“To pass a tax increase at a time like this would be far worse on the people and far worse on the economic recovery than taking the needed cuts.” – Sen. Susan Wagle, R-Wichita, in early 2010, about a proposal to avert damaging state budget cuts by raising the statewide sales tax to 6.3 percent for three years
“Let’s just leave Kansas. Let’s forget about buying food in Kansas.” – Wagle again in May 2010, as the Senate passed the sales-tax hike
“Sales tax has nothing to do with economic growth. It doesn’t really matter what your sales-tax rate is.” – Wagle, now Senate president and an advocate for keeping the sales-tax rate where it is after July 1 to pay for income-tax cuts, speaking last week to GOP Senate and House members
However the sales-tax debate turns out, state lawmakers and Gov. Sam Brownback can say they lowered one tax by a whopping 30 percent this year – the property tax on boats and other watercraft. That tax had been so high in Kansas that many residents unlawfully registered and kept their boats in neighboring states. Voters finally passed a constitutional amendment last November authorizing lawmakers to classify and tax watercraft on a different basis from other personal property, and Brownback signed the resulting measure April 16 as part of a larger tax-related bill. Now, boats will be taxed at 11.5 percent of appraised value next year and 5 percent as of 2015. The new tax rate should benefit Kansas boat owners and dealers as well as the state’s lakes, parks and budget.
Gov. Sam Brownback’s effort to turn Kansas into a “red-state model” was featured in a long report on National Public Radio last weekend. Brownback explained how he wants to put Kansas on a “glide path” to zero income taxes as a way to create growth and attract investment. But economist Brad DeLong warned that Brownback’s approach likely will produce “a relatively low-wage form of economic development” and result in social services that are “quite lousy.” Former Gov. Bill Graves also was interviewed and blamed Kansas’ sharp shift to the right on a well-funded effort to “suggest that less government is gonna be better for everyone.”
The state’s new revenue estimates released last week show the stark budget challenge facing the state – how to cover the loss of nearly $1 billion of revenue over two years, mostly due to the tax cuts signed by Gov. Sam Brownback and the scheduled reduction in the statewide sales-tax rate. Actual revenue receipts in fiscal year 2012 were $6.4 billion. The new revenue estimate for next fiscal year is $5.45 billion. That drop is considerably more than what occurred during the Great Recession, when revenue dropped by $618 million over a three-year period, according to former state budget director Duane Goossen. Federal stimulus money helped offset a significant amount of that drop. Another big difference between then and now: The previous budget problems were triggered by a global economic crisis that was beyond our control; the current shortfall is self-inflicted.
Though many Kansans like to complain about federal spending, they may not realize, or won’t admit, how dependent our state is on that spending. A Kansas City Star investigation published in the Sunday Eagle highlighted Sumner County, just south of Wichita. It noted how the direct federal benefits that the county’s 24,000 residents received in 2010 were 40 to 50 percent more, on average, than what they paid in federal taxes. Sedgwick County actually topped the state in receiving the most federal spending – $4.6 billion in 2010. Statewide, Kansas receives about $1.12 in federal spending for every tax dollar paid.
Duane Goossen, former longtime state budget director, warned that the state’s “current spending levels dramatically exceed expected income.” On his blog for the Kansas Health Institute, Goossen noted that state general fund spending approved for fiscal year 2013 is nearly $6.2 billion, while the estimated revenue for fiscal 2014 is only $5.4 billion. He also said the fiscal 2014 budgets proposed by the governor, Senate and House variously rob highway money and cut higher education and courts but still don’t get to even $6.1 billion. “The inability to close the gap with spending cuts suggests the solution must be increased revenue,” Goossen wrote, saying the governor and lawmakers could “transfer money from other funds,” “use up the available bank balance” and “add tax revenue.” They also can hope Friday’s updated revenue estimates will narrow the budget gap, he wrote.
“We should swallow hard and extend the sales tax,” concluded Kansas City Star columnist Steve Rose, urging the House to go along with the Senate and Gov. Sam Brownback. The 2012 tax plan won’t be repealed, Rose wrote, and extending the sales-tax hike beyond its June 30 sunset date is the only way to avoid draconian budget cuts to K-12 schools, higher education and social programs as state revenue ebbs. “It is appropriate to feel sympathy for those who would like to see the governor pay the price for his irresponsible income tax cuts. And sympathies abound for those who were viciously attacked for supporting the sales-tax hike in the first place,” Rose wrote. “But let’s not shoot ourselves in the foot while aiming at Brownback.”
America’s economy is poised to roar ahead if only Washington would stop holding it back. Ever since the Great Recession officially ended, the private sector has been adding jobs. What’s kept the economy in low gear and the unemployment rate stubbornly high has been the shrinking of government workforces: cops, teachers and other valuable public employees let go in the face of inadequate tax revenue. What fiscal policy should Washington adopt to boost our economy rather than drag it down? The first thing is to acknowledge that our current debt-reduction efforts can’t be primarily focused on spending reductions. We can’t cut our way out of debt, especially if we want to support our economy at the same time. We need a balanced approach of thoughtful spending curbs and increased revenue. If we don’t want to go deeper in debt, we need sufficient tax revenue from those best able to supply it to support job-creating federal investment in our still-struggling economy. – William Rice, Americans for Democratic Action
Even though economic growth is what we badly need to hasten our recovery, many of our leaders in Washington are hungry for even more tax revenue. Some still champion a big-government agenda that requires greater resources to implement more programs. But a heavy tax burden means consumers have less of their income to spend in the economy and businesses have less for hiring, expansion and investment. So when taxes go up, the rate of economic growth goes down. In order to keep our economy humming and put the government back on sound fiscal footing, we must undertake comprehensive tax reform and exercise real spending restraint through fundamental entitlement reform. Comprehensive tax reform should broaden the tax base so more people are paying into the system and simplify compliance for all business entities. It is the responsibility of the business community to keep the pressure on. Let’s remind Congress and the administration that, when families and employers fall on hard financial times, they must make tough decisions. It’s time for Washington to follow suit. – Martin A. Regalia, U.S. Chamber of Commerce
The tax-filing deadline is still a week away, but today marks “Tax Freedom Day” in Kansas, according to the Tax Foundation, based in Washington, D.C. Tax Freedom Day is when the average citizen will have earned enough money to pay this year’s tax obligations at the federal, state and local levels. Kansans actually fared better than average Americans, whose Tax Freedom Day isn’t until April 18. “This year, Americans will pay $2.764 trillion in federal taxes and $1.459 trillion in state-local taxes out of $14.366 trillion in income, for a 29.4 percent tax bill,” said Tax Foundation economist Will McBride. “That means taxpayers will pay more in taxes in 2013 than they will spend on food, clothing and housing combined.”
Democratic leaders in Topeka aren’t eager to help bail out Gov. Sam Brownback, who is calling on lawmakers to make permanent the state’s temporary sales-tax increase in order to help fill the budget shortfall created by the income-tax cuts he signed last year. House Minority Leader Paul Davis, D-Lawrence, said that he and others aren’t interested in “putting a lot of lipstick on a pig.” Senate Minority Leader Anthony Hensley, D-Topeka, refuses to be put in a box of choosing between breaking a promise on sales taxes or making more budget cuts. “My conscience is clear,” he said.
Praise is due members of the south-central Kansas legislative delegation for their bipartisan efforts to spare disaster victims from paying property tax on destroyed homes. There are significant differences between the bill that passed the Senate unanimously Wednesday and the House version, including whether the cost of the tax relief would fall on the state or individual counties. But many lawmakers clearly recognize the unfairness of receiving a property-tax bill in December for a house that was blown away in April, which is what some south Wichitans experienced in 2012. Good for area legislators for leading the way on this commonsense fix.
Count former state budget director Duane Goossen among those wondering how Kansas will fund a state budget without a state income tax, which currently represents 46.5 percent of state general fund revenue. None of the options Goossen offered sounded possible, let alone politically viable, including more than doubling the sales tax or newly applying it to professional services, pharmaceuticals, farm machinery and more, or implementing a 100-mill statewide property-tax levy. “A decision to not replace the income-tax revenue would dramatically lower education and human service budgets,” Goossen wrote on his blog for the Kansas Health Institute. “The governor and other supporters of a zero income tax have not identified how income-tax receipts might be replaced other than to suggest that economic growth will somehow take care of it.”
Sixteen current state senators who had bitterly opposed and voted against the temporary sales-tax hike in 2010 nevertheless voted last week to make it permanent, arguing that it’s now needed to pay for income-tax cuts. They may not have lost any sleep over the hypocrisy of their flip-flop, but it upset some of the moderate GOP legislators who were targeted for defeat after voting for the increase. “I think it’s disingenuous that people who were so adamantly opposed to it are saying, ‘Oh, no – it’s OK,’” former Sen. Ruth Teichman of Stafford told the Hutchinson News. Former Sen. Jean Schodorf of Wichita told The Eagle editorial board: “It seems like the end justifies the means, and the conservatives believe that cutting income tax is so important to people that they don’t think the public will see the hypocrisy of raising the sales tax.”
Another researcher is challenging Gov. Sam Brownback’s contention that lower state income taxes will be like “a shot of adrenaline to the heart” of the state’s economy. Michael Mazerov, senior fellow at the Center on Budget and Policy Priorities, said that “there’s a ton of research out there that argues very strongly this will not appreciably help small businesses,” and that very few will “make a decision to hire somebody based on their tax situation.” Iowa finance experts also published “Selling Snake Oil to the States,” which concluded that there is no significant relationship between lower income taxes and growth in state gross domestic product. But the American Legislative Exchange Council contends that the critics’ research is flawed and that the tax reforms will help “grow the economic pie for everyone.”
Missouri is wrestling with whether to imitate Kansas’ income-tax cuts and, not coincidentally, risk its own budget shortfall. “It may turn out that Kansas decides it wasn’t such a good fiscal policy to decimate their revenue,” said Sen. Jason Holsman, D-Kansas City, as the Missouri Senate approved a bill to cut state income taxes and raise sales taxes. Sponsoring Sen. Will Kraus, R-Lee’s Summit, said: “I’m trying to stop the bleeding. I’m trying to stop the businesses from fleeing into Kansas.” Earlier, Sen. Paul LeVota, D-Independence, had argued: “I believe we need to be the Show-Me State, not the ‘me too’ state.”
The four members of the Kansas congressional delegation who previously served in the Legislature are supportive of Gov. Sam Brownback’s push to cut state income taxes and reduce government, the Topeka Capital-Journal reported. Sen. Jerry Moran, R-Kan., said that Kansas needed to be more like Texas. Rep. Lynn Jenkins, R-Topeka, said that Kansas also has to compete with low-cost countries. Reps. Kevin Yoder, R-Overland Park, and Tim Huelskamp, R-Fowler, contrasted Brownback’s approach to President Obama’s call for higher taxes. “Kansas has a better pathway,” Yoder said.
State Rep. Steve Brunk, R-Wichita, again is promoting a bill that would require local governments to lower their mill levy every time property values rise, unless they publicly vote to increase taxes. The idea is to help prevent “hidden tax increases.” But former Topeka Rep. Ann Mah contends that it is a “a nanny-state bill masquerading as property-tax relief.” She argued in committee testimony last week that the Legislature, not local government, is to blame for the pressure to raise property taxes: “Who cut school funding? Who cut funding for safety-net services? Who cut funding for mental health, turning our jails into psych wards? Who has systematically been pushing the cost of government from the state to local units of government? You can thank the Legislature for all that.”
Last year Kansas and Oklahoma were in a race to see which state could cut its income taxes fastest and deepest. Oklahoma lost, as Gov. Mary Fallin’s proposal fell short in the Legislature. But did Kansas and Gov. Sam Brownback win? An editorial in the Oklahoman newspaper in Oklahoma City noted that Brownback now must offset a revenue shortfall: “Kansas faces a revenue decline of $700 million for the fiscal year that begins July 1, compared with the current year. On the other hand, Kansans will pay less in income taxes. The state can boast that it taxes its highest earners at a lower rate than most states in the region, including Oklahoma. This will add fuel to the fire that Oklahoma must protect its flanks, sandwiched as it is between a state with no income tax (Texas) and another with a lower top rate. Nevertheless, what’s happening in Kansas is a cautionary tale.”
Good for Reps. Brandon Whipple, D-Wichita, and Joe Edwards, R-Haysville, for getting a fast start on a bill to abate property taxes on homes destroyed in natural disasters. The problem, brought to light by The Eagle’s Dion Lefler last month, is that current law required the owners of the 144 houses and mobile homes lost in April’s tornado to pay a full year of property taxes. That’s unfair and even offensive, making the proposed legislative remedy a no-brainer that should cut across lines of party and geography. It would be better if the measure spared victims from even getting a tax bill, rather than just refunding their tax payments – and better yet if it were retroactive, to help out the 2012 tornado victims. But the bill co-authored by legislative newcomers Whipple and Edwards is a good move that deserves swift passage and the governor’s signature.
As with most legislation, the fiscal-cliff bill has provisions and special deals that have received little attention. Brad Plumer of the Washington Post ranked the “10 weirdest” parts of the bill, including: extending the so-called NASCAR loophole, which allows accelerated depreciation on racetracks; subsidizing coal mined on tribal lands; renewing special expensing rules for movies; and continuing a special excise tax on all rum produced in or imported to the United States.
It was no surprise that U.S. Rep. Tim Huelskamp, R-Fowler, was less than enthusiastic Tuesday about a fiscal-cliff solution backed by House Speaker John Boehner that includes raising tax rates on income of more than $1 million, in addition to $1 trillion in spending cuts over 10 years. “Republicans have taken a pledge not to raise taxes, and a trillion tax increase is a violation of that pledge,” Huelskamp told Roll Call. In prepared remarks about the proposal, Boehner said, “Most importantly, we’d lock in a process for tax reform and entitlement reform in 2013 – the two big goals we’ve talked about for years.” The White House also balked at the proposal, saying it didn’t ask enough of the wealthy and shifted the burden to the middle class and seniors.
Grover Norquist, an unelected right-wing lobbyist accountable to no one except his wealthy funders, has had the Republican Party in his hip pocket for several decades. All but a handful of congressional Republicans have signed his pledge never, ever to raise taxes. Perhaps no other individual is more responsible for the intransigence and irresponsibility of the modern GOP. With the “fiscal cliff” deadline looming, it is time finally for the Republicans to exercise true statesmanship by defying Norquist and asking the most privileged among us to assume a little more sacrifice. The Norquist vision, as he has famously said, is a government so small “we can drown it in the bathtub.” He apparently believes that people who need government support ought to be washed down the drain. For the good of the country and also the Republican Party, it’s time to toss Norquist’s no-tax pledge over the cliff. – Rep. Lynn Woolsey, D-Calif.
Grover Norquist has become one of Washington’s favorite whipping boys, but taxpayers owe him thanks for focusing needed attention on the real problem in Washington: excessive spending, rather than too-little taxing. Norquist’s no-tax pledge does exactly that. Excessive spending is the cause of Washington’s unprecedented trillion-dollar budget deficits in recent years. The disorder in the federal government’s fiscal house can be set right only by getting rid of spending programs that America’s taxpayers can’t afford. There are plenty to go round. Signing Norquist’s pledge doesn’t mean opposing all changes in the federal tax code; it merely means looking to spending cuts, first, and then to reforming our Byzantine IRS tax apparatus for collecting them. Republicans, especially, and all of us owe Norquist thanks, not condemnation. – William F. Shughart II, Independent Institute
People love to complain about how much their taxes are going up, but a New York Times analysis found that most Americans paid far less in total taxes – federal, state and local – in 2010 than they would have paid with the same inflation-adjusted income in 1980. Not surprisingly, households earning more than $200,000 had the largest percentage declines in total taxation as a share of income, the Times reported, while lower-income households saved little or nothing.
Among the little-discussed consequences of the state’s big tax-cut plan is how it will affect the Kansas Bioscience Authority, which gets the money it uses to fund bioscience initiatives from income-tax withholdings at bioscience companies. As they exempt the owners of 191,000 partnerships, sole proprietorships and other businesses from state income taxes, “the tax cuts will reduce the withholding available for bioscience,” confirmed the spokeswoman for Revenue Secretary Nick Jordan, who was an architect of the Kansas Economic Growth Act that created the authority while he served in the state Senate. But the authority has seen the state cap its annual funding over the past four or five years to about $35 million, and the tax bill “shouldn’t have any impact on” that amount of funding, Jordan’s spokeswoman said. Still, if Gov. Sam Brownback and his allies eventually succeed in eliminating the state income tax entirely, the funding stream and goals of the 2004 bioscience law will be undermined.
A few Republicans are backing away from the Grover Norquist pledge to never, ever raise taxes no matter what. South Carolina Sen. Lindsey Graham, Tennessee Sen. Bob Corker, Georgia Sen. Saxby Chambliss, New York Rep. Peter King and a few other lawmakers have indicated that they would support some revenue increases (preferably by eliminating deductions and tax loopholes rather than by raising rates) as part of a deal to avoid the “fiscal cliff.” But many GOP lawmakers are still scared that violating the pledge will result in a tea party challenge during their next election.
“To pass a tax increase at a time like this would be far worse on the people and far worse on the economic recovery than taking the needed cuts.” – Sen. Susan Wagle, R-Wichita, in early 2010, about a proposal to avert damaging state budget cuts by raising the statewide sales tax to 6.3 percent for three years
