State should increase efficiency, not taxes

Many parents will soon be faced with the annual Christmas wish list dilemma – deciding how much of their kids’ list they can afford without inflicting economic turmoil on the family. A lot of new legislators will face the same challenge come January, as granting everything on the vote-for-me list would require enormous tax increases on individuals, which in turn would negatively impact the Kansas economy.

Just granting the wishes to spend more on schools, highways, Medicaid expansion, and reducing the sales tax on food would cost about $1.25 billion. Eliminating the pass-through exemption would only generate $200 million (if that), and at least the first two years of that new tax would be needed to get reserves up the statutorily required level.

And while the pass-through exemption raises a legitimate fairness discussion, eliminating it would very likely reduce employment, because new Census data shows that 82 percent of new jobs in 2013 and 2014 came from pass-through entities.

Granting $1.25 billion in spending wishes would require a 56 percent across-the-board income tax hike on individuals, causing Kansans to pay much higher rates than pre-2012. Alternatively, raising taxes on those earning $100,000 or more would require a 93 percent increase on those folks.

Many people aren’t aware that the pass-through exemption only accounted for 29 percent of tax reform; individuals got the lion’s share of relief; individuals got the lion’s share of relief with double-digit declines in income tax liability at all income levels.

But even if some of the new legislators want to raise taxes, they’ll soon learn that that would have very little impact on the current fiscal year and not much more on the next year.

Making government operate a little more efficiently is the only practical option to deal with near-term budget challenges. Fortunately, there are many options to do so – if fiscal responsibility can be put ahead of politics.

Democrats and many Republicans in the last Legislature were unwilling to stand up to the special interests that profit from excess government spending, but perhaps more of the newly elected will put citizens and fairness ahead of politics. Examples abound of inefficient government spending, so why should anyone’s taxes be increased so that government can continue spending more than necessary?

This story was originally published November 26, 2016 at 5:04 AM with the headline "State should increase efficiency, not taxes."