Voice For Liberty

Tag: Taxation

  • Local economic development in Wichita

    Writing from Memphis, Tennessee

    Today’s Wichita Eagle (November 5, 2005) tells us of a new economic development package that our local governments have given to induce a call center to locate in Wichita. The deal is described as “one of the biggest the two-year-old economic development coalition [Greater Wichita Economic Development Coalition] has landed.”

    There is an interesting academic paper titled “The Failures of Economic Development Incentives,” published in Journal of the American Planning Association, and which can be read here: www.planning.org/japa/pdf/04winterecondev.pdf. A few quotes from the study:

    Given the weak effects of incentives on the location choices of businesses at the interstate level, state governments and their local governments in the aggregate probably lose far more revenue, by cutting taxes to firms that would have located in that state anyway than they gain from the few firms induced to change location.

    On the three major questions — Do economic development incentives create new jobs? Are those jobs taken by targeted populations in targeted places? Are incentives, at worst, only moderately revenue negative? — traditional economic development incentives do not fare well. It is possible that incentives do induce significant new growth, that the beneficiaries of that growth are mainly those who have greatest difficulty in the labor market, and that both states and local governments benefit fiscally from that growth. But after decades of policy experimentation and literally hundreds of scholarly studies, none of these claims is clearly substantiated. Indeed, as we have argued in this article, there is a good chance that all of these claims are false.

    The most fundamental problem is that many public officials appear to believe that they can influence the course of their state or local economies through incentives and subsidies to a degree far beyond anything supported by even the most optimistic evidence. We need to begin by lowering their expectations about their ability to micromanage economic growth and making the case for a more sensible view of the role of government — providing the foundations for growth through sound fiscal practices, quality public infrastructure, and good education systems — and then letting the economy take care of itself.

    On the surface of things, to the average person, it would seem that spending to attract new businesses makes a lot of sense. It’s a win-win deal, backers say. Everyone benefits. This is why it appeals so to politicians. It lets them trumpet their achievements doing something that no one should reasonably disagree with. After all, who could be against jobs and prosperity? But the evidence that these schemes work is lacking, as this article shows.

    Close to Wichita we have the town of Lawrence, which has recently realized that it as been, well, bamboozled? A September 29, 2005 Lawrence Journal-World article (“Firms must earn tax incentives”) tell us: “Even with these generous standards for compliance, to have 13 out of 17 partnerships fail [to live up to promised economic activity levels] indicates that the city has received poor guidance in its economic development activities.” Further: “The most disconcerting fact is that Lawrence would probably have gained nearly all of the jobs generated by these firms without giving away wasteful tax breaks.”

    On November 6, 2005, an article in the Lexington (Kentucky) Herald-Leader said this:

    The Herald-Leader’s investigation, based on a review of more than 15,000 pages of documents and interviews with more than 100 people, reveals a pattern of government giveaways that, all too often, ends in lost jobs, abandoned factories and broken promises.

    The investigation shows:

    Companies that received incentives often did not live up to their promises. In a 10-year period the paper analyzed, at least one in four companies that received assistance from the state’s main cash-grant program did not create the number of jobs projected.

    A tax-incentive program specifically for counties with high unemployment has had little effect in many of those areas. One in five manufacturing companies that received the tax break has since closed.

    There is spotty oversight of state tax incentives. The state sometimes does not attempt to recover incentives, even when companies don’t create jobs as required.

    …

    Unlike some other states, Kentucky makes little information about incentives public. The Cabinet for Economic Development refuses to release much of the information about its dealings with businesses, citing proprietary concerns. The cabinet has never studied its programs’ effectiveness, and it blocked a legislative committee’s effort to do so.

    The Herald-Leader’s examination of Kentucky’s business-incentive programs comes when, nationally, questions are mounting about the effectiveness and legality of expensive government job-creation efforts. The U.S. Supreme Court is expected to decide by spring whether trading tax breaks for jobs is legal or whether they amount to discrimination against other companies.

    Meanwhile, states continue engaging in costly economic battles for new jobs, even though research strongly suggests that few business subsidies actually influence where a company sets up shop.

    We might want to be optimistic and hope that our local Wichita and Sedgwick County leaders are smarter than those in Lawrence and Lexington. Evidence shows us, however, that this probably isn’t the case. Our own local Wichita City Council members have shown that they aren’t familiar with even the most basic facts about our economic development programs. How do we know this? Consider the article titled “Tax break triggers call for reform” published in the Wichita Eagle on August 1, 2004:

    Public controversy over the Genesis bond has exposed some glaring flaws in the process used to review industrial revenue bonds and accompanying tax breaks.

    For example, on July 13, Mayans and council members Sharon Fearey, Carl Brewer, Bob Martz and Paul Gray voted in favor of granting Genesis $11.8 million in industrial revenue bond financing for its expansion, along with a 50 percent break on property taxes worth $1.7 million.

    They all said they didn’t know that, with that vote, they were also approving a sales tax exemption, estimated by Genesis to be worth about $375,000.

    It is not like the sales tax exemption that accompanies industrial revenue bonds is a secret. An easily accessible web page on the City of Wichita’s web site explains it.

    But perhaps there is hope. The Wichita Business Journal has recently reported this: “The city and county are getting $2 back for every dollar they spent over the past 18 months on economic development incentives, according to an analysis of GWEDC-supplied data. The report was presented at Thursday’s GWEDC investor luncheon at the Hyatt Regency by Janet Harrah, director of the Center for Economic Development and Business Research at Wichita State University.” Personally, I am skeptical. I have asked to see these figures and how they are calculated, but I have not been able to obtain them.

  • Tax reform and simplification

    Writing from Orlando, Florida

    Two recent Wall Street Journal articles (“A Golden Opportunity” in the November 1, 2005 issue, and “Triple Jeopardy” in the November 2, 2005 issue) make the case for simplification and reform of our current income tax system. In these articles we learn these things:

    “… true reform — changing to a broad-based income or consumption levy that taxes income only once — could yield once-and-for-all annual household income gains of 9%.”

    Our tax system has a bias against saving and investment. That slows capital formation and wage growth.

    “It is the marginal tax rate — the rate on the additional dollar earned from work, saving or entrepreneurship — that sets incentives and governs the pro-growth gains from tax reform.”

    “Eliminating the tax bias altogether in favor of employer-provided insurance is sound tax policy and would increase efficiency in health-care spending.” I have written in the past about how employer-provided health insurance is not good for our economy, or for consumers of insurance.

    “A tax system should generate the government’s required revenue with as little economic distortion as possible, while distributing tax burdens fairly. It should not discourage work, saving or entrepreneurship more than is necessary, and it should not discourage individuals from acquiring the skills and education that will increase their productivity. It should not discourage investment, or favor investments in one asset over those in another. In short, an efficient tax system alters economic decision-making as little as possible.

    “Although many see simplification as the primary goal of tax reform, promoting economic growth is a more important objective. Even in the relatively short run, the economic costs of a tax system that slows growth are likely to exceed compliance costs. U.S. households spend roughly 1% of GDP in complying with the income tax system. Halving the costs of compliance would be equivalent to raising GDP by one half of one percent — no minor accomplishment. The increase in GDP that might result from a tax reform that reduces tax burdens on investment and shifts the tax system toward a consumption tax are much larger.”

    “Tax reform, as distinct from tax reduction, inevitably involves curtailing some entrenched tax benefits. If reform proposals are dissected by politicians in an attempt to promote provisions that reduce their constituents’ tax liabilities while excising those that increase constituents’ tax liabilities, reform will inevitably fail. But if reform proposals are viewed instead as a collection of provisions that leave most families in a position not very different from their current one, while also shifting the tax system toward a structure that will promote long-term economic growth and reduce the burden of tax compliance, then these proposals can command broad popular support and even enthusiasm. Genuine tax reform is a difficult process that requires commitment to the goal of creating a more efficient, simpler and fairer tax system.”

    With so much to be gained, why isn’t there a rush to implement tax reform and simplification? The primary reason is that there are many special interest groups with a lot of political power that favor the present system. These interests include those industries and companies powerful enough to manipulate the tax system to their benefit. Politicians, of course, enjoy the present system, as it offers many ways to reward those who help them stay in office and increase their power. It also lets them influence the behavior of nearly everyone through manipulation of the activities that the tax code favors with deductions and breaks.

    Sadly, neither promotes economic growth and prosperity, which is what would really benefit the average person. Instead, people cringe at the idea that they might not be able to deduct their home mortgage interest. In reality, the mortgage interest deduction is worth very little to most middle-income families. (I get the feeling sometimes that people think they get to deduct the interest from their tax liability rather than from their taxable income.) Considering today’s low mortgage interest rates, the relatively low marginal income tax rate many people pay, and the fact that the benefit of the deduction is only valuable to the extent it exceeds the standard deduction, many families may not see any benefit from the mortgage interest deduction. But they would probably revolt against any politician who supported its elimination.

  • Taxpayer Bill Of Rights (TABOR) eviscerated

    By Karl Peterjohn

    Governor Bill Owens won a Pyrrhic victory in his campaign to eliminate the Taxpayers Bill Of Rights (TABOR) limits on government growth in Colorado. Owens’ short lived Proposition C victory will lead to a host of long term consequences that are mainly negative for Coloradans looking for a better economic future for themselves and their families. Passage of Proposition C is huge defeat for economic freedom across the country and a setback for fiscal responsibility.

    The passage of Proposition C will mark a key political and public policy turning point that ends Owens’ career as a fiscally conservative Republican. Owens is truly now a political lame-duck who will be known forever more as the individual primarily responsible for the demise of TABOR. Among fiscal conservatives nationwide he is now a political dead-duck. A couple of years ago National Review featured Owens as a potential presidential model for GOP conservatives. Now he is nothing more than another Republican office holder who “grew in office.”

    While it is certainly true that the entire Colorado Democrat Party, their mainstream media allies, and the usual leftie academic types also bear significant responsibility for the outcome of this vote, the face on the evisceration of the Taxpayers Bill of Rights will be, and should be, Governor Bill Owens. Now, TABOR is wounded but it not dead. Here’s what the Left will target next based on the Kansas model.

    The Left’s next step will be to figure out a similar evisceration of TABOR’s provisions affecting local governments spending in Colorado. Naturally, extending the time limit for TABOR’s evisceration at the state level will be needed, but that can wait for a couple of years until Democrats return to running all levers of power in state government in Colorado.

    Owens success November 1 in passing Proposition C and possibly (the preliminary vote indicates a very narrow defeat for Proposition D that a re-count may reverese) Proposition D will lead to a host of long term negative consequences for Colorado. In the short run the state will be free to go on a spending spree. They will.

    The state spending Bacchanalia will be certainly be followed by a fiscal hangover. The spending will be short run stimulative and long run drag on the state. This is not unexpected and in fact, there is a model for this pattern: California. Almost 20 years ago the Gann Amendement that limited state spending growth was a 1970’s (the Gann Amendment was enacted in the wake of Proposition 13) forefather of the Taxpayers Bill of Rights. The spending lobbies in California hated it and roughly a decade after passing it, they succeeded in eliminating Gann.

    California has fiscally struggled ever since this cap on government was terminated. Massive fiscal uncertainty was created and the California fiscal climate clouded up in the wake of this policy change. Next week a very pale imitation of a state spending limit will be voted upon in California as part of the four initiative package promoted there by Governor Schwarzennegger. A narrow, 52-48 percent Colorado majority has decided that California is the fiscal path to follow instead of the tried and true Taxpayers Bill of Rights.

    As the fiscal hangover appears following the Colorado state spending spree in a few years this is will help my state, Kansas, compete with Colorado. The model Governor Owens and his bipartisan spending coalition has adopted is very similar to the pattern of higher spending adopted by Kansas’ nominally Republican Governor Bill Graves and a bipartisan majority of the Kansas legislature during his second term here (1999-2003). Record spending leading to more taxes leading to more economic stagnation leading to more Kansans leaving for states with more fiscally prudent policies. Kansans number one destination state to move to today is Texas according to census figures. The most delicious irony of the anti-TABOR campaign is the fact that the leading TABOR critic touring Kansas these days is Carol Hedges. She is one of many Kansans who have moved to Colorado which has a large number of expatriate Kansans.

    These economic and demographic changes will take years and possibly even decades to fully play out. It is possible that a taxpayers bill of rights will eventually stage a comeback in Colorado, but that is unlikely for the rest of this decade. What is likely is resurrection of the Democratic Party as the Republicans fracture because of Owens’ fiscal apostasy in abandoning TABOR. The next governor of Colorado will be a Democrat.

    In the decade before Coloradan’s adopted the Taxpayers Bill of Rights in 1992 there wasn’t much difference in economic growth between my state of Kansas and Colorado. Both states grew below the national average. Colorado did slightly better than Kansas. That lethargic growth ended in 1992 in Colorado with TABOR’s passage. The growth in Colorado compared to Kansas in the 13 years of TABOR was dramatic and compelling. Soon it will be gone. TABOR will be a memory for Coloradans and that state’s economy will drift back into the tax ‘n spend lethargy that is Kansas today. What a shame.

  • Reports of TABOR’s Demise Have Been Greatly Exaggerated

    by Alan Cobb

    The supporters of Big Government were overjoyed this week when 52 percent of Colorado voters backed an effort to fix a glitch in that state’s hugely successful Taxpayer’s Bill of Rights by allowing the state government to keep an estimated $3.7 billion in scheduled tax relief over the next five years.

    This vote, they claimed, was a sign that the voters of Colorado had rejected their Taxpayer’s Bill of Rights, and that taxpayers across the nation should consider the Colorado vote a reason to oppose similar tax-and-spending limits in their own states.

    On the contrary, what Coloradoans actually did on Tuesday is vote to make their Taxpayer’s Bill of Rights look more like the improved version that is currently being proposed here in Kansas and in more than 20 other states.

    Colorado approved the nation’s first constitutional Taxpayer’s Bill of Rights in 1992. It limits the growth in state spending to the rate of inflation plus population growth, and it requires voter approval before politicians can raise taxes or spend above that limit.

    Since Colorado enacted its Taxpayer’s Bill of Rights, millions of that state’s citizens have reaped the benefits. For example, in the eight years before Colorado voters enacted the Taxpayer’s Bill of Rights (TABOR), the state ranked 43rd nationally in median family income growth. Since then, Colorado is 7th. Before TABOR, Colorado ranked 33rd nationally in job growth. Since then, Colorado is 6th. Before TABOR, Colorado ranked 43rd nationally in economic growth per capita, and since then it ranks 7th. TABOR opponents give the credit for Colorado’s recent economic success to the Rocky Mountains, apparently forgetting that the Rockies didn’t just spring up from the Plains in the 1990s.

    Still, like all first-of-its-kind products, Colorado’s Taxpayers Bill of Rights wasnt perfect. Think of Colorado’s TABOR as the first version of amazing new computer technology that helps millions of people become wealthier and more productive: overwhelmingly positive, a benefit to millions, but with a minor bug or two. In the case of Colorado’s TABOR, the bug is called the ratchet effect.

    Under the ratchet effect, when state revenue levels dip during a recession, the TABOR limit drops with it, and it cant automatically increase to the pre-recession high-water mark. Colorado’s TABOR also doesnt have any effective “Rainy Day” funds that would smooth out budget shortfalls in the lean years. This ratchet effect, when coupled with a competing constitutional amendment unique to Colorado that mandates large automatic increases in education spending, can create a budget squeeze. Fortunately, this ratchet effect bug in Colorado’s TABOR version 1.0 has been corrected in the TABOR version 2.0 that is now being considered in other states.

    It would obviously be ridiculous to declare the computer age dead or to call for the abolition of laptops because of a minor bug that can and will be fixed in subsequent versions. The cost of doing that would far outweigh the benefits that will come by improving and promoting a very effective and popular product.

    Colorado’s voters did not throw out their Taxpayers Bill of Rights. They used their TABOR-provided right to temporarily suspended scheduled tax relief in an attempt to fix the ratchet effect — essentially trying to make their TABOR look a little more like the improved TABOR version 2.0 that is under consideration in other states.

    To paraphrase Mark Twain, reports of the Taxpayer’s Bill of Rights’ death have been greatly exaggerated. The truth is Colorado’s taxpayers just endorsed the improvements that we’ve proposed, which would help bring tax relief, economic freedom and a generally higher standard of living to millions of Americans, including many Kansans.

    Alan Cobb is the Director of the Kansas chapter of the Americans for Prosperity Foundation.

  • How About Something Simple Like the Truth

    How About Something Simple Like the Truth
    Alan Cobb, Americans For Prosperity, Kansas

    I had a great time visiting 23 cities across Kansas last week to promote the Taxpayer’s Bill of Rights (TABOR). The number of supporters vastly outnumbered the opponents, but both sides had more folks come out than I ever imagined.

    During the tour, several things became clear. While TABOR supporters offer hope and solutions to getting out of our economic slump, opponents offer nothing but nay-saying, scare tactics and misinformation.

    In fact, the flagrantly dishonest information being spread is simply breathtaking.

    Let’s remember all the Taxpayer’s Bill of Rights does is allow Kansas voters to approve tax increases and spending increases above the rate of inflation plus population growth.

    The purpose of TABOR is simple. Government should have to live within its means just as Kansas families and businesses do every day.

    Opponents cite Colorado and make claims TABOR decimates the economy with few or no facts. The truth is Colorado has one of the strongest economies in America. How in the world Kansas’ Regents head Donna Shank could say that Colorado’s economy is “running on life support” makes one wonder.

    Although Shank recently stated publicly she wanted to research the subject and ask “tough questions,” when she showed up at the American Dream Express bus stop in Liberal, she didn’t stay long enough for even an easy question. In fact, the short presentations made by myself, State Rep. Larry Powell and State Senator Tim Huelskamp didn’t elicit one question from Shank

    For those unable to ask questions during our bus tour, below are myths and facts surrounding TABOR:

    Myth: TABOR hurts the poor.Fact: Colorado’s poverty rate is lower than Kansas’
    Myth: Thousands of teachers would be eliminated.Fact: Colorado has gained more than 11,000 teachers since 1994.
    Myth: TABOR has hurt teachers in ColoradoFact: Colorado teachers are paid more than teachers in Kansas.
    Myth: TABOR has devastated higher-ed in Colorado.Fact: U.S. News ranks the University of Colorado as the 78th best university in the country and ranks K.U. 97th. Colorado State was ranked 120th and K-State wasn’t ranked.

    Kansas doesn’t have a state university among the best 120 masters-level universities in the county, and Colorado does.

    Both K.U. and K-State have higher tuition than the Univ. of Colorado.

    Myth: Colorado Gov. Owens wants to repeal TABOR.Fact: Gov. Owens has repeatedly stated he wishes Colorado’s TABOR was like Kansas’ TABOR.
    Myth: Kansas government spending as a percent of income hasn’t changed over the last 30 years.Fact: State spending as a percent of income increased almost 50% over the last 30 years.
    Myth: TABOR has devastated the Colorado economy.Fact: Prior to TABOR passing in Colorado in 1992, Kansas and Colorado’s economic growth was similar. From 1984 to 1992, Colorado ranked 43rd in median family income growth and Kansas ranked 48th. From 1992 to 2004, Kansas ranked 44th in family income growth and Colorado ranked 7th.

    In 1980, Kansas per capita income rank was 16th, Colorado was 12th. By 2004, Kansas per capita income rank was 29th, Colorado was 8th.

    From 1980 to 1992, Kansas ranked 43rd in productivity growth and Colorado ranked 26th. Colorado ranks 4th in productivity growth since 1992, Kansas ranks 37th.

    Colorado ranks 1st in concentration of technology jobs, 2nd in number of new companies per capita, and 4th in estimated long-term job growth.

    Let’s do a service to all interested in this debate and quit the ridiculous demagoguery.

    There is a reason TABOR opponents have stooped to scare tactics in defense of the old “we’ve always done it this way” mentality. Scare tactics are what you use when you don’t have the facts on your side.

  • TABORTruth.org Not Quite So

    Right away the website tabortruth.org states: “TABOR proponents are baiting citizens with the allure of tax cuts, …”

    My understanding of proposals for a TABOR in Kansas doesn’t include tax cuts, except in one case. That’s because taxing and spending will proceed in this way: First, spend up to the limit imposed by the sum of inflation plus population growth. Then, put some tax money away in the emergency and budget stabilization fund. Then — and only then — if there were excess tax revenues, they would be sent back to the taxpayer. This doesn’t sound to me like much of a tax cut.

    It is likely that politicians will vote to spend all they can under TABOR limits, so it is quite likely that Kansas spending and taxes will continue to rise. It’s just that now there is a limit on the rate of growth. In the peculiar language of Washington and Topeka, a reduction in the rate of growth is called a “cut,” so maybe in the hearts and minds of the authors of tabortruth.org, there will be “tax cuts.”

  • Fact Sheet: The Truth About Colorado’s Taxpayer’s Bill of Rights

    The Taxpayer’s Bill of Rights amendment has been an overwhelming success in Colorado. Colorado’s TABOR has successfully restrained the growth of state government and allowed millions of taxpayers to keep more of their hard-earned money.

    Since Colorado enacted the Taxpayer’s Bill of Rights in 1992, the state has experienced one of the strongest economic growth rates in the country and has provided taxpayers with more than $3 billion in tax rebates and refunds.

    Colorado experienced a challenge almost entirely because of Amendment 23 — a state constitutional amendment that mandates large increases in spending on education programs. The ultimate answer to Colorado’s budget challenge is the repeal of Amendment 23.

    While Amendment 23 is the main cause of Colorado’s challenge, that state’s version of the Taxpayer’s Bill of Rights isn’t perfect. That’s exactly why the TABOR legislation proposed in Kansas includes key improvements that will help us achieve even better results than Colorado has enjoyed.

    One key improvement we’re proposing to the Taxpayer’s Bill of Rights in Kansas is the inclusion of budget stabilization and emergency funds that will help us better deal with economic downturns. In periods of rapid economic growth, when revenue exceeds the TABOR limit, surplus revenue would be deposited into the emergency fund and budget stabilization fund. When the cap is reached on those funds, surplus revenue is then offset by tax cuts or tax rebates. In periods of recession, when revenue is falling, money is then transferred from the budget stabilization fund.

    Another important improvement we’ve proposed to the TABOR in Kansas is the elimination of the so-called “ratchet-down” effect. In Colorado, when revenues drop during a recession, the TABOR spending and revenue limit drops to that lower level and will grow from there — even after the economy recovers and revenues bounce back. That’s not the way it’ll work in our state. Here, when revenues drop during a recession, the “Rainy Day” fund allows TABOR spending and revenue limit to remain at the pre-recession high-water mark and only kick back in after revenues recover to pre-recession levels.

    These three key differences between a Kansas Taxpayer’s Bill of Rights and Colorado’s — the absence of constitutionally mandated annual spending increases here, the ratchet-down correction, and the budget stabilization and emergency funds — means our Taxpayer’s Bill of Rights will give us stronger economic growth, more tax relief and restrained government spending — without any of the minor side effects Colorado has experienced.

    Courtesy of Americans For Prosperity, Kansas Chapter.

  • TABOR Fact Sheet: Kansas vs. Colorado

    TABOR Fact Sheet: Kansas vs. Colorado

    Estimated at 10.4 percent of income, Kansas’s state/local tax burden percentage ranks 14th highest nationally, well above the national average of 10.1 percent.

    Kansas taxpayers pay $3,629 per-capita in state and local taxes.

    Kansas ranks 32nd in the Tax Foundation’s State Business Tax Climate Index: Missouri (11th), Oklahoma (14th), and Colorado (8th).

    Source: Tax Foundation

    Taxpayer’s Bill of Rights: GOOD FOR COLORADO…GOOD FOR KANSAS*

    3-year average poverty rate, from 2002 to 2004

    Colorado: 9.8 percent
    Kansas: 10.7 percent

    Change from 2003 to 2004

    Colorado: .1 percent
    Kansas: .7 percent

    Since TABOR was enacted in Colorado in 1992:

    Colorado ranks 3rd in population growth, Kansas ranks 36th.
    Colorado ranks 3rd in personal income growth, Kansas ranks 41st.

    In 1992

    Colorado ranked 18th in per capita income
    Kansas ranked 24th in per capita income

    In 2003

    Colorado ranked 9th in per capita income
    Kansas ranked 28th. In per capita income
    Colorado ranked 6th in per capita income growth
    Kansas ranked 30th in per capita income growth

    Since 1992

    Colorado ranks 3rd in productivity growth
    Kansas ranks 32nd in productivity growth
    Prior to the passage of the Taxpayer’s Bill of Rights in Colorado in 1992, economic growth in Colorado and Kansas was similar.

    From 1980 to 1992:

    Kansas per capita income growth ranked 47th, Colorado was 34th.
    Kansas ranked 25th in population growth, Colorado ranked 13th.

    Income

    Kansas rank for per capita income in 1980 was #16, Colorado was #12
    Kansas rank for per capita income in 2004 was #29, Colorado was #8

    Median Household income

    1984 rank: Kansas 14, Colorado 10
    2004 rank: Kansas 36, Colorado 10

    State Economic Productivity (Gross State Product)**
    Economic growth from 1980 – 1992

    Colorado rank #26
    Kansas rank #43

    Economic growth from 1993 – 2003

    Colorado rank #3
    Kansas rank #37

    Job Growth**
    June 04 to June 05 private sector job growth:

    Colorado ranks #16
    Kansas ranks #32

    June 03 to June 05 private sector job growth:

    Colorado ranks #21
    Kansas ranks #34

    Education* **

    Kansas 2003 Spending Per Student ($) 7,454
    Colorado 2003 Spending Per Student ($) 7,384
    Kansas Bachelor’s degree or higher, persons age 25+, 2000 25.8 percent
    Coloardo Bachelor’s degree or higher, persons age 25+, 2000 32.7 percent

    *U.S. Census Bureau
    *Bureau of Economic Analysis
    *Standard & Poor’s

    Courtesy of Americans For Prosperity, Kansas Chapter.

  • Revenue Growth Lags As Kansas Falters

    Revenue Growth Lags As Kansas Falters
    By Karl Peterjohn, Kansas Taxpayers Network

    In early August Governor Sebelius issued a news release praising the economic growth that had allowed state tax revenues to grow significantly in the fiscal year that ended June 30. In the state’s general fund revenues were 7.1 percent or $322 million above last year.

    This seemingly good news hides a big problem. Kansas revenues are growing well below the national averages. We are also lagging behind our neighbors and this includes job growth too. Nationally, the Wall Street Journal reported in July that federal revenues were 14.6% above the same period last year or over $204 billion. Oklahoma’s state government is taking $150 million of their increased tax revenue to use to cut personal income taxes but they will also raise spending by $750 million more according to Budget and Tax News in August.

    Why is Kansas economic growth lagging? Some tax collections are actually down. In 2002 the state’s cigarette tax was raised from 24 to 79 cents a pack. Naturally, tax collections soared in 2003 with this 229 percent tax hike. However, the state’s revenue per penny of cigarette taxes started to fall and has continued to decline. Total revenues are falling in the last two years and are now over $10 million below the 2003 high point.

    Before the cigarette tax was raised, this levy generated about $2 million for every penny of tax. Now it is barely $1.5 million per penny. While total revenues are about $119 million, or 2 percent of the state’s revenues, the proposal by Governor Sebelius for another large, 50 cent a pack tax hike will just shift a lot of cigarette purchases out-of-state, to the internet, or other tax avoiding alternatives. Sadly, this is also leading to more illegal cigarette sales and smuggling.

    Severance tax collections soared over 22 percent or over $18 million in the most recent fiscal year as oil and gas prices enjoyed large hikes. This tax collected over $100 million for the first time but is also just 2 percent of state tax collections.

    Personal and corporate income tax receipts enjoyed a large percentage growth of 11.9 percent or $244 million above last year. This increase alone was 75 percent of the total increase in state general fund revenues. In contrast, Kansans are shopping outside of Kansas since sales tax collections grew only 2.2 percent or $35 million. Many Kansans, particularly those in eastern Kansas, have learned that the lower state tax rates on groceries, cigarettes, gasoline, beer and alcohol lead to lower prices in western Missouri and in other border states.

    This might also explain the generally flat overall, but in some individual cases, declining tax collections the state has on various forms of alcohol and related products. The state’s cereal malt beverage tax collections actually dropped over 4 percent or $88 thousand last year.

    The state’s 20 mill property tax for public schools is excluded from the official state revenue estimates. However, the increase in appraisals resulted in estimates of a $40 million hike in the state’s tax collections for this levy that is excluded from the official Kansas General Fund figures.

    So the shifting changes in Kansas tax collections shows the mixed nature of the economic recovery in this state. This is an additional reason why Kansas cannot afford another new state spending spree next year.

    #####

    Karl Peterjohn is the executive director of the Kansas Taxpayers Network and is a former news reporter and California Department of Finance budget analyst.