At a forum last week, Bradley Borden, an associate professor at Washburn University School of Law, delivered a low-key, 16-page lecture that is bound to provide talking points for those fighting against further cuts to the state budget.
Borden didn’t say it like this, but his message essentially was that the Kansas tax system is out of whack with the needs of our society, and tax cuts for some turn into tax hikes for others.
Borden’s thesis isn’t how much we should tax, but what we should tax.
“Unfortunately, public finance discussions often focus solely on tax rates. The focus should, however, include thoughtful analysis of tax bases,” he said.
For example, the state sales tax of 5.3 cents per dollar produced $3 billion in revenue on $57 billion of sales in 2008.
But $75 billion in sales was exempt from the tax. If those had been taxed, the state sales tax rate could have been lowered to 2.3 cents per dollar to raise the same $3 billion.
Borden is not advocating that the state sales tax be applied to everything, but, he said, “Undoubtedly, many sales tax exemptions do not help increase the tax base, and we should repeal them.”
Tax exemptions, he argues, should be scrutinized to the same extent as appropriations because in reality the exemptions are expenditures.
Everyone benefits from state services, such as roads, security, schools and the social safety net. When one area of commerce is exempt from being taxed to support that system, “the exempt amounts are economically equivalent to state direct expenditures and subsidies, and we should treat them as such,” Borden said.
The exemptions benefit a small portion of the population but increase the tax burden on everyone else.
Borden calls tax exemptions “tax expenditures.”
“Tax expenditures are popular to beneficiaries because they do not appear in the state’s budget report as expenditures. Therefore, tax expenditures are comparable to off-balance-sheet financing that plagues the private sector. In short, tax expenditures allow people to secretly manipulate state finances,” he said.
So in short, according to Borden, when a politician brags about cutting taxes, or carving out a tax exemption, he or she should be asked to explain: Who is paying for that?
Comments
LJWorld.com doesn’t necessarily condone the comments here, nor does it review every post. Read our full policy. Also, read about banned accounts and harassing comments.
toe (anonymous) says…
Tax supported schools love taxes. No surprise there. But notice this author did not talk about reducing expenditures. Government is trying to be all things to all people and never says no to a request for funding. After all, the representative that can "bring home the bacon", gets reelected. The Federal government even spends future taxes to guarantee the reelection of its politicians. We need far less spending. We will have lower spending soon enough, as more and more states and the federal government go bankrupt.
lee_go_hawks (anonymous) says…
What an incredibly incomplete attempt at an article. He never mentions WHO is buying things that are tax exempt. I would imagine state and local government accounts for a considerable amount of those purchases, and of course they don't have to pay sales taxes.
Liberty_One (anonymous) says…
“the exempt amounts are economically equivalent to state direct expenditures"
In other words, it's not your money to begin with. It's the State's money and when you are exempt from a tax that is the State being generous to you.
jaywalker (anonymous) says…
Agree w/ the earlier post that this article was poorly written and supported. And the headline is completely misleading. PU.
true_patriot (anonymous) says…
It's amazing how something so simple is so misunderstood. Revenues minus expenses equals your budget bottom line.
If you make a cut to the revenue (tax cuts, tax exemptions, phase-out of the estate tax for the ultra-wealthy, etc.), it's exactly the same as making an increase on the expenditure side (spending more money on something).
The author was not saying we should not monitor spending; he's saying that in Kansas the discussion is only ever about the spending side and never about the revenue side, when in fact both are equally important and should be discussed equally.
If you want to take a cut in pay or quit your job altogether to spend more time fishing, most families would have an intense discussion about whether they could afford that "expense", that loss of revenue. This kind of discussion is consistently and conspicuously absent from state budget talks.
Taking a cut in pay is exactly the same as taking on more debt. Getting a raise at work is exactly the same as cutting an expense. It's not rocket science, but then again TABOR is spending astonishing amounts of the Koch Brothers (from Wichita) cash along with heavy inputs from the national level to keep politicians in Kansas in line and perpetuate deep misunderstandings about how the eoconomy works and what is really in the best interests of 90% of Kansans.
SettingTheRecordStraight (anonymous) says…
The more accurate term is "tax relief," not "tax cuts."
Also, sales taxes should be described in terms of percentages (5.3% of my income), not in terms of pennies (5.3 cents), as Rothschild is inclined to do.
Additionally, sales taxes didn't "produce $3 billion in revenue" in 2008, they removed $3 billion from working families' budgets.
Finally, to say that the sales tax rate could have been lowered to 2.3% had the state simply taxed more goods is an intellectually weak observation. Sales tax rates never, ever go down. We should not be so stupid as to believe that widening the tax base will lower tax rates for anyone, ever. Widening the tax base will only result in more government collections and more government spending.
Bob_Keeshan (anonymous) says…
STRS loves the talking point about "working families."
According to actual analysis, "working families" pay a greater share of the tax burden in Kansas. http://blogs.kansas.com/gov/2009/11/1...
All those "targeted" tax cuts at high earners aren't helping working families at all. To the contrary, working families are paying more of their income in taxes in order to support these tax giveaways.
For the record, sales tax rates do, indeed, go down. Funny how STRS is so adamant in supporting "targeted" tax giveaways but apparently opposed to actually reducing the sales tax.
RonBurgandy (anonymous) says…
true_patriot - Exactly.
What's the Republican solution to any crisis?
Tax cuts.
just_another_bozo_on_this_bus (anonymous) says…
"What's the Republican solution to any crisis?
Tax cuts."
And tax cuts for whom? The wealthy who pay for re-election campaigns and maintain revolving doors between the legislature and the industries they operate and the lobbying firms they fund. But rarely any tax cuts for "working families."
SettingTheRecordStraight (anonymous) says…
Bob,
By all means, keep drawing the all the wrong conclusions. Then, when you're done assuming, I'd encourage you to develop a strategy to counteract what you think you've observed about your public policy opponents. Be sure to pour a lot of time and money into whatever you scheme up.
You'll be chasing your tail while the rest of us are coming up with actual solutions to the budget crisis and other real-world problems.
Satirical (anonymous) says…
I agree with true_patriot (except for the last paragraph). Reducing spending is important, but so is deciding who gets the tax breaks. Fairness would mean everyone/thing gets taxed at the same rate. Every tax break is by legislative grace and should be scrutinized just like an increase in spending should be scrutinized.
Satirical (anonymous) says…
RonBurgandy…
“What's the Republican solution to any crisis? Tax cuts”
If that were true (which it isn’t) then the Dems solution to any crisis is – more government and higher taxes.
While playing the role of the partisan internet troll can be fun, how about we try to rise above the fray every once in a while...
cait48 (anonymous) says…
Ah but Barry just who are the grasshoppers and who are the ants?
Are the ants the ones who show up at their 12-15$ an hour jobs every day and pay their taxes faithfully every year? Or is it the suits that sit upstairs on their a$$es milking the system of tax cuts, loopholes and exemptions so they can buy their Hummers and vacation in Europe and buy Aspen condos for their weekend get-aways?
Does anybody else find it sad that the only people that can truly afford to send their kids to KU, a state supported school, is the upper 10% of the income bracket in this state? Anybody else that does, does so with the specter of crushing education debt they will pay for the next thirty years after they get out of school.
Want to REALLY go back to the "Good Old Days"? Go back to the time when you could cover a full semester's tuition on a Pell Grant.
Bob_Keeshan (anonymous) says…
STRS, you could have just posted, "Everything Bob said was true" and saved some bandwidth.
Good luck finding solutions to your "real world problems" like Obama's birth certificate and school prayer.
fan4kufootball (anonymous) says…
Raising taxes of any kind ultimately are paid by the consumer. Tax increases on income for companies cause the companies to raise their selling prices (ultimately paid by the consumer). To begin taxing services provided (which are currently exempt) such as getting a hair cut are paid by the consumer. Increasing sales tax rates are (of course) paid by the consumer. If the government had half a brain they would lower taxes and allow people to support themselves by using their wages to pay for the services and consumable goods they need at a price they can afford. Duh...!
Satirical (anonymous) says…
fan4kufootball....
Of course businesses don't pay taxes, they pass them on to the consumer. Only crazy liberals don't understand this elementary concept. But the question this article is asking is, why should consumers of hair cuts get a tax break and consumers of service 'Y' not (these are obviously both just examples)?
Cutting taxes is only half the equation. Scrutinizing which products or services deserve a tax break and are worth the decrease in revenue, when others don't get the tax break, is the other half of the equation.
Satirical (anonymous) says…
Cait48…
Please tell me you realize the wealthiest 10% in our country pay over 65% of income taxes, and the bottom 50% pay almost nothing.
headdoctor (anonymous) says…
lee_go_hawks (Anonymous) says…
What an incredibly incomplete attempt at an article. He never mentions WHO is buying things that are tax exempt. I would imagine state and local government accounts for a considerable amount of those purchases, and of course they don't have to pay sales taxes.
_________________________________________________
I agree. One can only assume that there have been a lot of different categories rolled into one. I would like to know how they arrived at the 75 Billion figure. I can't find a lot of info on it other than that claim. There are a lot of tax exempt amounts that are very easy to track but there is also a lot that cannot be tracked. I am thinking that this is like the figure for lost sales tax from internet sales. They just grabbed a figure out of mid air and ran with it.
I find it odd that when times are hard virtually every taxing authority is trying to figure out how to raise taxes and fees, of which I have no doubt will not return to a more sensible level once the economy recovers. The politicians will just keep finding 5 ways to spend every dollar they hope to take in instead of making the best use of what they have. I am sure this phrase has been way over used by many but quite true. "No Country through out the history of man has ever taxed their selves into prosperity."
tbaker (anonymous) says…
Whatever is taxed is discouraged which makes taxing income stupid, not to mention immoral. The American model of government was built on the premise the government exists to guarantee personal liberty. It should be prevented from taking a person's liberty. That portion of your life devoted to earning the money the government takes from you is lost; it is a form of tyranny. You don't "pay" income taxes folks - they are "taken" from you by threat of force.
Check out the FairTax. We should tax consumption, not production.
fan4kufootball (anonymous) says…
Yes - there are many tax exempt sales. Services, tax exempt entities(non profit, hospitals, education institutions, etc), labor for residental repairs, labor for new commerical construction, farm machinery and equipment, sales to government entities, manufactureing machinery and equipment, prescription drugs, etc. All taxes (no matter whom is taxed) effects us all. I do believe the government has a place and needs taxes to operate but the spending in our government is out of control. The governments duties of spending should be for things like roads that the many (all citizens) benefit from. We provide to many services for individuals (legal and illegal). We need to encourage individuals to maintain their own budgets and take care of themselves. Don't get me wrong there are times when everyone needs a helping hand but I believe that helping hand needs to come from their families and communties instead of state run government who does not really have a clue who needs what therefore there are those that "milk" the system. The government admistration of services costs way to much as well.
I also believe that the government payroll could be cut in just about half if employees would do a full days work like the rest of us that go to work everyday.
kugrad (anonymous) says…
When a real-estate developer gets tax cuts to, say, build a new Walmart or a luxury hotel on top of the hill, it benefits only the developer (who would have built anyway) and no one else. It costs those who own property who are paying for the infrastructure of the city, the schools and so on. It costs renters who pay the taxes passed on as increased rent.
When the state passes laws that reduce revenues, such as the one that relieved out-of-state casino owners of paying taxes, it just adds to the revenue shortfall and costs KS residents more $$.
tbaker (anonymous) says…
"You cannot legislate the poor into freedom by legislating the wealthy out of freedom. What one person receives without working for, another person must work for without receiving. The government cannot give to anybody anything that the government does not first take from somebody else. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that is about the end of any nation. You cannot multiply wealth by dividing it."
Dr. Adrian Rogers
fan4kufootball (anonymous) says…
Well said Dr. Adrian Rogers!
headdoctor (anonymous) says…
beobachter (Anonymous) says…
Simply take a look at what is exempt. Can all of these be justified?
http://www.ksrevenue.org/pdf/forms/pu…
__________________________________________________
If you want to find lost tax money, looking at the sales tax arrangements wont find you very much money unless you want to pay tax on tax and drive the cost of products up as much as double what they are now, or risk running off industry that we cannot afford to lose.
drake (anonymous) says…
I think tbaker summed up this discussion pretty well with Dr. Adrian Rogers' quote.
If you have any other stupid comments to make, please refer back to the 12:15 PM post and read it again.
ftw- tbaker!!
tbaker (anonymous) says…
Thanks Drake.
There will be those on this blog who will seek to justify government taxation policies by citing the moral obligation to care for the less fortunate. The logic says it's OK for the government to loot and plunder the productive people because poor people depend on the government to survive.
When people (voters) come to believe they can live off of the productivity of others, then we have to modify the ten commandments: Thou shalt not steal, except by majority vote. (Gary North)
The sad truth is only a tiny fraction of the money taken by government from working people is spent on those who cannot care from themselves. If taxation for social programs was strictly limited to JUST caring for those people, very few reasonable people would object. Its when that money is designed to create a permanent dependency (for political advantage) for otherwise capable people that the line is crossed.
Satirical (anonymous) says…
However...the question still remains...who agrees with Broden's thesis that; "Tax exemptions should be scrutinized to the same extent as appropriations because in reality the exemptions are expenditures?"
We can talk all day regarding whether taxes to support the "less fortunate" are justified, but without acknowledging the fact that a tax break for one is the same as a tax increase on someone else (and is the same as stealing, based on tbaker's logic) then you have all entirely missed the point.
By exempting some goods and services from taxes, the burden gets shifted to other goods and services (and de facto the producers and consumers of those other goods and services). Increasing the tax base, by having fewer exemptions, would mean fewer taxes for many.
tomatogrower (anonymous) says…
All businesses should have their taxes raised by 500%, then lowered if they create jobs. We've assumed if we lower taxes on businesses, they will create jobs, and that's just not happening. Every state and the national government should enact this. Make them perform first, before rewarding them. A business who brings back their outsourced jobs and start putting people to work could easily be back to their regular tax rate in no time. Let's see the results first.
supertrampofkansas (anonymous) says…
tbaker,
I couldn't help notice that you seem to be contradicating yourself. Maybe you could clear this up for me.
First you refer to a state that would be undesirable in that roughly 50% of the people would be working to support the other 50%. No argument here. But then later you say that is not what is happening with our taxes, that they are not being used to support people who aren't working.
So that leaves me with the dubious statement of "Its when that money is designed to create a permanent dependency (for political advantage) for otherwise capable people that the line is crossed."
So I'm confused tbaker. First of all who are these capable people and what is their percentage overall? How is the money being spent that helps these lazy but capable people to live?
I'm not trying to be argumentative here. I really want to know because I do agree with you that productive people should not have to support people who could work but choose not to. The problem is that it is heck of alot easier to talk about than it is to actually show this is what's happening or that it could happen this way. It just sounds a lot like fearmongering to me.
just_another_bozo_on_this_bus (anonymous) says…
" When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that is about the end of any nation."
This is about as straw man an argument as you'll find. I think everyone dislikes some aspect(s) of their work, but I know very few people who don't recognize that they must work to support themselves and their families, and act accordingly. Are there people who are capable of working who choose not to? Of course. But it's nowhere approaching half of the population, which means Rogers's statement is a pointless hypothetical.
tbaker (anonymous) says…
tomatorgrower - your 5:07 post has got to take the prize for the most ignorant thing I have ever read on this blog. Instead of "out-sourcing" jobs, would you prefer the American company in question to just simply close it's doors because it can no longer compete because it can no longer make a profit because of labor costs? Have you considered the fact the US has the 2nd highest corporate income tax in the world?
supertrampofkansas - wheres the contradiction? Politicians come up with programs to redistribute wealth and create classes of people who are made dependent on the government program such that who ever defends the continuation of the program can count on their vote in perpatuity. The results are sickening. Drive up to the Pine Ridge Indian reservation and take a tour. See for yourself. Compared to "government services" there are piles of studies that show how much more efficient private charitable organizations are at delivering care for the indigent. Caring for the less fortunate is not the goal of government wealth redistribution programs. And yes, both parties do it.
Bozo - if you refuse to accept this simple analogy, there's nothing more to say. It says a lot about how you think. Tell me, do you measure care and compassion for the less fortunate by counting how many of them no longer need government assistance, or by counting how many more are receiving it?
just_another_bozo_on_this_bus (anonymous) says…
"if you refuse to accept this simple analogy,"
What analogy are you talking about?
"do you measure care and compassion for the less fortunate by counting how many of them no longer need government assistance, or by counting how many more are receiving it?"
It's not an either/or situation.
captainzeep (anonymous) says…
Step right up, step right up, step right up,
Everyone's a winner, bargains galore
http://finance.senate.gov/sitepages/2...
Mr. Brownback on behalf of Payless saves importers some money on basketball shoes. Sorry ladies, Mens shoes only: http://www.thomas.gov/cgi-bin/query/z...
No more tariffs for imported "green" products:
Lithium Ion batteries for Hybrids: http://www.thomas.gov/cgi-bin/query/z...
Non-woven PP grocery bags: http://www.thomas.gov/cgi-bin/query/z...