property Tax System for Kansans” is the subject of a study conducted by Dr. Art Hall, Executive Director of the Center for Applied Economics at the University of Kansas and is published by the Flint Hills Center for Public Policy at www.flinthills.org. Proposition K is supported by the Kansas Building Industry Association, Kansas CCIM (commercial realtors), Wichita Area Builders Association, and Americans for Prosperity; several other organizations are expected to join the coalition in the near future.

Proposition K uses 3 key elements to replace the tax-related appraisal system on real estate:

1. On a specific date (January 1, 2010 in the legislation) current property values become fixed as the so-called “baseline value.” (Property owners will always have the ability to appeal.)
2. Each property’s baseline value increases by 2% each year. Properties never revalue for tax purposes unless substantially improved or altered. Upon sale, the new owner inherits the annually-adjusted baseline value of the property.
3. To preserve fairness and promote simplicity, the plan applies to new construction, substantial alterations to existing structural improvements and re-classified land the average per-square-foot annually-adjusted baseline values of nearby properties.

A new web site at www.PropositionK.org explains the plan, provides downloads of Dr. Hall’s study and other information, offers a forum for citizen comments and includes a means for individuals to indicate whether Proposition K should be adopted.

Proposition K hearing spotlights differences

At Wednesday’s hearing before the Kansas House of Representatives Taxation Committee, different ideas about property taxation became clear. The subject of the hearing was Proposition K, a proposal to reform property tax appraisals in Kansas. On this day, proponents of Proposition K testified.

Questioning by Representative Nile Dillmore, Democrat from Wichita, provided an example of these differences. Dillmore asked about “infill” development, questioning the fairness of Proposition K. What about someone building a new house across the street from older houses? The new home might have cost $200 per square foot to build, while the old home is not worth anywhere near that much. “It seems patently unfair to me that situation would exist,” he said.

Underlying Dillmore’s question, I believe, is refusal to either understand or to buy in to one of Proposition K’s tenets, which is a move away from property taxation based on wealth. Instead, Proposition K is based on a “fixed-share” concept of funding government.

In answering the question, Professor Art Hall, the author of Proposition K, used this illustration: Suppose the new house being built across the street from a modest house has granite counters and other fancy (and expensive) appointments, but is the same size as the older home. “What is it about that choice that makes their stake in the local public services double what their neighbors’ are?”

Rep. Dillmore turned the answer around, asking “Why am I being asked to pay the same property values as the guy with the castle?”

It should be noted that under Proposition K the new construction would be valued based on the size of the structure. So if Rep. Dillmmore, by using the term “castle” means a large new house, it would pay more in taxes than the smaller surrounding houses. But a new house of same size would pay the same taxes as other nearby houses, even if it is built to luxury standards.

At other times during the hearing it was mentioned that this might encourage construction of new houses in older neighborhoods. That seems like something that proponents of older parts of cities might welcome.

This pushback by Dillmore is typical of those who benefit from the existing system. This system produces large increases in revenue for government without the need for elected officials to raise tax rates. For those who desire and thrive on increasing government spending — this includes the public school and local government lobbies — Proposition K will shine sunlight on this practice.

It should be noted that Dillmore’s wife is Janet Miller, a candidate for Wichita city council. It was under her leadership as president of the Wichita Board of Park Commissioners that a very expensive plan for parks in Wichita was announced. Reform measures such as Proposition K will mean that the funding for plans like these will be more transparent to citizens.

Coverage of this Proposition K hearing is available at Kansas House hears support for property tax proposals; foes to speak today. An illustration of how the combined affect of rising appraisals and rising mill levies creates large inflows of tax revenues for a school district can be found at Wichita School District Tax Revenues Rise Rapidly.

Proposition K opponents sometimes misinformed

In public debate, sometimes people don’t let facts or reason get in the way of arguments they want to press. This is the case in some of the comments left to a Wichita Eagle article about Proposition K, an effort to reform property tax appraisals in Kansas.

Here’s one example of a comment left in response to the article:

It’s like having 10 friends go out to eat 2 of them order the steak and lobster platter for $22 bucks each, 6 people order regular burger/fries plate for about $7 each and you and the remaining friend having only a cup of coffee for $1. All of a sudden, when the bill comes and it’s $88, the 2 that ordered steak and lobster say to you “oh well, why don’t we all just pay $8.80 to make it easier for everybody. Does that sound fair? But, hey…that’s what Republicans do…protect the rich.

The argument this author makes is misleading on several levels. First, Proposition K has nothing to do with existing property values, only the increase in the appraised values. This writer makes the argument that everyone is going to start with the same value, whether they have a “burger/fries” home or a “steak and lobster” home. This is false.

Second, in the story the author tells, the diners who ordered the expensive meals try to change the rules afterwards. But when purchasing a home, everyone knows that more expensive homes pay more taxes. There’s no secret, no trying to change this after everyone has made their menu choices, that is, purchased their homes.

So the arguments this author makes are disingenuous, to say the least.

Then, some writers may not be thinking the situation through:

I am totally against this proposition. My home is already appraised at 20% more than it’s [sic] value. They have raised the value of my home 30% over the past 3 years. Adding an automatic 2% increase every year would then raise the value of my home by 50% over market in just 10 more years. I make $10 per hour and if taxes go up any more I will have to TRY to sell my house just to get out from under the tax burden.

Proposition K, as this writer correctly notes, proposed a 2% increase in appraised value each year. This writer complains of a 10% increase in appraised value each year for three years running. Wouldn’t Proposition K have greatly helped this person, if it had been in effect for these years?

Proposition K op-ed confuses issue

Today’s Wichita Eagle contains an op-ed by Glenn W. Fisher, regents professor emeritus at Wichita State University and property tax expert (Con: Tax plan would shift burden, be arbitrary, February 8, 2009 Wichita Eagle). The subject of this piece is Proposition K, an effort to reform the property tax appraisal system in Kansas.

Proposition K is starting to attract attention and debate, the reason for two op-ed pieces in today’s newspaper. The piece by Fisher, however, contains a number of puzzling arguments.

First, Fisher states: “Proposition K would do nothing to reduce taxes or spending.” This statement is not true or false, as the amount of tax revenue raised through property taxes depends on two things — the “moving parts” referred to in Proposition K: The first is appraised values, and the second is the mill levy that governments impose. Proposition K proposes a growth rate of appraised values that is less than what has been happening. So unless governments raise the mill levy, it is very likely that the amount of tax revenue collected will be less than it would be under the present system.

Proposition K, however, does not address spending, so it’s curious as to why Fisher included this in his argument.

Here’s something else that’s peculiar in this article: Fisher says “… it is very likely that the courts would find it violates the provisions that require various classes of property to be assessed at specified percentages of value.” But Proposition K has nothing to do with assessment percentages. (This is the law that says residential property is assigned an assessed value that is 11.5% of its appraised value, commercial property at 25% of appraised value, utility property at 33% of appraised value, plus a few other classes.)

Instead, Proposition K proposes reform in appraised values. Why Fisher would bring into this argument the assessment percentages of various classes of property — something that has absolutely nothing to do with the merits of Proposition K — is not relevant and confuses the issue.

Finally, Fisher states: “The property tax began with the idea that market value is a good measure of the owner’s ability to pay …” The problem, however, is that this is not an absolute linkage. As stated in the Proposition K document: “Property values represent wealth, not income. Growing home values do not imply growing incomes.” Those people on fixed incomes who find their property values — but not their incomes — growing rapidly take little comfort in Fisher’s judgment of the ability to pay.

Fisher’s piece is paired in the Wichita Eagle with Pro: Proposition K is fair, equal, transparent. Read the entire Proposition K proposal at Proposition K: A Better Property Tax System for Kansans.

Proposition K is a Constitutionally Valid Reform Option for Kansas

Some opponents of Proposition K, an effort to reform property tax appraisals in Kansas, are questioning whether this measure would conform to the Kansas Constitution. The following news release from the Flint Hills Center for Public Policy introduces a study that answers this question.

New Study Shows that a Constitutional Amendment is Not Required

(WICHITA) Wednesday Rep. Steve Brunk (R-Bel Aire) introduced legislation to reform the property tax system in Kansas. The bill changes the way that the taxable base is set. The current system relies on a system of appraisals, which is purported to be fair market value. Proposition K, as the bill is being called, changes the system by setting the taxable value at the appraised value as of January 1, 2010 and that baseline is adjusted not by reappraisal but by an annual increase set at 2%.

A new study by the Flint Hills Center, “The Constitutionality of Proposition K,” considers whether this proposed reform can indeed be made through statutory change or whether a constitutional amendment is required.

Author of the study, Vice President of Programs Sarah McIntosh says that, “Proposition K is a valid statutory change. Under the Kansas Constitution the legislature has to provide a ‘… uniform and equal basis of valuation …’ Proposition K meets this requirement because of the way it sets the baseline, applies a uniform rate increase, and does not re-evaluate property when sold.”

Public Forum on Kansas Property Tax Reform

The Flint Hills Center for Public Policy is holding public forums on Proposition K, an effort to reform property taxes in Kansas.

The first of these meetings will be held on Thursday, January 29 at 6:00pm at Willowbend Golf Club (8001 Mulberry Drive in NE Wichita). The public is invited to attend. Here’s a link to a map of the meeting location.

Nashville Shows Need for Kansas Property Tax Reform

Using the small town of Nashville, Kansas, a KWCH Television news story shows why property tax reform is needed in Kansas.

Specifically, reform of the appraisal process is required. In Nashville, just by cleaning up his property, a homeowner’s property taxes doubled. Proposition K would, in part, introduce predictable growth in appraisals, which would eliminate situations like this in Nashville.

The KWCH news story by reporter Kim Wilhelm, which includes video, is Prop K Could Change Your Property Taxes.

For more information on Proposition K, see these links:

Proposition K Will Make Property Taxes Fairer and More Predictable, a news release at the Flint Hills Center for Public Policy.
House committee hears call for property tax overhaul today, a news story at Kansas Liberty.