Despite the fact that President Obama campaigned on raising taxes on the rich, Senate Minority Leader Mitch McConnell, R-Ky., said that “Republicans in the House and Senate think we have a voter mandate not to raise taxes.” But new opinion polls show again that the public supports higher taxes on the wealthy. A Hart Research survey found that 56 percent of Americans support ending the Bush tax cuts for those making more than $250,000, while 39 percent favor continuing the cuts for everyone. Meanwhile, exit polling in eight swing states also showed even more support for ending the tax cuts for the wealthy, ranging from 57 percent in Florida and Ohio to 64 percent in Nevada and Wisconsin. Even Fox News commentator and Weekly Standard editor Bill Kristol argued that the GOP should be open to a tax increase on the wealthy. “It won’t kill the country if Republicans raise taxes a little bit on millionaires,” he said.
Gov. Sam Brownback pointed to other states’ lack of income tax as a key reason Kansas needed its own massive tax breaks. Now that it has them, forces in Missouri and Oklahoma in turn are pointing to Kansas with alarm. “What if people start moving jobs and businesses to Kansas? What’s going to happen to our tax base? Who is going to pay my teacher? What’s our plan? You got nothing?” asks a little girl in a new TV ad, sponsored by a group called Save Missouri Jobs, calling for action by Missouri lawmakers. And Oklahoma Gov. Mary Fallin, whose tax-cut advocacy fell short this year, wants to slash Oklahoma’s top income-tax rate from 5.25 to 4.8 percent or lower — less than Kansas’ new rate of 4.9 percent. “Oklahoma needs to compete with our neighbors; to do that, we need to lower our income tax,” Fallin has said.
Paul Ryan’s election night wasn’t all bad. He lost the vice presidency, but state law allowed him to be on the ballot for Wisconsin’s 1st Congressional District, too. He won re-election easily and returned to work Tuesday as House Budget Committee chairman. He told ABC News that President Obama won “fair and square,” but that the election was no mandate to raise taxes. “There are other ways of getting more revenue into our government without damaging the economy, and that’s the kind of thing we hope to achieve,” Ryan said, suggesting that they “take away the loopholes.” Ryan also said Mitt Romney’s campaign was “exactly the kind of campaign that I would’ve run had I been on the top of the ticket” – gracious talk, but not what Republicans looking to win in 2016 will be looking for.
The election isn’t the only big event happening Tuesday. The state revenue estimators are meeting in Topeka to make the forecasts to be used to help set next year’s state budget. This will be the first official forecasts since Gov. Sam Brownback signed a large tax cut, which goes into effect Jan. 1. Staff from the Legislative Research Department, which earlier calculated that the tax cut would result in a large revenue shortfall, will be part of the estimating group. So will leaders of the state’s Division of the Budget and Department of Revenue, who have tried to downplay the impact of the tax cuts. The meeting also comes on the heels of new numbers showing that so far this fiscal year the state has collected $22 million less than expected. And it follows complaints by Democrats about the Revenue Department having sent out, less than a week before the election, 146,000 letters (which cost taxpayers $52,000) to business owners in Kansas championing the tax cuts.
Local city and county leaders were initially cautious and restrained in reacting to a proposal supported by Gov. Sam Brownback to automatically reduce local property-tax rates when appraisal values increase, unless local governments vote to keep the mill levy the same. Sedgwick County Manager William Buchanan told The Eagle that county services would have to be cut, but that “if this is what the state believes is important, we will make it work.” During Wednesday’s meeting, Sedgwick County Commissioners Karl Peterjohn and Richard Ranzau advocated adding a statement to the county’s legislative agenda expressing support for the proposal (a discussion deferred until next week). But leaders in Douglas County were not as subdued or positive, the Lawrence Journal-World reported. “Somebody might want to read the budget law and see what we actually have to do now before they try to tack on another requirement,” Lawrence City Manager David Corliss said, adding that “I don’t want someone on the third floor of the Statehouse telling us how to spend or raise our money.” Douglas County Commissioner Mike Gaughan complained that the proposal is another attempt by the state to off-load problems: “In Douglas County we’ve picked up costs to keep the (Kansas Department of Social and Rehabilitation Services) SRS office open, to handle the state’s new vehicle registrations software, to implement (Secretary of State) Kris Kobach’s phony voter-fraud laws, and to keep our courts open and operating, The governor’s income-tax cuts will force schools districts and local governments to raise property taxes to pay for the basics like public schools and water quality. So this isn’t a surprise. Blaming others is what they do best.”
Just in time for Halloween, some groups are trying to scare voters with campaign mailings that make false or misleading claims. The Kansas Democratic Party apologized for a mailer stating incorrectly that Rep. Joseph Scapa, R-Wichita, and Rep. Jana Goodman, R-Leavenworth, “voted for the largest cut to education in Kansas history.” That was referring to the 2011 state budget bill, which the lawmakers voted against (though they voted for earlier versions of the budget that cut aid to public schools even more, Associated Press reported). Meanwhile, the Kansas Chamber of Commerce sent out mailings opposing some Democrats and claiming that the state’s economic policies left “154,643 unemployed Kansans” – when the actual number is 87,416. The mailers also blasted Democrats for supporting the temporary statewide sales-tax increase in 2010 – the same tax that the Kansas Chamber later advocated be made permanent.
Mitt Romney has said that he will cut taxes by 20 percent without increasing the deficit, because he will take away or cap some tax deductions for the wealthy. When pressed during Tuesday’s debate to explain how the numbers add up, he responded, “Of course they add up.” The only thing specific that he said was that he might limit total itemized deductions to $25,000. But such a cap would raise about $1.3 trillion over 10 years, far less than the estimated $5 trillion cost of his tax plan. “The math is the math,” Jonathan Bernstein wrote in the Washington Post. “There just aren’t enough tax expenditures that the wealthy use to allow Romney to cut tax rates by 20 percent without either reducing revenue or by making it up with tax increases on everyone else.”
It’s good that Mitt Romney finally acknowledged this week that his secretly recorded comments about how 47 percent of Americans are dependent on government were “just completely wrong.” After the tape surfaced a couple weeks ago, Romney said that his comments were “not elegantly stated,” but not that his claims were wrong. Though it is true that 47 percent of American households don’t pay income tax, that doesn’t mean these Americans think they are victims, are dependent on government, and will vote for President Obama no matter what, as Romney said on the tape. Most of that 47 percent are retirees, people who are disabled, college students, people in the military and people who are working (often more than one job) but don’t make much money. Is Romney’s admission part of his move to the middle, as seen during Wednesday’s debate?
During Wednesday’s debate, President Obama again felt the need to single out the owners of corporate jets as worthy of higher taxes – a contention that mischaracterizes the role of business jets in the economy and understandably pains planemakers and their employees in Wichita. The president asked: “Why wouldn’t we eliminate tax breaks for corporate jets? My attitude is, if you got a corporate jet, you can probably afford to pay full freight, not get a special break for it.” That’s a reference to the accelerated depreciation of business jets that was part of Obama’s own 2009 stimulus package. Increasing the depreciation life from five years to seven years would increase tax revenue by about $3 billion over 10 years, having little impact on the federal deficit. Obama’s comment drew this response Wednesday night from Ed Bolen, president and CEO of the National Business Aviation Association: “At a time when both candidates claim to be putting job creation at the top of their agenda, it’s unfortunate that the president tonight denigrated the business aviation industry, which is responsible for 1.2 million American jobs and $150 billion in economic impact.”
State Senate candidate and Wichita City Council member Michael O’Donnell may blame his church’s new liability for back taxes on “a political agenda from the Wisconsin atheists,” as he put it. But the Freedom From Religion Foundation’s challenge to the tax-exempt status of O’Donnell’s home has been justified by the Sedgwick County Appraiser’s Office, which ruled last week that the former Grace Baptist Church parsonage is subject to property taxes from 2010 onward. As a foundation attorney said, “Sedgwick County taxpayers should not have to pay more taxes because a church and its leaders have falsely claimed an exemption.” And given that O’Donnell wants to be a state lawmaker, he should be more respectful of what the law says. He showed a similar disdain early this year, when he dismissed an ethics complaint against him as “a political hit job” – though the Kansas Governmental Ethics Commission later fined him $500.
Gov. Sam Brownback’s tax cuts were supposed to spur enough economic growth that significant budget cuts wouldn’t be necessary. But his administration now seems to be fashioning a new narrative as it moves toward cutting state spending next year, Associated Press reported. “There are forces beyond the state’s control,” spokeswoman Sherriene Jones-Sontag said. “There’s still a great deal of uncertainty with the economy.” That’s true, but that was the case when Brownback signed the tax cuts into law, despite warnings from state budget analysts that the cuts could result in significant budget shortfalls. “Sherriene can spin it as forces beyond their control,” Kansas Democratic Party chairwoman Joan Wagnon said, “but the truth is this is what they created.”
The Kansas Department of Revenue projected that Kansas would have added about 150,000 new jobs between now and 2020 without any state tax cuts. The expected impact of the state tax cuts passed during the recent legislative session is an additional 20,000 jobs. Similarly, the department estimated that Kansas could have expected 200,000 new residents without the tax cuts, and it expects that to increase by about 40,000 as a result of the tax cuts. “Despite the administration’s claims that tax reform will light a fire under the economy, the Department of Revenue’s own projections show less than amazing results,” a Hutchinson News editorial noted. And those tax cuts are projected to result in large budget shortfalls.
Mitt Romney claimed that the 47 percent of Americans who don’t pay any federal income taxes “will vote for President Obama no matter what.” But according to the Tax Foundation, eight of the top 10 states with the highest percentage of people who don’t pay federal income taxes are decidedly Republican. These include Texas and most of the South. The two others in the top 10 are Florida and New Mexico, which are swing states. Only three of the 10 states with the lowest percentage of people who don’t pay income taxes are Republican – Alaska, North Dakota and Wyoming. Kansas has the 28th-highest percentage of filers with no tax liability, at 34 percent.
Politicians, like everyone, sometime flub what they mean to say. But it is difficult for Mitt Romney to dismiss as “off the cuff” his remarks disparaging Americans who don’t pay any federal income taxes. Speaking to wealthy donors earlier this year, Romney said: “There are 47 percent who are with him (President Obama), who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it, that that’s an entitlement. And the government should give it to them. And they will vote for this president no matter what.” Romney also said he will never convince those people “they should take personal responsibility and care for their lives.” After a video from the event became public, Romney said Monday that his comments were not “elegantly stated.” But do they reflect what he believes? Or was he just saying it to pander to wealthy Republicans? Though nearly half of American households do not pay federal income tax, that does not mean they are getting a free ride and expect the government to provide everything for them. Most of the people in this group are working but simply earn too little money to owe taxes (in part because exemptions and credits were increased by the Bush tax cuts). Though they don’t pay federal income taxes, they do pay payroll taxes, sales taxes, and other state and local taxes. Senior citizens are another large portion of this group. Are they moochers?
What matters most about Kansas’ tax revenue is how it compares with the official projections – which are what lawmakers use to create the state budget. But when the revenue comes in below those estimates, as it did last month, the Kansas Department of Revenue tends to focus on how the revenue is higher than it was the previous year. “Kansas economy shows signs of growth compared to one year ago,” the headline on the department’s news release said, before noting how tax receipts for August were $14.9 million less than expected. A press release about the May numbers touted how “revenue receipts show that the Kansas economy continues to improve,” though revenue was $27 million less than the projections. So far this fiscal year, which began in July, tax revenue is about $12.2 million less than projections.
Gov. Sam Brownback said that the reason he pushed for reducing income taxes was that it had the most potential to spur economic activity. And he focused on eliminating income taxes on partnerships, sole proprietorships and other businesses because most Kansans work for businesses with 10 or fewer employees. “We took a narrow slice within that because of your key economic growth being small businesses,” he told Associated Press. Brownback said he would have liked to reduce property taxes or eliminate any marriage penalty in the income-tax code but that those reductions were unlikely to result in as much economic growth. As to why he signed a tax bill that is projected to result in large budget deficits, Brownback said he didn’t want the state to stay on the same track it has been on. “It’s better to get to a different track,” he said. Critics contend the new track shifts more of the tax burden to poor and working-class families and is unlikely to produce enough revenue growth to cover the budget shortfalls.
At least two recent Wall Street Journal editorials, including one about the Kansas primary results, claimed that Gov. Sam Brownback’s plan to help pay for a tax cut by eliminating many tax credits and deductions, including mortgage interest, was blocked by those darn GOP moderates in the Kansas Senate. The reality is that Brownback’s plan was dead on arrival in the Legislature. And it was conservative leaders in the House who didn’t wait even a week before releasing their own tax plan that kept key deductions and credits.
It had to be painful for residents of six Kansas counties to read last week about how the Keystone oil pipeline is boosting property tax revenue in Nebraska. Butler, Clay, Cowley, Dickinson, Marion and Washington counties – which the pipeline crosses – are receiving no property taxes thanks to a boneheaded move by Kansas lawmakers in 2006 to grant a 10-year property tax exemption. The counties expect to lose between $75 million and $100 million in tax revenue over the exemption period. Kansas is the only state along the pipeline route with such an exemption. A county clerk in Nebraska said last week that his county might lower its tax levy because of the extra revenue. Meanwhile, county officials in Kansas are struggling to pay their bills.
Congress and the administration need to unleash the dynamism of the private sector by adopting policies that will result in the economic growth necessary to reduce our deficits and put our citizens back to work. A reduction in the corporate tax rate to the average rate of other industrialized countries – about 25 percent – would eliminate a great disadvantage faced by businesses. The basic strategy is to achieve these lower rates by eliminating exemptions and other tax breaks, essentially broadening, flattening and simplifying the tax structure. It’s a daunting assignment, but with hard work and a focused effort, comprehensive reform can be accomplished within a year. At the same time, the United States must modernize its international tax system to enable American companies to compete more effectively in foreign markets. Comprehensive tax reform is a significant step we can take today that will improve American competitiveness, increase economic growth and put the nation on the path toward fiscal stability. – John Engler, Business Roundtable
Thanks to record profits, essentially zero short-term borrowing costs and extremely low effective tax rates, U.S. companies are sitting on more than a trillion dollars in cash. Further business tax breaks will do nothing to provide the real incentive that companies need in order to invest in our economy: strong consumer demand. Claims that federal business taxes are too high usually cite the nominal corporate tax rate of 35 percent. But what really matters is not the official rate, but how much companies actually pay, and by that measure corporate taxes are already very low. A study released in 2011 by Citizens for Tax Justice of 280 Fortune 500 companies found that their average effective tax rate over the previous two years was just 17.3 percent, less than half the statuary rate. Instead of cutting already low effective rates, corporate tax reform should focus on ending incentives to send profits and jobs overseas and making sure all companies pay their fair share. – Don Kusler, Americans for Democratic Action
The May passage of the legislation slashing income taxes gave Gov. Sam Brownback bragging rights to say “I signed the largest tax cut in state history,” as he did in a commentary in the July 29 Eagle. That claim previously belonged to former Gov. Bill Graves, who recently campaigned in Wichita and other cities on behalf of moderate Republican state senators targeted for defeat by Brownback and his allies at the Kansas Chamber of Commerce and Americans for Prosperity. Now, Graves quipped to a Wichita fundraiser crowd, he’s revised his biography to say, “I signed the largest responsible tax cut in the history of Kansas.”
How big would the tax increase be if the Bush tax cuts expire on Jan. 1, 2013? “The increased tax payments of all the families in Kansas’ 4th District put together totals a staggering $1 billion, $4.2 billion from all Kansans, and $494 billion nationwide,” wrote Rep. Mike Pompeo, R-Wichita. “The tax increase would target Kansas families, low-income workers and retirees – and it would be the largest tax hike our state has ever had to endure.”
Gov. Sam Brownback tried to make the case last week that the state can afford his tax cuts without cutting core services such as education, Medicaid, social services and public safety. Few are buying it. His ideological colleagues at the Kansas Policy Institute determined that even using “dynamic scoring” to calculate greater than projected economic growth, the state would need to cut spending by about 8.5 percent in fiscal year 2014, or about $550 million. Given that Medicaid costs will continue to increase (even under the new KanCare program), that would be a traumatic cut to state programs that already have been through several rounds of deep budget cuts. And there is no way to cut that much spending without cutting education, which accounts for about two-thirds of the state budget. Local officials also aren’t expecting a rush of economic growth and are bracing for more funding cuts. During a recent meeting with The Eagle editorial board, Sedgwick County Manager William Buchanan spoke of when, not if, the bottom falls out of the state budget and when, not if, the tax cuts fail to produce enough jobs to replace the lost revenue.
News of Gov. Sam Brownback’s “real live experiment” of massively cutting state income taxes went global with a Reuters story likening the reform to the GOP blueprint at the national level crafted by Rep. Paul Ryan, R-Wis. “Someone has to get the nation’s fiscal house in order. The people who can get that done are conservatives,” retiring House Speaker Mike O’Neal, R-Hutchinson, told the international news service. The quoted moderate GOP state senators begged to differ: “The tax cuts will do huge damage to Kansas over the next few years,” predicted retiring state Sen. John Vratil, R-Leawood. Sen. Jean Schodorf, R-Wichita, said: “Unless jobs come flooding to Kansas, the first place to cut is education. We have to hope this (tax-cut package) is a success, or a lot of people are going to get hurt. This is bare-bones, libertarian government.”
Retailers compete with one another every day on price, service, convenience and selection. But under the current system, the law gives remote sellers a singular advantage that brick-and-mortar stores can’t match because they aren’t required to collect sales tax. As stores have lost business, communities have lost much-needed jobs. In Ohio, for example, a recent study found that leveling the playing field for local retailers could add 15,000 jobs to the state’s economy. Forcing online retailers to collect sales tax also would provide revenue for cash-strapped state and local governments – more than $23 billion this year nationally, according to the National Conference of State Legislatures. In the Senate, Democrats and Republicans sponsored a bill called the Marketplace Fairness Act that would require online retailers to comply with state sales-tax laws. To avoid burdening smaller merchants with compliance costs, the bill exempts online retailers with less than $500,000 in annual sales. In other words, casual sellers just looking to make a few extra bucks on eBay would have nothing to fear. During this time of economic challenge, Main Street businesses across America already have paid their fair share. Now online retailers should, too. – Matthew Shay, National Retail Federation
There is no “sales-tax exemption” for out-of-state vendors. State and local sales taxes are owed by consumers, not producers. If the good or service is provided by an in-state firm, that firm must collect the applicable sales tax from the consumer. If the stuff comes from a “remote” seller that has no contact with the consumer’s state, the sale is not “tax-free”: The consumer owes a “use tax” equivalent to the local sales tax. However, state and local governments would rather not trouble their own citizens with enforcing that rule. Thus they demand a federal law that would allow them to impose collection and remittance obligations on out-of-state sellers whose goods or services happen to be demanded in, and therefore end up in, the local jurisdiction. What we have here is not a tax or equity problem but an enforcement problem. And no one, including the state officials and federal legislators who yelp about “fairness,” seriously believes that problem warrants a central solution. – Michael S. Greve, American Enterprise Institute
A New York Times article this week highlighted how Kansas and Maryland took different paths in responding to the improving economy. Kansas cut taxes to try to grow the economy, which likely will necessitate more budget cuts. Maryland raised income taxes on its top earners in order to preserve and restore funding for state services and public education. “The choices made by Kansas and Maryland could provide something of a real-time test of the prevailing political theories of taxing and spending – though it could be years before the results are in,” the article said.
Despite the fact that President Obama campaigned on raising taxes on the rich, Senate Minority Leader Mitch McConnell, R-Ky., said that “Republicans in the House and Senate think we have a voter mandate not to raise taxes.” But new opinion polls show again that the public supports higher taxes on the wealthy. A Hart Research survey found that 56 percent of Americans support ending the Bush tax cuts for those making more than $250,000, while 39 percent favor continuing the cuts for everyone. Meanwhile, exit polling in eight swing states also showed even more support for ending the tax cuts for the wealthy, ranging from 57 percent in Florida and Ohio to 64 percent in Nevada and Wisconsin. Even Fox News commentator and Weekly Standard editor Bill Kristol argued that the GOP should be open to a tax increase on the wealthy. “It won’t kill the country if Republicans raise taxes a little bit on millionaires,” he said.
