Category Archives: taxes

California, Kansas waging ‘ideological battle’

Hoover Institution fellow David Davenport called California (his current home) and Kansas (where he grew up) “the blue and red point-counterpoint states of the nation” and the scenes of “a far more interesting and potentially important ideological battle than what we see in Washington, D.C., at the moment.” Writing for Forbes, Davenport said California has “become the model of blue-state governance (high taxes, high regulation)” while Kansas “is focused on shaping the mold for red-state governance (low taxes, high freedom). Even as California raised its tax rates, Kansas Gov. Sam Brownback is driving his state toward zero income tax, aiming to stimulate economic growth. It’s clearly a tale not only of two states but of two models of governance.”

Jordan points to bigger picture on taxes

When the 6.3 percent statewide sales-tax rate didn’t drop to 5.7 percent on Monday as promised by the 2010 Legislature, but instead dropped to 6.15 percent via action of the 2013 Legislature, was that a tax increase or decrease? It depends on how Kansans look at it, and Revenue Secretary Nick Jordan (in photo) and others want them to see a bigger picture. “Kansans will pay significantly less in taxes in 2013 than they did in 2012, and the savings will grow from there,” Jordan wrote in a commentary in Friday’s Eagle. Jordan also said that “when it comes to compassionate assistance to the poor, it is imperative to remember the full range of government benefits provided, rather than one item in isolation. Low-income and disabled Kansans receive more than $3.5 billion in assistance annually through programs already in place, forming a sizable safety net.” Recent Eagle editorials have questioned the state’s commitment to reducing child poverty and its failure to get rid of the regressive sales tax on food.

IRS abuse bad but not a political conspiracy

Lois Lerner, the head of the IRS tax-exempt department, did a bad job overseeing employees and should have immediately told Congress about the targeting of tea party groups, but there is no evidence that the targeting was part of a political conspiracy, wrote Stephen Stromberg of the Washington Post. “Given what we know now, the story that best fits the facts is that IRS employees subordinate to Lerner – in Washington or elsewhere – were involved in some unforgivably stupid behavior, and those above them failed to keep an eye on it,” Stromberg wrote.

IRS managers have double standard on documentation

Managers with the Internal Revenue Service were unable to provide auditors with accurate data or supporting documentation on many costs for a conference in Anaheim, Calif. – one of 225 conferences the agency held in fiscal years 2010 through 2012 at an obscene cost of $49 million, the Washington Post reported. Yet if citizens and businesses tried to claim such expenses without documentation, the IRS would reject them and possibly press charges for tax evasion.

State budget covers shortfall, but not for long

It took 99 days (nine more than the 90-day allotment and 19 more than legislative leaders said would be needed) for lawmakers to agree to set the state sales tax at 6.15 percent instead of allowing it to fall to 5.7 percent on July 1 as promised, our editorial Tuesday noted. Along with a phasedown of income-tax deductions, the tax increase is expected to raise about $777 million over the next five years. The extra revenue will help cover the shortfall created by last year’s tax cuts, but it won’t eliminate the state’s budget problems. Estimates show the state burning through its cash balances by 2018. And that doesn’t factor in the likelihood that the Kansas Supreme Court will order an increase in K-12 funding of about $500 million.

Some tax-exempt groups deserve scrutiny

The Internal Revenue Service deserves scrutiny and criticism for targeting conservative and tea party groups. But some of those groups also could use some scrutiny (as could some liberal groups). Though they claimed tax-exempt status as “social welfare” organizations, their activities seem primarily political. For example, while it was applying for tax exemption, the Wetumpka Tea Party of Alabama was sponsoring training for a get-out-the-vote initiative dedicated to the “defeat of President Barack Obama,” and CVFC, a conservative veterans’ group in California, was spending thousands of dollars on radio ads backing a Republican candidate for Congress, the New York Times reported. “While some of the IRS questions may have been overbroad,” said Donald B. Tobin, a former lawyer with the Justice Department’s tax division, “you can look at some of these groups and understand why these questions were being asked.”

Melcher’s tax argument draws ridicule

During the Kansas Senate’s tax debate last week, Sen. Jeff Melcher, R-Leawood, offered the novel argument that with a proposal to cut the sales tax on food from 6.3 to 4.95 percent, “we are encouraging the behavior of purchasing food and discouraging the behavior of purchasing anything else,” also calling it “social engineering” that could increase obesity in the state. That drew the notice of the Huffington Post: “Sure, there can be little doubt that an almost imperceptible decrease in the sales tax on groceries is bound to cause ordinary people to just straight-up spend all their disposable income on foodstuffs, to the detriment of all other industries.” The Wonkette blog exclaimed: “Look, Ma, we found a Republican what does not want to cut taxes!” Rep. Barbara Bollier, R-Mission Hills, told the Huffington Post, “I have no words.” Kansas City Star columnist Steve Kraske concluded: “Melcher won’t be living down that one for awhile.”

House freshmen aren’t taking blame for long session

Kansas House members are understandably irritated by the condescending attitude of some Senate leaders. The last straw was when Senate Majority Leader Terry Bruce (in photo), R-Hutchinson, blamed the long session in part on the House freshmen having difficulty grasping the major changes proposed for state policy, the Topeka Capital-Journal reported. Bruce said that most of the freshmen “spent half the session trying to find where the bathrooms are.” Rep. Blaine Finch, R-Ottawa, responded that House freshmen “are more than capable of understanding state tax policy” and “will not assume blame for the current state of affairs.” Finch also noted: “We were not in the building last year when the tax plan was passed without the ‘pay fors’ that are now so hard to find. It was not us who promised the public a temporary sales tax that we are now told needs to be made permanent to the vexation of many citizens and legislators.”

Governor needs to usher lawmakers to the exits

Instead of ending in 80 days, as promised by the Legislature’s new conservative GOP leaders, the legislative session has spun out of control. On the 91st day, which was Friday, the House unceremoniously rejected the Senate’s tax plan on a 5-109 vote and adjourned until Tuesday. That was despite a closed-door appeal to House freshmen that morning by Gov. Sam Brownback. Such rancor among conservatives reflects badly on the leadership of the governor, Senate President Susan Wagle, R-Wichita, and House Speaker Ray Merrick, R-Stilwell, and the resulting overtime days are wasting tax dollars. Senate negotiators took a big step Friday afternoon in blessing House negotiators’ preferred 6 percent sales-tax rate, but will the rank and file fall in line? Brownback needs to usher lawmakers to the exits.

Will lawmakers stick by no-tax pledge?

A pledge by some state lawmakers to never raise taxes is a factor in finalizing the state budget, the Topeka Capital-Journal reported. Fifteen House members (half of whom are from the Wichita area) signed a no-tax pledge administered by Americans for Prosperity, and AFP considers the proposed extension of the statewide sales tax to be a tax increase. However, eight state senators who signed the AFP pledge voted for the sales-tax extension, including Senate President Susan Wagle, R-Wichita.

How Wagle’s tune has changed on sales taxes

“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

Lawmakers finally brought boat taxes in line

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.

Will Kansas be a model for nation or a warning?

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.”

State revenue dropping by $1 billion over two years

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.

Kansas cashes in on federal spending

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.

Kansas will need more cash, cuts or both

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.

Extended sales tax or draconian budget cuts?

“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.”

Pro-con: Does U.S. need increased tax revenue?

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

Happy Tax Freedom Day

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.”

Brownback won’t get much help from Democrats

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.

Tax help for disaster victims

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.

How will state fund its budget without income tax?

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.”

Calling out legislators on their sales-tax hypocrisy

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.”

More doubts about low-tax claims

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.”

Kansas’ tax cuts inspiring Missouri debate

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.”