The governor and Legislature took much pride in the recent elimination of the tax on new machinery and equipment. And lawmakers took pains to soften the resulting revenue blow to local governments, but it’s showing up as a factor in the ongoing budget-setting process: As a result, Sedgwick County estimates it will see $1.1 million less revenue in the 2008. The city of Wichita says its annual hit will reach $7.7 million by 2013.
In other words, state-level tax cuts again are having serious local consequences. It will further strengthen the case that the state should reinstate the city and county revenue-sharing that was halted during the Graves-era fiscal crisis, especially as new gambling revenue flows into state coffers.
Posted by Rhonda Holman
Registered?
Commenting on WE Blog now requires you to be a Kansas.com member. Use the links above to register, if you haven't already, or to log in.Contact us
Follow us
Daily Archives
-
Recent Comments
- writerdog on Health care reform would save state money
- CapnAmerica on Open thread 11/22
- george on Open thread 11/22
- DorisKing on Open thread 11/22
- Chas on Open thread 11/22
- george on Health care reform would save state money
- satatom on Open thread 11/22
- satatom on Open thread 11/22
- Politico on So they said
- BlueJay on Open thread 11/22
79 Comments
The cities and counties can offset this by discontinuing the special breaks they give certain businesses.
The city and county have been enjoying tax increases with the hugh increase in appraisals. So they have their shares.
As far as the casino revenue goes the share to the county is already set. You cannot be asking for more with the law that was passed.
“should reinstate the city and county revenue-sharing that was halted during the Graves-era fiscal crisis”
Uh, Rhonda? The fiscal crisis may have begun with graves, but it was governor leadership who stopped the city and county revenue-sharing under HER administration.
Seems like that is the go-to response for sebelius and company. When faced with financial pain, push it downstream so the local governments get the brunt of the problem and THEY are forced to raise taxes.
Win-win for governor leadership and the republican legislature. Lose-lose for cities and counties.
And lose-lose-lose-lose for the taxpayers…
Sounds like about the same amount that airtran gets as a handout.
Since someone brought up Air Tran, I recently purchased airline tickets for New York.
Quess what? Its still cheaper to fly from KC than from Wichita.
The KC flight is direct too!
Wichita pays Air Tran for nothing!
Oh woe is us when Papa Government come up a few dollars short. Rather than eat a little less, get ready for Papa to take from the plates of his children.
Here’s my advice to city and county: STOP SPENDING SO MUCH GODDAMN MONEY.
The premise of this story is a bit flawed:
Governments DON’T set their budgets based on revenue!
Governments base their budgets on what they think the NEED (or the political reality) might be, then governments turn in their various budgets to the County Clerk.
Yes, every jurisdiction would like to claim that they did not “raise” their individual mill levy, but the levy is SET and CERTIFIED by the County Clerk.
So, When the State makes a decision about what property is or is not taxable, or when the state makes a decision about the various classes of property, it does not “cut” revenue in any shape or form.
This is simply the local governments trying to blame part of any future mill-levy increase on the fact that some property is no longer available when “budgets” are spread over “values” (supplied by the Appraiser or the Department of Revenue (in the case of utilities).
NOBODY got a “CUT” in anything. Topeka simply removed some property from the tax base.
This is like squeezing a balloon, it will pop up somewhere else.
But NOTHING was “cut”>
By the way, there are about 105 taxing authorities in Sedgwick County.
Good points econ. To which I would add that when the local units remove property from the rolls (their favored companies) the rest of us make it up. Also, all that land condemned by the County downtown will be off the rolls after this year.
So, When the State makes a decision about what property is or is not taxable, or when the state makes a decision about the various classes of property, it does not “cut” revenue in any shape or form.
Posted by: Econ101
I would disagree in part with the above statement: Anytime you decrease the accessed valuation of real property which contributes to the ad-valorem tax revenue collected – you decrease revenue.
Econ, the county clerk, as you WELL know, does not APPROVE budgets. NOR do they do tax appeals. The CC certifies them as official and the board of tax appeals does the appeals. Big difference.
Getting certified doesnt have a damn thing to do with “approving” the budget. Or watching out for the taxpayers’ interests.
So, when an entire class of taxable revenue is REMOVED or CUT from the POOL, the POOL from which to draw revenue is SMALLER everytime “property” or some taxpaying entity is REMOVED from the rolls.
Since you are the one who brought up NEED, the NEED must be met by tapping and smaller and smaller pool.
What does that mean, Mr. 101?
The people who are still IN the pool have to pay larger and larger individual bills to make up the DIFFERENCE between the NEED and the available money in the “pool”, since the business lobby in Topeka go their folks OFF the tax rolls. Business equipment and inventory is no longer available to your local governments to be taxed.
The business lobby in kansas couldnt win at the local level, so they ginned up their lobby in Topeka, went over the counties’ heads, so to speak, and got themselves REMOVED or CUT from the pool of potential tax paying.
And governor leadership, who never met a republican idea she didnt like, seized on it as a way to make herself look good, even though PROPERTY taxpayers at the local level would likely foot the bill instead of the poor pitiful business lobby memebers. Sniff sniff.
Good grief paulie. That is a CUT in potential revenue no matter HOW you try to spin it. It is cut, and then need dictates it has to be made up. By us.
But nice try, we are amused, and we do encourage you to try again.
The people who are still IN the pool have to pay larger and larger individual bills to make up the DIFFERENCE between the NEED and the available money in the “pool”, since the business lobby in Topeka go their folks OFF the tax rolls.Posted by: ksfarmgrrl
The above statement is not mathematically true. When you add up all the revenue, the amount generated gets smaller. As you stated, “the pool gets smaller”.
It does result in less revenue collected.
Now, whether or not those still swimming in the pool will pay more is a political decision. No law does NOT allow for increasing the taxes on the remaining swimmers.
Each persons property taxes are based on the accessed valuation of their own real property. It is not based upon the other swimmers in the pool.
No law does NOT allow
should read:
The law does NOT allow
“No law does NOT allow for increasing the taxes on the remaining swimmers.”
201, that doesnt even make sense, and it isnt true. You are splitting hairs, and you know it. Plus you are blurring the distinction between the “pool” and the “swimmers”.
The remaining “people” both real and corporate, may own differing AMOUNTS and shares of the taxable resources in the pool, and hence, pay unequal amounts.
But as the pool gets smaller, and government tries to raise the same amount of revenue or more than in previous years, OF COURSE the remaining “pool members” or swimmers have to pony up more. That is how the “cuts” in revenue potential are made up.
How complicated is THAT?
Ok, so you corrected your typo. But wtf, it STILL isnt right.
The LAW certainly DOES allow for the remaining resources to be taxed at a higher level to make up the difference. Sometimes local governments mask those tax increases as merely increases in assessed valuation, but the truth is…
…the remaining swimmers DO pay more taxes, either through increased assessed valuation OR higher mill levy. Or higher sales taxes.
The devil needs his due. I have no argument about wasteful spending of tax dollars. Look at the guarantees and loans for WWW. We can cut lots of waste, but that isnt what happens in the real world, and you know it.
Let me try to explain my above posts. I think it is important to clearly identify the tax law, from the political decisions our elected leaders make. Right up front I will tell you, I belong to a small club who believes if you have less money in your pocket, you simply spend less.
Some leaders at local levels and up – will make the bold proclamation that, “WE HELD THE MILL LEVY INCREASE TO ZERO!!”
The impression is that if your mill levy does not increase – your property taxes will remain the same.
But your property taxes are based not only on the mill levy – but also your properties value. This value, the accessed valuation has been increasing on average 7% a year across NE Kansas.
What does this mean?
Even though your politicans pat themselves on the back for not raising the mill levy – YOU STILL PAID MORE TAXES.
In order to remain revenue neutral, your politicans should actually LOWER the MILL LEVY by the exact increase in county-wide valuation.
Finally, you should ask your local politician, ‘WHAT DID YOU DO WITH THE INCREASED REVENUE YOU COLLECTED?” (in my example, the 7%).
What I think Farm Girl is implying, is that BECAUSE there is less revenue in the pool, our politicans end up INCREASING the MILL LEVY.
So think about this: Everytime your mill levy goes up, that increases revenue OVER AND ABOVE THE INCREASE GENERATED BY HIGHER VALUATION!!!!
Now “WHAT ARE YOU DOING WITH ALL THAT MONEY!!!!”
The “club for growth” and “americans for prosperity” are not “clubs”.
They are members of a business and “taxpayer” lobby that worships grover norquist.
Farmgrrl isnt TRYING to say anything. I said it very clearly. That you choose to spin it does NOT reflect on my ability to say anything.
Econ201, a question: should “revenue neutral” be no more than if $X were collected in FY07, no more than $X may be collected in FY08, or, should it be in real terms, no more than $X in FY08 (that is, FY07 $X + inflation)? This principle is currently found within the Internal Revenue Code, for example, recognizing that if the dollars a taxpayer receives remains constant, s/he is actually less well off than the year before.
But as the pool gets smaller, and government tries to raise the same amount of revenue or more than in previous years, OF COURSE the remaining “pool members” or swimmers have to pony up more. That is how the “cuts” in revenue potential are made up.
How complicated is THAT?
Posted by: ksfarmgrrl | July 30, 2007 at 02:05 PM
It is true. There is no spin on math. (Where is VT when you need him?)
Less property taxed will result in lower revenue collected.
Now if you want to proclaim that politicians THEREFORE increase taxes to make up for lost revenue, go to town. I agreed.
But the formula remains the same and they do not change the math to generate more revenue.
They are two separate things and if you want to discuss, “State tax cuts leave locals feeling pinch” it involves:
Less revenue generated
The rest of it is crying about big business.
But the truth is, local governments aren’t hurting. They just aren’t getting as much.In turn, they may TAX YOU MORE.Check your water, sewer, refuse, cable, franchise fees on electric too. Did your local governments increase these bills too?
But in all these things, businesses are paying more too.
VT, I was just wishing you were here. You are better at this than I admittedly am. Trying to state the basic formula, without political statement. I think it is important to know the difference.
Revenue neutral, at the local city level government,our city council has a chance to vote every year on the budget based upon the county-wide (our city) valuation for ad valorem taxes.
Revenue neutral does not include an adjustment for inflation. Truely it is what it is. Inflationcan be measured in many ways. For instance, for employees salaries, we relied on something called MARC (Mid-AMerican-Regional Council). They provided salary information for our area – by employee classification (cop, fire, clerk). Now, my area is influenced heavily by the big cities nearby. So salaries are on average, higher in my area than say western Kansas. To stay competitive, we were encouraged to stay up with MARC. But if you are talking about a COLA, it could be based upon half a dozen “things” like a CPI.
Regardless, I digest just to demonstrate that these are still political decisions. It is very much politically correct for me to allow for an increase in revenue, but be able to say our budget was “revenue neutral”.
My hope is that the voters can see the truth.
Clear as mud, I know.
“But the formula remains the same and they do not change the math to generate more revenue.”
WTF? The “formula” does NOT remain the same.
There is a mix of property and sales and other taxes. The “mix” is the “formula”. And it changes every tax year, depending on budgets, available tax base, needs, wants, and assessed valuations.
And btw, ALL taxation involves “political decisions”. Even TO TAX at all is a “political decision”, much less how much to tax and what/whom to tax.
That’s just a red herring to this discussion.
Good grief! Taxing entities, or so they say, look at proposed budgets from other departments, not other governments, and come up with a number of dollars “needed” and “wanted”.
Then they look at the various sources of revenue and determine how, in what proportion and what rate, the overall “revenue” number can be achieved.
They dont look at their current tax base, insist it remain the same and in the same proportion, and then say, “this is how much money is available”.
Have you ever BEEN to a county or city or school budget hearing?
Actually, I have served.
;-)
And yes, we looked at providing a revenue neutral budget. A budget which would not increase taxes. A budget which allowed for NEED, not just inflation.
And had I had a consensus, we would have gone a long way to not just hold the line on the mill levy, but to lower it. Came close, but unless you #1 Find savings (efficiencies) or #2 decrease services, it’s nearly impossible to do.
Personnel costs are 75-80% of costs. Just add a COLA for them and you have to increase revenue.
And healthcare costs are huge.
“And healthcare costs are huge.”
No shit? Why didnt someone say something!
And they are HUGE even without universal coverage or single payer?
I’m shocked, SHOCKED, I say.
Econ201, I just do the best I can.
Anytime one has personnel costs representing 75 – 80 per cent of a budget, there’s a limit to efficiencies available by increasing, e.g., productivity before a cut in services becomes the issue, IF there’s to be no increase in absolute revenue. True in private business, too.
Were you born with that cob up your hind end, or is that a developed quality?
Thanks VT, earlier comment was not directed at you.
Can’t seem to discuss the basics without someone getting their-its in a sling.
201You are splitting hairs.
The fact is, there ARE various steps that each governing body MUST take, on their budget submission.If a USD, for instance, puts too much into its “recreation district” — the County Clerk has a DUTY to reject the budget.There are percentage limits for certain funds.The Clerk does NOT have to accept every budget, as submitted, unless that budget is in good form!
Farmgirl
“over the heads” of WHO, exactly?
The only way a local government could do ANYTHING about business equipment would be through IRB tax abatement.
To me, taking ALL new equipment off the roles is more “fair” than only taking off equipment for those businesses that qualify for IRB treatment.
By the way, business equipment taxes are a tax on the honest busisnesses.
How many personal computers, used for business purposes, are on the tax roles???
201
I do find it irritating that you have chosen a nic close to mine.
People will get us confused, which is probably your intent.—
Now, more precisely, to the entire Blog:
Business Equipment Taxes were NOT a big percentage of total tax revenues, for ANY taxing district, BEFORE this law was passed.
In MOST, if not ALL taxing districts, WESTAR ENERGY is the biggest taxpayer. Utility property is assessed at the HIGHEST (30%, I forget) tax rate.
The “TOP 10″ taxpayers in ALL 105 taxing districts, in Sedwick County, are BUSINESS PROPERTIES and in NO CASE did they make the “TOP 10″ based on equipment, alone.
Therefore, While businesses WILL benefit from this tax cut, BUSINESSES will ALSO, in large measure PAY for this tax cut.
Budgets are “spread” over Values.
Businesses STILL own expensive real estate. Commericial Property is STILL assessed at a higher rate than Residential Property.
Yes, businesses benefit from this tax cut.
Businesses will also PAY most of the “cost” of this tax cut.
AND — more business might HAPPEN because now, Kansas is more competitive with a more honest taxing system!
FARMGIRL
I think we are in agreement on the fact that 201 does not understand the process.
We dont agree often.
Just thought I would point out this rare event!
Econ101, yes, the nics do create a problem as to “typing” the same.
Don’t know if the elimination of business equipment taxes, in and of itself, will result in more business; as you note, it might happen, and the negative is equally true right now, it might not. We’re both speculating here. I tend to believe those studies that put taxation towards the bottom of the list of priorities considered by businesses in siting decisions, otherwise, how does one explain California? :-)
VTThey got a great big BEACH that seems to attract a few people!
But, point taken.
If you don’t have mountains, beaches, etc, I think LOW TAXES are about the only way to attract new business.
If low taxes don’t work, why do we come up with tax breaks for conservation, tax breaks for new construction, etc?
“Tax” also means “strain” — for good reason! If you want more of something, subsidize it, if you want less of something, TAX it!
This is so predictable. Anytime a tax gets cut, you can bet your last dime some goofball is going to write a story crying the blues because government has less of our money to spend. Wah, Wah, Wah.
“I think we are in agreement on the fact that 201 does not understand the process.”
Ditto Paul. It is rare, but we do agree :)
Paul, I agree with VT. My years of experience in economic development tell me that they look at the overall cost of doing business. Transportation, proximety to market or raw materials, availability and suitability of physcial facilities, infrastructure and utilities, appropriate numbers and skills of people in the workforce. To the last point, which is often ranked number one in importance, the quality of life issues come into play, including cost of housing, quality of schools, appearance and “greeness” of community, recreation, etc.
Taxation is just ONE cost of doing business. But in the late eighties and early nineties, some very smart economic development folks realized it was one of the FEW costs they could control or offset.
E.D. folks have always played to their community’s strengths and downplayed their weaknesses. For example, it used to be that if you had high utility costs, you could offset that with targeted breaks, or “tax cuts” or by running special infrastructure to their sites for free. You could get the railroad to pitch in a spur if needed, the local juco to throw in some free training, and the “deal making” went from there.
But also, along the way, some of the folks BEING recruited got the idea that tax breaks were easy and there for the taking. They knew elected and public officials wanted to run to the head of any parade for a new business, so they THREW tax breaks at new business or new jobs.
Now? The corporate folks think tax incentives, (not really breaks) are table stakes. They come with EVERY deal. They are what you have to have just to sit at the table and play.
And the sheeple so devooted to the old model of economic development just keep on following…
“I think LOW TAXES are about the only way to attract new business.”
How about a well-trained quality work force? Or do you want to try to “out-Haiti” Haiti?
Chris, YOU are the one who needs the waaaaaaaaaaaaaaaaambulance.
I said I had no argument with cutting waste. But I dont see that happening. So… of COURSE it matters how the revenue pie is sliced. I see the business slice getting smaller.
Are you volunteering more of YOUR personal slice to make up the difference?
Thanks!
I tend to believe those studies that put taxation towards the bottom of the list of priorities considered by businesses in siting decisions, otherwise, how does one explain California? :-)—
California is starting to feel the pinch of high taxes and various expensive laws. It is getting too expensive to live there. My mother in law bought a house in the 80’s for $80K; houses in her neighborhood now run a minimum of $600K, and this is considered in/near the bario part of town, not the nice part of L.A. Businesses are feeling it too.
I think most people miss the basis premise. Your highest tax rate should be at your lowest level of govt. USD 259 should have a high rate solely for educ.; then city, county, state, and fed.
Trickle down taxing costs more money than it saves. If you pay $1,000 in fed. taxes for educ., maybe half gets to the local school district, the USDOE, KSDOE, and numerous other govt. bodies eat it up to cover salaries, etc. Better to pay the money straight to USD at 100%. This also reduces duplication of services in the process.
I totally agree with Ben. It is most often, after water and transportation, the number one consideration for new or expanding businesses.
SMART E.D. folks these days try to find out what the biz really needs, and then address that issue. If you could supply the right workforce in abundance, I’m pretty sure they wouldnt mind paying a little more in taxes.
And if you dont have the right quality or quantity of water, not only does it affect quality of life decisions, but it is a deal breaker off the top for most businesses that use it.
JUST throwing tax money away and at the problem isnt the answer. Targeted incentives of ALL kinds are the answer.
California suffers from high real estate prices. That is a result of demand. Like as in, people WANT to live and work there.
High real estate prices are not caused by high taxes. High taxes usually result as a by product of high real estate values.
The businesses leaving California tend to be “resource” based. Like dairy farms. The humans dont want to live that close to animals, so much of the animal agriculture is leaving.
Also, businesses that need lots of real estate are leaving for greener pastures and looking for lower prices and more acreage.
It’s NOT because of the taxes.
The problem with targeted incentives, for big or international businesses at least, is WTO violations. Look at the fight between Boeing and Airbus over subsidies, incentives, etc.
And, how are these incentives fair to local businesses if they do not get the same opportunities to use them?
I would say Ben hit it on the head with quality work force.
In the 60’s, there were 2 main products sold in the US: those made in America and those made in Japan. At the time, made in the US meant two things: high price, and high quality. Made in Japan also meant two things cheaply made and cheap. By the late 70’s, the switch started with Japanese manufacturers making higher quality stuff at a somewhat higher price.
Incentives, in order to be legal, have to be available for everyone. Out here it usually runs about $1000 for every “job” created. No kidding. That’s the standard in Hays.
So, west coaster, are you saying there should be NO incentives? Actually, I could agree with that.
Could you?
…oh, and btw, it has to be a BIG incentive to get the attention of the WTO.
Jesus wept….
And dont forget, communities COMPETE for these business expansions and creations. If YOUR community wont “incentivise” the deal, you can bet your sweet ass the neighbors will.
kfg, I agree that tax incentives have become “table stakes”. One doesn’t go to the table without them, as they have become the accepted “ante”, so to speak.
I, like you, have no issue with no incentives. Likely not to happen again in my lifetime.
WTO issues can be VERY important. As noted, see the squabbles with Boeing and Airbus. We are also seeing a lot of that with agriculture that severely impacts developing countries. Our subsidies price them out of the market and are in violation of trade agreements.
However, if we provide great infrastructure (and that inlcudes human resources) that does NOT violate trade agreements. And, as a businessman I will say that is what I need to prosper.
Yes, I could live without incentives.
I believe the next big depression/recession will at least temporarily solve that problem. And I am talking about a 30’s style depression. We, as a world, have lived too long without one. I am not wanting one, but realisitcally, it is just a matter of time.
ksfarmgrrl,
To your earlier comments, yes demand is part of the cost of real estate, but taxes are a high priority. They may not be #1 or 2, but they are high enough to be an issue. I am going on what my mother-in-law has seen in the last 50+ years living in the LA area. She is a lot closer to city issues because of her long-term participation in civic affairs.
As to dairy farms, I see more CA dairy ads here in Kansas, so I am not sure where these CA cows are moving to.
Work calls, so I might not say anyone until tomorrow.
People don’t like to be around animals so the ANIMALS leave?
Huh?
More realistically, the price of the land went UP because of the development AROUND the land.
Appraisers compute the “HIGHEST AND BEST USE” of property, for appraisal purposes.
Therefore, agricultural use might be profitable, without the tax component.
But — when a farm is now surrounded by commercial development, the land is appraised for what it might bring on the open market, not the cash flow generated by the agricultural use. This means that the taxes owed on that land might go clear through the roof!
Therefore, class:
THE TAX RATES IN CALIFORNIA DO HAVE AN EFFECT ON BEHAVIOR!
Incentives?
Again, I think it is more fair for the “liars paradise” of business equipment taxes to be done away with.
If we are going to grant breaks on equipment, lets give that break to everyone, not just those who get IRB financing to buy their equipment.
Econ
Start a business, inc it and then watch as the gov gives you all your taxes back!
Even a caveman can do it!
One lady I know, got the gov to loan her money for her backyard swimming pool because she incorporated her swim lesson business. Now, just about everything she does is a tax deduction.
You don’t have to pay income taxes if you’re smart and start a home business.
Let’s see here. You eliminate taxes on new equipment. If this allows you to expand your business and hire more people then perhaps the state actually gains that revenue back from additional payroll taxes and sales taxes from wages being spent. I wonder if the county is taking that into account?
What am I thinking, economic growth surely could’nt mean increased tax revenue. Silly me.
Of course the alternative is to cut spending. But a politician who dare suggest that today would be considered crazy, selfish, and unholy.
When you have less revenue coming in, is not the time to be increasing spending. But that’s exactly how backwards our system has become.
We need to look at “what’s next” for cutting taxes. There is no point in crying in our beer about business getting a break. Let’s give the rest of us a break too.
Freeze the property tax increases which are based upon inflated evaluations. Many states have done so for senior citizens.
Does Kansas tax social security? Let’s cut that some more.
Cut some more! Cut some more! Cut some more!~
Paulie, really patiently, I am going to explain this again.
The higher TAXES came from higher VALUES of the property, not the other way around.
By your own post, you admit that land prices rise because of demand. That results in higher assessed valuation, which THEN translates into higher taxes.
Yes, land values and the RESULTING higher taxes can be an issue for land or real estate based businesses, as dairies and agriculture are. No argument there.
But, once again, the DEMAND for LAND drove the taxation, not the other way around.
Also, please post where I said taxes have NO effect. Of course they do, but no more and no less than any OTHER cost of doing business. Like I said, they look at OVERALL cost of doing business when making relocation, expansion or start up decisions.
So as a component of the OVERALL cost of biz, taxes of ALL kinds so have an effect. So if you take biz equip off the rolls, and it forces local government to raise PROPERTY taxes and SALES taxes, you think the biz in question wont see THOSE increases as increases in the overall cost of doing biz?
For using an “econ” nic Paulie, you dont seem to see the forest for the trees.
And I am back to my point that WORKFORCE, proximity to market and raw materials, transportation, and quality of life are WAAAAAAYYYYY more important than taxes.
But please, continue to advocate for giving away more business and corporate welfare. For no reason. Check the states with the overall lowest taxes and look at their growth rate. Then look at high tax areas like California, New York, Florida, etc. and check THEIR growth rate.
See how much difference the other factors make? And how little taxes make?
“One lady I know, got the gov to loan her money for her backyard swimming pool because she incorporated her swim lesson business.”
I’m gonna call BULLSHIT on that one.
There is a HUGE myth about the availability of “government” loans. SBA? 504? Local revolving loan fund? USDA? State loan programs?
Yeah, they exist, but they are NOT meant for things like building a backyard swimming pool. That is just myth.
And the myths around the availability of getting “grant” money to start or expand businesses are even MORE outrageous.
I wish I had a quarter for everytime someone walked into my office and wanted me to put them in touch with “grants” to help them out.
I always told them if loans or grants were available, and the criteria.
They always came back with some bullshit story like the backyard swimming pool, but when pushed, they admited they just “heard” it somewhere. Urban myth.
In fact, on some of the more outrageous requests and outrageous people in my office DEMANDING their grants and loans, I gave them a list of resources. Then I told them if they found a grant or loan to fulfill their request, I would PERSONALLY match whatever money they got.
Funny, in twenty years, I never paid out one penny…
…and as for the “dairy cows” leaving California….
There is a two bit group out here called wKREDA that does a few projects now and then. The biggest project they ever did was to recruit dairies to move to western kansas and away from the more populated areas.
The number one place to look for dairies wanting to move? California. The number one place to network with dairies wanting to move?
The Tulare Dairy Show. As in Tulare, California.
Bring your “A” game in here from now on. These are easily found facs.
Here is a link to the Forbes article about “best states to do business”. See how many are chosen on the basis of low taxes. Yes it is a factor, but not nearly as important as the club for growth and americans for prosperity want you to believe.
http://articles.moneycentral.msn.com/Investing/Extra/TheBestStatesForDoingBusiness.aspx
Also worth mention is the part where the governor of Washington talks about how many businesses Washington is poaching from California.
Because of taxes or high real estate? Nope, not really.
Because of too much red tape. A pal of mine moved to CA to do economic development, and he commented early on that the Prop 13 folks had made a patchwork of permits and fees so cumbersome that it was almost impossible to expand or start a new business or move to a new location.
The governor of Washington confirms that in the article.
You might also find this interesting:
The ten best states in the Tax Foundation’s 2007 State Business Tax Climate Index are as follows:
1. Wyoming2. South Dakota3. Alaska4. Nevada5. Florida6. Texas7. New Hampshire8. Montana9. Delaware10. Oregon
Notice the top three? Not exactly known for their economic or population growth, now are they?
The ten worst states in the Tax Foundation’s 2007 State Business Tax Climate Index are:
41. Minnesota42. Maine43. Iowa44. Nebraska45. California46. Vermont47. New York48. New Jersey49. Ohio50. Rhode Island
Note that Minnesota, New York, New Jersy and Ohio continue to register economic growth.
Kinda puts the lie to the “business tax myth”, no?
Let me be the first to jump in and note that Washington State has no individual income tax at the state level. With that out of the way,
kfg, what are you trying to do here? Use facts? ;-)
With respect to Minnesota, as that is where the elder is, it is my understanding from her that the Twin Cities area is the second-largest area in the country of biotech businesses, second only to the California Bay Area.
And, according to the State DOR website, no corporate income tax. Washington has a business or occupation tax, which I didn’t investigate; a fairly healthy property tax; a state sales tax rate at a base a bit higher than Kansas, and with local municipalities allowed to impose sales taxes, the total rate can be as high as 8.9% (food and prescription drugs exempted).
So, if property and business taxes are issues, doesn’t look like WA is all that tax friendly to me.
Yep VT, no INDIVIDUAL income tax.
Same with Texas, Nevada, and Florida to name a few.
So… I’m almost inclined to believe giving tax breaks to INDIVIDUALS, not corporations and business, is the BEST way to stimulate economic growth.
But damn, that SURE flies in the face of the club for growth and ‘mericans for prosperity party lines.
It also flies in the face of the folks here who whine that ALL taxes are paid by induhviduals because biz just passes the cost of their biz taxes on down the food chain.
So then… why the growth in the states with NO personal income tax, and perhaps higher biz taxes?
POPULATION drives growth. But then, I’ve been saying that for 20 years in economic development circles both large and small.
you see how many converts I’ve made. Businesses follow people, not the other way around. In ks, we still think creating jobs brings population, when in fact, it is just the other way around. Read Richard Florida’s “Rise of the Creative Class” if you dont believe me.
But hell, I’ve just got degrees and training and 20+ years of experience in community and economic development. And I use those pesky facts.
Those just arent relevant in today’s economic development world. Following the urban myths is SO MUCH MORE reliable.
How’s that mythology working for ks?
“a state sales tax rate at a base a bit higher than Kansas, and with local municipalities allowed to impose sales taxes, the total rate can be as high as 8.9% (food and prescription drugs exempted).”
Ever so true, VT. Austin is consistently ranked as one of the best places in the nation to live and do business. And their sales tax rate, last I checked, was pushing 10 percent. And they are growing wildly.
And what have I been preaching here? Sales taxes over property taxes, with food and drugs exempt.
Sure works for Austin. And Washington…
Yep, kfg; btw, MN also has a higher sales tax rate than KS, again food and prescription drugs exempted, as well as clothing! The clothing exemption, I was told, was a part of the deal to get the Mall of America in Bloomington.
Well VT, SUCCESSFUL economic development isnt all that hard, as long as it is FACT driven and not MYTH driven as it is in kansas.
As Mary Chapin Carpenter sings “the stars might lie, but the numbers never do”.
It would be prudent for the chambers and e.d. folks in this state to tone down the rhetoric and actually practice by the evidence or numbers. But that doesnt suit the elected officials who are usually in charge of their jobs.
Hence, we have economic development, as practiced in most of kansas, as the BIGGEST hoax EVER perpetrated on the taxpayers of the state.
How’s THAT working for us?
Well, kfg, that (practicing by the numbers vs. myth) might be inconvenient for those folks. I’m sure you are aware of the Prof from Carnegie-Mellon and his work on why certain places have growth and others stagnate (or worse). As a native Pittsburghian, he became interested in tracking the growth of Minneapolis and Pittsburgh over a period which, as I recall, encompassed over 20 years. Basically, Minneapolis has grown, Pittsburgh remained stagnant over that period. At the beginning of his study, the two cities were in a statistical same place, that is, the traditional industrial base of both (Minneapolis, milling; Pittsburgh, steel) was “dying”; the populations were similar, the property values similar, income levels, etc., similar. His examination of why Minneapolis went one way and Pittsburgh the other has proved controversial (btw, as his thesis on Austin, San Francisco and other growth areas) as he points to the development of certain social (not economic) attitudes, etc., as being central to the growth. His detractors busily work on discrediting his thesis, all of which results, to my thinking, as admitting these areas indeed have grown, but God forbid, it surely couldn’t be for the reasons the good Professor assigns. Just cannot recall his name so I can provide a link.
Farmgirl
By your own posts, taxes ARE important.I don’t recall ever claiming that taxes were the ONLY important inssue in growth.
Also, Farmgirl, I understand your experience in Eco Devo.However, “Growth” means more, to me, than just snatching business and jobs from other locals.
The growth that is most important, to me, is the growth of existing firms that are already here. Add to that, I want to encourage people who already live here to start NEW businesses.
I do believe that tax incentives help, in that regard.
I do not argue against the imporantance of education, at all. Boeing once tried to expand to Greenville, MS. That did not work. Remedial education was simply too expensive.
Now, beyond the “public welfare” of economic growth being a public good, which justifies tax cuts that promote such growth —
Let me repeat my position, which has yet to be refuted here:
The taxation of business equipment depends ENTIRELY on the knowledge of the business owners that their equipment is taxable, and on the honesty of said owners to provide personal property renditions to the County Appraiser.
A very LARGE percentage of business equipment is under the radar screen, never reported.
Realestate has a deed. Vehicles have titles.
Equipment can be bought or sold with little or no paper trail, especially if there is no lien against the equipment.
Personal Property, especially business equipment, is hard to appraise.
The cost of appraisal, or valuation, for personal property and business equipment, is rather high as a percentage of its actual value. For unusual pieces of equipment, an exact appraisal would be impossible.
For all of these reasons, I think the State is wise to back off of the business equipment property tax.
It is a tax on the honest business person, a tax that is avoided by many, with virtually no fear of ever being caught.
Again, how many businesses list their personal computers on their property tax rendition to the appraiser?
Farmgirl
I do not believe that agricultural land, surrounded by commercial property, would be able, legally, to retain the “agricultural” classification.
Typically, “AG” use is the cheapest use, for classification purposes, next to charitable or government use, followed by not for profit, residential, commercial and then utility.
That is how it is in Kansas.
Anyway, you are correct, valuation DOES affect taxation.
I am ALSO correct, CLASSIFICATION affects valuation.
If I decided to plant corn in Eastborough or in Old Town, I would not be granted “AG” classification.
“Highest and best use” — that term applies to classification as well as valuation, in most jurisdictions.
Classification ALSO affects tax rates, that is another matter.
Econ101, yes, I’m the honest one listing the personal computers on the rendition. Some of what you complain is inherent within any system of voluntary compliance; I’m sure we both have heard the “war stories” of the cash under the table payments never reported, etc., etc.
Your point in trying to obtain consistency between equipment financed with IRBs and those purchased from operating capital is well taken.
On the rendition, many of us report the purchase price from which the appraiser applies the manual’s depreciation, etc., rates in arriving at appraised, and then assessed valuations. I’ve never thought it worthwhile to challenge the appraisal with an actual physical appraisal of the personal property reported on the rendition for the reasons you state.
I think I and kfg disagree with you on the degree to which taxes on businesses, in whatever form imposed, are important in attracting new businesses. Your ideas on growth are somewhat self-limiting, IMHO. I believe that while the two things you cite are of importance, an increase in population followed by additional business creation is more important to the future viability of an area, compared to growing what is already here and encouraging those already here to start new businesses. Just my two cents on the latter.
VT, I’m laughing now. The “prof from CM” is indeed Richard Florida who wrote “The Rise of the Creative Class”. You are correct on all points. Same source as mine.
Paulie, you have yet to prove this in any way: “Now, beyond the “public welfare” of economic growth being a public good, which justifies tax cuts that promote such growth”
VT and I have provided PROOF that “tax cuts” or even a low tax rate does NOT foster business growth. You just “believe” it but have shown no proof in the face of US proving it not to be true.
The laffer curve has been debunked in theory and in fact many times. Tax cuts do not necessarily, if ever, foster new growth.
And you “believe” that taxes have an effect on NEW businesses being created? As my evidence shows, that is NOT true.
You club for growth and ‘mericans for prosperity guys just REFUSE to see the facts.
And Paulie? “It is a tax on the honest business person, a tax that is avoided by many, with virtually no fear of ever being caught.”
Well hell, THAT can be said about ALL forms of taxation. People sky out on sales tax payments and income tax payments all the time. Should we stop those too because we have trouble enforcing the laws?
I hear you saying we have an enforcement problem with the biz tax, not anything harmful about the tax itself. So let’s just beef up enforcement.
Hey, isnt that what republicans and conservatives say about illegal immigration? We have an enforcement problem so let’s step up the enforcement?
Those guys always post, with some sarcasm, that just because we cant enforce a law, that law shouldnt be wiped off the books.
Sorry paulie. This argument about biz taxes just isnt going your way. It flies in the face of the evidence.
“Your point in trying to obtain consistency between equipment financed with IRBs and those purchased from operating capital is well taken.”
Ok, I’m going out on a limb here. But IRBs ARE used to give tax breaks when nothing else works. I had a real estate developer hose me out here on a project that he could WELL afford taxes on, but he just didnt want to pay them. So after the project was started, he held up the city council for IRBs. JUST so he could avoid taxes and increase profit.
Also, IIRC, when IRBs are used to buy real estate or equipment, doesnt the city or county actually hold the title and “lease” the stuff back to the biz? THAT is how they avoid property taxes.
Government doesnt pay taxes on property they own, except voluntarily on “in lieu of” payments. By the city out here “holding” the property and giving IRB tax breaks, they also jeopordise the county and school districts’ shares of the take.
I think that is generally correct, but other information might prove me wrong. I would be interested to know.
Geez, kfg, there the name was in your post and I’m so far out of it mentally, it didn’t penetrate the mass. Laughing at myself, too, at this point. Your (and my) source is, IMHO, well thought out, raises many issues which many wish to ignore (at their peril, I hasten to add), and generally a work of extremely fine scholarship. I commend it to all who are interested in the area, with the admonition to keep the mind open while reading the same.
That’s my understanding, kfg; but Paul is correct in the sense that by the issuing governmental entity holding title, with the “leasing” done by the beneficiary of the IRB issue resulting in the ‘tax break’, there is little substantive difference between true ownership of said business property and outright ownership. Thus, why punish the owner is where I perceive he’s coming from.
It is interesting the effect that the IRBs have on the other taxing entities. So long as property taxes are the bulk of the financing for these entities, the replacement of unavailable property tax revenues with revenues from other forms of taxation (sales, income, excise, whatever) needs to be considered. While I understand that the school finance formula does take some income tax revenues for funding education, I am not certain that these revenues serve as adequate replacements for the foregone property tax revenues.
This is all from the top of my head, so anyone with knowledge correct any misstatements I have made, for as has been amply demonstrated, the thought process is a bit muddled today.
Further proof: please replace “true” with “beneficial”, supra.
I dont disagree with your assessment, and perhaps paul’s as well, that there is little difference between ownership and IRB leasing. It is another shell game to give BIG businesses tax breaks that they dont need, they just want.
And that brings us back full circle. No matter HOW many ways businesses find to dodge their taxes, the “difference” has to be made up somewhere. It is a shifting of the tax burden, not a reduction.
VT, I actually disagree with Florida on one point, but I think it is a distinction WITH a difference. Richard says the things he outlines for communities to do will ONLY work in urban areas or “cities” if you will.
I heartily disagree. It works in small towns as well if it is done properly. I proved it true in WaKeeney and Collyer. But it doesnt suit the interests of “big” business necessarily. Thankfully in this instance, I had no “bigs” to deal with.
If communities, especially out here, are doing anything BUT what increases the tax base, brings in new money, and sustains or increases population…
…they are DINOSAURS waiting for better weather.
How’s that going for us?
Well, kfg, I agree that is a distinction with a difference; hadn’t thought it through. However, being raised as a small town guy myself, I likely read that as referring to any place with a population of, say, greater than 50 living within defined “city” limits. :-)
farmgirl
The Laffer Curve is alive and well.It works when you try it.I fail to see how your arguments dove tail with that comment at all, concerning the Laffer Curve, which I think applies primarily to INCOME taxes.If anything, in reading through the posts, rather quickly, I think we agree on a few points but disagree on how to address those points.
YES, there are problems with ANY taxation source. My point, on the equipment taxation, was that it is more expensive, per dollar raised, than the other sources of taxation. Does the cost of collection matter to you?
Yes, I agree that political favoritism has taken over in the Eco-Devo field.
Those of us who like “across the board tax cuts” like them, in part, because they take the political favoritism OUT of the process, to some degree.
I ADMIT that passing out tax breaks is a corrupt system, at times. That is why I want to make the system more fair for everyone.
I ADMIT that it is hard to tell which businesses would expand ANYWAY without the break, and which businesses need the breaks, in order to expand.
This is why I advocate backing off of equipment taxation entirely.
Businesses that buy new equipment, especially, are going to be needing employees to RUN that equipment. I think this is a smart area to focus upon for eco-devo.
By the way, I agee, population does drive economics.
Read Harry Dent.