From Tax Foundation. The link to the study is here.

State and Local Sales Tax Data for 2015
How does your state compare to its neighbors?

Antique cash register old detail vintage-653946_1280Washington, DC (Apr 8, 2015)—This morning, the nonpartisan Tax Foundation released an updated report of sales taxes throughout the states in 2015. Using a population-weighted average of local sales taxes, the report details the combined state and local sales tax rates for each state and explains how sales taxes fit into a state’s overall tax structure.

The key findings include:

  • 45 states collect statewide sales taxes.
  • 38 states collect local sales taxes.
  • The five states with the highest average combined state-local sales tax rates are Tennessee (9.45 percent), Arkansas (9.26 percent), Alabama (8.91 percent), Louisiana (8.91 percent), and Washington (8.89 percent).
  • Sales tax rates differ by state, but sales tax bases also impact how much revenue is collected from a tax and how the tax affects the economy.
  • Differences in sales tax rates cause consumers to shop across borders or buy products online.

“Sales taxes are some of the most easily understood taxes because every time a consumer makes a purchase, they can see the rate on the receipt,” says Tax Foundation Economist Scott Drenkard.

Our study addresses the fact that 38 states allow local governments to levy sales taxes within their jurisdiction. These local rates, when combined with the statewide rates, can result in substantially larger tax bites.

“Of course, sales taxes are just one part of an overall tax structure and should be considered in context,” adds Drenkard. “For example, Washington State has high sales taxes but no income tax; Oregon has no sales tax but high income taxes. While many factors influence business location and investment decisions, sales taxes are something within policymakers’ control that can have immediate impacts.”

Full report: State and Local Sales Tax Rates in 2015

From Kansas Policy Institute.

Media is snowblind to school “budget cuts” and scheduling realities

By David Dorsey

Contestant: “Alex, I’ll take ‘Media Bias’ for 200.”

Alex: “It’s what the news media calls a ‘snow day’ in Kansas.”

Contestant: “What is a budget cut?”

Alex: “Correct!”

Although to my knowledge that answer/question combination has never been on Jeopardy!, it certainly would be appropriate the way the media continues to misrepresent the state of education funding in the Sunflower State.

An article in Education Week and this similar one in the Huffington Post, both of which were published April 3, used sensationalized headlines and irresponsible reporting to contrive a false financial crisis for the state’s public schools. Both headlines, the Huffington Posts “Kansas Schools Will Close Early This Spring For Lack Of Funds” and Education Week’s “Funding Cuts Force Kansas Districts to End School Year Early,” even make it appear that all 286 school districts will be starting summer vacation early this year. The reality is that there are only two: Concordia (USD 333) and Twin Valley (USD 240) and the headlines are false.  It’s not a disastrous a financial picture that is precipitating a shorter school year, the districts are merely forgoing some unused snow days.

The Education Week piece cited this Salina Journal article to support their assertion that it is Governor Brownback’s late year funding cuts and the new block grant funding law (which restored those cuts) that have precipitated the early dismissal. But regardless of the misleading headline, the Salina Journal story gives a much different picture of the real reasons those districts chose to end their schools years ahead of the original schedule.

Concordia has chosen to cut six days from the current school calendar. Their buildings will close four days early and there will be no school two other days. However, contrary to the article’s premise, the Salina Journal piece did not quote Concordia Superintendent Bev Mortimer as using budget constraints as a reason, although both Education Week and the Huffington Post chose to make that inference in relying heavily from that article. Specifically, Superintendent Mortimer cited one reason for the decision is to provide a perk to the teachers. “We haven’t been able to give raises to teachers like we like. One thing we could give them is some time…It was one positive thing we could do for our staff.” And they are able to give teachers that time by cashing in their unused snow days. “We would have done some of these [snow]days anyway,” the superintendent said. “We might not have chosen to do all six of them.”

Mortimer did state, however, that the decision would save USD 333 about $30,000. To put that dollar figure in perspective, the district’s total budget for the current school year is in excess of $18 million, putting the savings at 0.2%. Furthermore, Concordia’s cash reserves at the beginning of the last two schools years have exceeded $800,000.

So much for a financial crisis.

Twin Valley’s situation is not unlike that of Concordia. That district decided to forgo 7.5 “discretionary days” as they call them and end the year on May 8 instead of May 20. As an example of sensationalistic reporting, Huffington Post implies the students are missing 12 days of schools. (Maybe they think kids in Kansas go to school on the weekends?)

“Discretionary days?” Sounds like more unused snow days schools build into their calendar. Although the Salina Journal quoted Twin Valley Superintendent Jan Neufeld as saying, “Twin Valley’s ‘financial status’ was among the reasons” for the decision, she “declined to guess how much the district would save” by ending the school year earlier. Again, it sounds like much more than just financial considerations. How can you blame a funding cut for ending the school early if you don’t know how much money it will save? Twin Valley also had healthy cash reserves in excess of half a million dollars each of the last two years.

These financial conditions provide a reality that is a far cry from Education Week’s claim that “education funding cuts are forcing two Kansas districts to end the school year early.” What the media outlets failed to report is that both districts will still meet state law requirements for the number of days or hours students will be in school for the year.

Also, the media has been spewing misinformation that the new block grant funding approach will result in a cut of dollars to education. As the table below shows, both districts are receiving increases this school year, not decreases. Concordia will get nearly $200,000 more than 2013-14 and Twin Valley will receive over $170,000 more. The impact statewide is similar. Record state aid to education will continue under the block grants to the tune of 5.6% additional money allocated to schools over a three year period.

 

So, is there any evidence that schools in Kansas are teetering on the edge of a fiscal cliff?

As Alex Trebek would say: “No, sorry.”

From April 2013.

Today on the Joseph Ashby Show, the host had a few comments regarding a television news story about Wichita Mayor Carl Brewer. An excerpt follows.

The KAKE TV news story referred to may be seen here. Background on this issue is here.

From The American Federation for Children.

Kevin P. Chavous reacts to Clinton campaign announcement and need for school choice
Washington, D.C. (April 13, 2015) – The American Federation for Children, the nation’s voice for educational choice, issued the following statement on Hillary Clinton’s candidacy announcement from AFC executive counsel, Kevin P. Chavous:
“Yesterday when Hillary Clinton announced her Presidential candidacy in a video, I was saddened by one of the families that was featured in her uplifting announcement. At the :17 second mark of the video, a mother is featured discussing how her family is moving so her child can attend a quality school. Featuring this family in her candidacy announcement highlights the problems with education in our country and the urgency to ensure that every family, regardless of their zip code, can choose a quality school.
“If Hillary supported school choice, the family in the video and other families across the country would not need to uproot their lives to ensure their child receives a great education. They would immediately have access to quality options and the opportunity to achieve their academic goals.
  
“As a fellow Democrat I challenge Hillary Clinton to embrace educational choice, to become a champion for every day Americans who are less fortunate and lack the resources to uproot their family and move. Because, in the America I believe in, no family should face the decision to have to move in order to give their child the opportunities afforded by a quality education.”
Kevin P. Chavous is executive counsel and a founding board member for the American Federation for Children. He is a former member of the Council of the District of Columbia and a former chairman of D.C.’s Education Committee. Chavous was responsible for enacting numerous education reforms in D.C. Chavous is chair emeritus of the Democrats for Education Reform and a former chair of the Black Alliance for Educational Options.

 

From Kansas Policy Institute. For an eposide of WichitaLiberty.TV featuring James Franko speaking on this topic, click here.

Businesses welcome transparent, accessible, accountable state & local regulations

By James Franko

Adapted from the foreward to KPI’s recent “Business Perceptions of the Economic Impact of State and Local Government Regulations” paper. Read the full paper here and check out KPI’s podcast discussion of the paper, the key findings, and related topics here.

When policy debates turn to job creation there is often scant detail beyond platitudes and talking points. “We need lower taxes.” “Targeted government investment is the name of the game.” “Create an environment in which all can succeed.” “Regulations need to be updated for the 21st Century.” Politicians from across the political spectrum offer bromides that serve their previously held beliefs while citizens and businesses struggle to decide who is right.

The recent Wichita debate on a new city sales tax…not to mention local elections this week…Kansas’ move to lower income taxes, and the national debate on a recovery that goes in fits and starts all circle around the same topic – what does it take to create more jobs and provide more opportunity. Taxes and regulations warrant the most coverage and comment in this conversation, as they are most commonly cited by businesses. While some literature exists on the national regulatory regime, there is very little specific research on state and local regulations. This is even more-true of Kansas and the greater Wichita area.

We recently partnered with Wichita State University’s Hugo Wall School of Public Affairs to take the pulse of local businesses and their interactions with regulators at the state and local level. Under the guidance of Nancy McCarthy Snyder, Ph.D., the research team conducted several focus groups with local business associations to better understand their specific experiences with the regulations and the people who enforce them. The groups and businesses interviewed provided a good cross-section of the Wichita economy and allow for the drawing of solid insights and conclusions.

In short, businesses weren’t all that concerned about the regulations themselves. Instead the guidelines and rules are sometimes less than transparent, too much focus is put on means rather than ends, and regulations aren’t equally applied across an industry…or across individual regulators. Across industries and focus group sessions the key themes were clear – give businesses transparency in what regulations are being applied, how they are employed, provide flexibility in meeting those goals, and allow an opportunity for compliance.

Almost across the board in the findings, businesses willingly adapt and comply with regulations if they are transparent and accountable. While the paper explored state regulations as well, the situation in SCKS offers a chance to “reset” the regulatory framework in the region. The sales tax debate remains fresh in the mind of citizens and Tuesday’s municipal elections confirmed that job creation and economic growth remain paramount.

Individuals and communities will always land on different places along the continuum of appropriate regulation. And, a give and take will always exist between regulators and the regulated. Those two truisms, however, should do nothing to undermine the need for regulations to be applied equally, based on clear rules and interpretations, and to give each business an opportunity to comply.

This project is a starting point from which to gain insight and guide future policy debates in Wichita and Kansas. In fact, many of the business leaders who took part in the focus groups would say these same trends are evident in other jurisdictions and with federal agencies as well. Give them transparency, accountability, and space and they will set about building a business. There is sometimes very little sympathy for business owners, but let’s not forget that they employ our neighbors, help us earn a living, provide for our children, and allow us the opportunity to find meaning and dignity in work.

The staff at the Hugo Wall School was great and should be considered a vital part of the local community. The project wouldn’t have come together without their work.

From National Taxpayers Union Foundation.

Study: $233.8 billion, 6.1 Billion Hours Lost to Rising Tax Complexity

by Douglas Kellogg /

(Washington, DC) – Today, National Taxpayers Union Foundation (NTUF) released a new annual study of tax code complexity in the U.S., finding the economy lost $233.8 billion due to 6.1 billion hours of lost productivity (an estimated value of $202.1 billion) and $31.7 billion in out-of-pocket costs spent complying with a complex and invasive tax code.

Additionally, a new analysis of the Affordable Care Act’s (ACA’s) impact on complexity found 3,322 pages of legal guidance related to the ACA added to IRS.gov – this overlaps partially with 1,865 pages of new ACA regulations.

“Americans face a rising tax complexity burden that essentially prevents anyone from being able to comply without assistance,” Study author and NTUF Policy Analyst Michael Tasselmyer said. “This year’s study gives an indication of future challenges, revealing the additional complications the Affordable Care Act will add to the Tax Code and filing.”

NTUF’s report also highlights complexity issues related to the Foreign Account Tax Compliance Act (FATCA), heavier paperwork burdens, taxpayer service challenges, and identity theft.

NTUF’s policy paper is available at ntu.org/taxcomplexity. This year’s key findings include:

  • According to the IRS National Taxpayer Advocate, the total time burden of tax compliance totals an astounding 6.1 billion hours this year.
    • That is the equivalent of 152.5 million 40-hour workweeks. It would take 59,580 American workers working every week with no days off from age 18 until reaching the full Social Security retirement age of 67, to account for that much time.
    • Or, enough time for the Voyager spacecraft to fly to the nearest star (Proxima Centauri) and back four times!
  • The total compliance cost is $233.813 billion a year. More than the GDP of Ireland, Portugal, or Pakistan.
    • Of this, individuals spend a combined $31.72 billion a year on tax software and other out-of-pocket costs.
    • When calculated at the average hourly wage, the value of the labor involved in tax compliance is a jaw-dropping $202.093 billion.
  • NTUF found a staggering 3,322 pages of legal guidance for the Affordable Care Act added to IRS.gov – including regulations (1,077), Treasury decisions (1,377), notices (669), revenue procedures (100), and revenue rulings (12).
  • The Treasury’s paperwork burden (most of it due to taxes) imposed on the public has grown from 6.4 billion hours to 7 billion hours over the period from fiscal year 2005 to 2013, never making up less than 74 percent of the burden imposed by all government agencies combined.
  • With paid preparers and tax preparation software accounting for 94 percent of returns, it is nearly impossible for any taxpayer to file without assistance. Meanwhile, the average retail fee per return for H&R Block rose to a high of $215.
  • Most estimates put the length of the Tax Code at roughly 4 million words. This is seven times the length of Leo Tolstoy’s War and Peace; more than two times the length of the King James Bible plus the entire works of Shakespeare combined; or, for a more modern reference, well over twice the length of the five Song of Ice and Fire series books that inspired the TV show “Game of Thrones.”
  • Over 75 years ago, the Form 1040 instructions were just two pages long. Today, taxpayers must wade through 209 pages of instructions, quadruple the number in 1985, the year before taxes were “simplified.”

Between 2009 and 2011 the cost of tax complexity spiked from under $150 billion per year to well over $200 billion per year. It has not fallen below that threshold since, and 2015’s estimates are nearly $10 billion higher than last year, showing complexity costs are back on the rise.

“The IRS has never had more power over America’s taxpayers, thanks to even greater cost and complexity added to the code by Obamacare and FATCA,” added Tasselmyer. “Without reform there is little reason to expect anything other than a rising time and financial burden, not to mention more invasion of privacy.”

National Taxpayers Union Foundation is the research and educational arm of National Taxpayers Union, “The Voice of America’s Taxpayers.” Note: NTUF Policy Paper 176, “A Complex Problem: The Compliance Burdens of the Tax Code” is available at ntu.org/taxcomplexity.

Kansas appears on the verge of borrowing one billion dollars to help fund KPERS, the state’s public employee retirement system. Following, from April 2013, why this is not a good idea.

Burden of debt, moneyBorrowing money to shore up the Kansas state employee pension plan is about the worst idea that could come out of Topeka. Legislatures across the country, and counties and cities of all sizes, have shown that government is fundamentally unable to manage the responsibilities of a defined benefit pension plan.

For more about the problems with KPERS, see KPERS problems must be confronted. Newspapers are not helping Kansans grasp the gravity of the problem; see KPERS editorial a disservice to Kansans. Below is a helpful explanation written by Kansas Policy Institute Adjunct Fiscal Policy Fellow Barry Poulson, Ph.D.. He is also Emeritus Professor at the University of Colorado — Boulder.

Public officials in Kansas have proposed using pension obligation bonds to solve the funding crisis in the Kansas Public Employee Pension System (KPERS). In my view this is not a solution to the funding problem and I will discuss what I perceive to be flaws in this proposal.

The rationale for using pension obligation bonds to pay off unfunded liabilities in the pension plan assumes that the state can borrow funds at a low interest rate and then earn a higher rate of return on the proceeds deposited with the pension fund. The flaw in this rationale is the assumption that KPERS will earn a higher rate of return on bond proceeds deposited in the KPERS fund. KPERS assumes an 8 percent return on assets accumulated in the fund. For a number of years, economists and actuaries have questioned this assumed rate of return and the use of this assumed rate to discount liabilities in the plan. The Government Accounting Standards Board has issued new standards, 67 and 68, to be implemented over the next two years, requiring state and local governments to use a lower interest rate, the mortgage bond rate, to discount liabilities in their financial statements.

If we assume that a lower rate of interest, such as the municipal bond rate, is the interest rate relevant in discounting unfunded liabilities in the pension plan then it is not clear that issuing pension obligation bonds will generate returns above the interest cost on those bonds. If the returns fall below the interest cost on the bonds then this introduces an additional risk and could in fact exacerbate the funding problem in KPERS.

A major flaw in the proposed issuance of pension obligation bonds is the lack of nexus between the investment of the bond proceeds and payments for unfunded liabilities in the plan. The experience in other states is that sometimes bond proceeds are earmarked for other state expenditures. The most egregious example of this problem is the state of Illinois which issued $10 billion in pension obligation bonds and then used the proceeds to meet current expenditures rather than to pay off unfunded liabilities in the pension plan.

Even if the state of Kansas would not commit this form of fraud on the taxpayers the fungible nature of state funding makes it impossible to guarantee the nexus between bond proceeds and the payment for unfunded liabilities in the pension plan. If legislators see that additional funds are available to pay off unfunded liabilities in the pension plan they may choose to allocate less general fund money to meet these pension obligations. The state has not allocated the annual required contribution (ARC) to KPERS for several decades and is not projected to do so for the foreseeable future. Legislators continue to promise pension benefits without allocating the funds required to meet these obligations. We should expect this moral hazard to be even greater with the issuance of pension obligation bonds.

Even if the proceeds of pension obligation bonds could be set aside in a lock box and earmarked to pay off unfunded liabilities in the pension plan the state must still address the accumulation of unfunded liabilities in the defined benefit plan. Without fundamental structural change, including shifting public employees to some form of defined contribution pension plan, these unfunded liabilities will continue to accumulate. Legislators should not be diverted from this difficult task by non-reforms, such as the issuance of pension obligation bonds.

Shifting the cost of pension obligations from one generation of employees and taxpayers to the next generation is not a solution to the funding crisis in KPERS. The defined benefit plan offered by KPERS is not sustainable.

I analyze the sources of unfunded liabilities in the plan and explore alternative reforms to solve this problem in an upcoming paper with KPI.

Some of my other work for KPI on KPERS is here and a legal analysis of what can, and cannot, be changed in KPERS is here; the latter piece was done by another scholar.

From the office of U.S. Congressman Mike Pompeo, Kansas fourth district.

Pompeo Responds to CIA Director’s Comments on Critics of Iran Deal

Director Brennan can’t defend the merits of the deal and is instead resorting to personal attacks.

WASHINGTON, D.C. – After CIA Director John Brennan attacked critics of the Iran deal as “wholly disingenuous” at Harvard University’s Institute of Politics on Tuesday, Congressman Mike Pompeo released the following statement commenting that Brennan has taken to making personal attacks instead of defending the deal on its merits.

Mike Pompeo

Mike Pompeo

“The CIA Director has been wrong before and could not be more wrong now – both in his assessment of the so-called ‘nuclear deal’ with Iran and on his assessment of my motives for criticizing it. I oppose the agreement the President has proposed with Iran because it puts Iran on the path to a nuclear arsenal. My concern is not politics, but American national security, keeping the Middle East out of a nuclear arms race, and protecting the very existence of Israel.

“Just over two years ago, when President Obama was running for re-election, he committed to blocking Iran from having centrifuges, shutting down its underground program at Fordow, and ensuring it doesn’t keep its processed uranium – three things we have now conceded to the Iranians. He said that Iran must end its nuclear program. But the present deal allows them to keep that program.

“It is unfortunate that CIA Director Brennan can’t defend the merits of the deal and has to resort to personal attacks in a failing effort to convince the public that the administration’s position is correct. But the CIA Director has been wrong before. He has been at the center of propagating the myth that the Islamic State isn’t comprised of radical Islamic terrorists, but is rather just a band of common ‘criminals.’

“It is this continuous underestimation of our enemies, whether it is the mullahs in Iran or the radical Islamic extremists that seek to kill Americans, that threatens our safety and security at home and abroad.”

Uh-oh. From Watchdog.org: “The bonds don’t actually fix the state’s pension debt. Rather, they shift the debt out of the pension funds, making them appear healthier than they are. As soon as that happens, public employees will be looking for an increase in benefits, warns Anderson.”

Pension bonds have been bad news, but Kansas is betting on them anyway

Summaries of legislation passed this year in the Kansas Legislature are available. From Kansas Legislative Research: “This publication contains summaries of selected bills enacted by the Legislature as of 12:00 noon, April 1, 2015. Bills that have not yet been signed by the Governor are included.”

2015 Preliminary Summary of Legislation April 2, 2015

2015 Preliminary Summary of Legislation — Supplement April 7, 2015

From Freedomworks:

Crony capitalism and corporate welfare at its worst, there is virtually no justification for the continued existence of the U.S. Export-Import Bank. Here are five reasons Congress should finally let the Ex-Im Bank expire in June.

3 Myths about “Tax Reform”

A newspaper editorial begins with “What is it, or why is it, that the name Koch, particularly here in Lawrence and Kansas, seems to trigger such angry, passionate and negative responses from a certain segment of the community, particularly among some at Kansas University?” It’s a good question. From April 2012.

A Saturday op-ed in the Lawrence Journal-World begins with: “What is it, or why is it, that the name Koch, particularly here in Lawrence and Kansas, seems to trigger such angry, passionate and negative responses from a certain segment of the community, particularly among some at Kansas University?”

It’s a good question. When people insert themselves into politics, there will be debate and criticism. I don’t think Charles and David Koch expect a free pass. But some of the online comments written in reaction to this op-ed show, however, that facts and reason won’t stand in the way of those who use demonization of Charles G. Koch and David H. Koch, principals of Wichita-based Koch Industries, to advance their political agendas.

Simons’ op-ed is generally accurate in its depiction of Charles and David Koch, although the company says Koch has not contributed to FreedomWorks, as is reported. But the reader comments — that’s where things really go off the mark.

Here’s a comment that is representative of many: “They would use their wealth to suppress innovation and competition. It’s another case of ‘I’ve got mine, and I want to make sure you don’t get yours.’ Why don’t they set up a loan company to encourage small businesses? Why don’t they hire more workers and give their present workers more benefits? Instead they want to buy the government, so they can control things instead of empowering others.”

As to suppressing innovation and competition: For decades the Kochs have supported free markets and competition through capitalism, which are the engines of innovation, not barriers. Last year Charles Koch, in the Wall Street Journal, strongly advocated for capitalism over cronyism. On the relationship between government and business, he wrote that too many business firms have practiced “crony capitalism”: lobbying for special favors, subsidies, and regulations to keep competitors — who may be more efficient — out of the way.

While it’s more difficult than practicing cronyism, competing in open markets assures that firms that efficiently provide goods and services that consumers demand are the companies that thrive, Koch added. It is these efficient firms that raise our standard of living. When politically-favored firms are propped up and bailed out, our economy is weakened: “Subsidizing inefficient jobs is costly, wastes resources, and weakens our economy.”

In the introduction to The Morality of Capitalism, Tom G. Palmer explains further how genuine capitalism is a system of innovation and creativity:

The term ‘capitalism’ refers not just to markets for the exchange of goods and services, which have existed since time immemorial, but to the system of innovation, wealth creation, and social change that has brought to billions of people prosperity that was unimaginable to earlier generations of human beings. Capitalism refers to a legal, social, economic, and cultural system that embraces equality of rights and ‘careers open to talent’ and that energizes decentralized innovation and processes of trial and error. … Capitalist culture celebrates the entrepreneur, the scientist, the risk-taker, the innovator, the creator. … Far from being an amoral arena for the clash of interests, as capitalism is often portrayed by those who seek to undermine or destroy it, capitalist interaction is highly structured by ethical norms and rules. Indeed, capitalism rests on a rejection of the ethics of loot and grab. … Capitalism puts human creativity to the service of humanity by respecting and encouraging entrepreneurial innovation, that elusive factor that explains the difference between the way we live now and how generation after generation after generation of our ancestors lived prior to the nineteenth century.

The charge of “I’ve got mine, and I want to make sure you don’t get yours” is often leveled against the wealthy, and for some, that may drive their policies. It’s important to know, though, that the policies of economic freedom that the Kochs have promoted are more important to poor people than the wealthy. A glance at the Economic Freedom of the World reports confirms what history has taught us: Countries with market-based and free, or relatively free, economies become wealthy. Poor countries generally do not have market-based economies and therefore little economic freedom, although the ruling class usually lives well.

There is concern that economic freedom is on the decline in America, and that our future is threatened by this.

When the writer asks “Why don’t they set up a loan company to encourage small businesses?” I wold refer them to Koch Ventures and Koch Genesis, two companies that do this.

Finally — for this writer — comes the allegation that Charles and David Koch want to buy government “so they can control things instead of empowering others.” This charge is not supported by facts and what the Kochs have actually done for decades. Institutions founded or supported by the Kochs such as Cato Institute, Mercatus Center at George Mason University, and Americans for Prosperity Foundation are dedicated to limited government and personal liberty. This, along with their support of capitalism — which, as Palmer explained above, leads to freedom, creativity, and individual empowerment for everyone.

Another comment contained “In their ‘ideal’ libertarian world they could do what they want and pollute whenever they want.” This is yet another ridiculous charge.

A statement on the KochFacts website states “recent critics have also claimed that Koch is one of the nation’s top 10 polluters. This study confuses pollution with permitted emissions, which are carefully regulated by the U.S. EPA and other agencies. The index labels as ‘polluters’ Ford Motor, General Motors, GE, Pfizer, Eastman Kodak, Sony, Honeywell, Berkshire Hathaway, Kimberly Clark, Anheuser Busch and Goodyear — corporations, like Koch companies, with significant manufacturing in the U.S. Emissions, a necessary by-product of manufacturing, are strictly monitored and legally permitted by federal, state and local governments.”

Wait a minute: Didn’t the federal government take over General Motors? And GE and Berkshire Hathaway: Aren’t those run by personal friends of Barack Obama?

The reality is that if we want the things these companies make for us, we must accept some emissions — pollution, if you will. The good news, however, is that manufacturing has become much more efficient with regards to emissions, and Koch Industries companies have lead the way. One report from the company illustrates such progress: “Over the last three years, Koch Carbon has spent $10 million to enhance environmental performance, including $5 million for dust abatement at one of its petroleum coke handling facilities. These investments have paid off. In 2008, Koch Carbon’s reportable emissions were 6.5 percent less than in 2000, while throughput increased 10.4 percent.”

Even when Koch Industries does not agree with the need for specific regulations, the company, nonetheless, complies. Writing about an increase in regulation in the 2007 book The Science of Success: How Market-Based Management Built the World’s Largest Private Company, Charles Koch explained the importance of regulatory compliance: “This reality required is to make a cultural change. We needed to be uncompromising, to expect 100 percent of our employees to comply 100 percent of the time with complex and ever-changing government mandates. Striving to comply with every law does not mean agreeing with every law. But, even when faced with laws we think are counter-productive, we must first comply. Only then, from a credible position, can we enter into a dialogue with regulatory agencies to determine alternatives that are more beneficial. If these efforts fail, we can then join with others in using education and/or political efforts to change the law.”

Koch companies have taken leadership roles in environmental compliance, explains another KochFacts page: “In 2000, EPA recognized Koch Petroleum Group for being ‘the first petroleum company to step forward’ to reach a comprehensive Clean Air Act agreement involving EPA and state regulatory agencies in Minnesota and Texas. Despite fundamental policy disagreements, then-EPA Administrator Carol Browner acknowledged Koch’s cooperation. She characterized the agreement as ‘innovative and comprehensive’ and praised the ‘unprecedented cooperation’ of Koch in stepping forward ahead of its industry peers.” Browner was no friend of industry, and had a “record as a strict enforcer of environmental laws during the Clinton years,” according to the New York Times.

These types of facts are not relevant to many of those who left comments to the Journal-World piece. To the political left, the facts must not be allowed get in the way of a useful political narrative.

Koch Industries and Koch brothers are assets to state

By Dolph C. Simons, Jr., Lawrence Journal-World.

What is it, or why is it, that the name Koch, particularly here in Lawrence and Kansas, seems to trigger such angry, passionate and negative responses from a certain segment of the community, particularly among some at Kansas University?

… The answer to the question at the beginning of this column is that the Kochs are conservatives, some would say “ultra conservatives.” They support organizations such as the Cato Institute, Citizens for a Sound Economy, Americans for Prosperity and Freedom Works. Their critics have been quick to try to fault them for supposedly funneling money to the tea party movement. Some say the brothers have given more than $100 million to these conservative organizations.

Charles and David Koch have been the lightning rods for liberal, anti-conservative forces in this country, and it is that likely liberal-leaning faculty members and administrators at KU, as well as at many other universities, have been critical of the Kochs in order to keep peace with their staffs.

The sad, phony or hard-to-understand part of this situation is that the two Koch brothers attribute the success of their family-owned business to the guiding principles espoused by their market-based management philosophy.

… Charles and David Koch have championed limited government, economic freedom and personal liberty and they have challenged excessive government spending. Their financial giving efforts — political and charitable, both personal and through their company and foundations — all have been lawful.

This being the case, it would seem KU officials, as well as other state officials, should be trying to work with Koch Industries, Charles and David Koch and their foundations on ways to benefit the university and the state. They should be trying to embrace the Kochs rather than acting as if they were pariahs.

Continue reading at Koch Industries and Koch brothers are assets to state.

The City of Wichita should not approve a measure that is not needed, that does not conform to the city’s policy (based on relevant information not disclosed to citizens), and which is steeped in cronyism. From April 2013.

This week the Wichita City Council will consider authorizing industrial revenue bonds (IRB) for the Ambassador Hotel project in downtown Wichita.

In most cases, the major benefit of IRBs is exemption from paying property taxes. Since the Ambassador Hotel is located within a tax increment financing (TIF) district, it’s not eligible for property tax abatement. (Because of the TIF, the developers have already achieved the diversion of the majority of their property tax payments away from the public treasury for their own benefit.)

Instead, in this case the benefit of the IRBs, according to city documents, is an estimated $703,017 in sales tax that the hotel won’t have to pay.

The Ambassador Hotel has benefited from many millions of taxpayer subsidy, both direct and indirect. So it’s a good question as to whether the hotel deserves another $703,017 from taxpayers.

But if we follow the city’s economic development policy, the city should not authorize the IRBs. Here’s why.

The Sedgwick County/City of Wichita Economic Development Policy states: “The ratio of public benefits to public costs, each on a present value basis, should not be less than 1.3 to one for both the general and debt service funds for the City of Wichita; for Sedgwick County should not be less than 1.3 overall.”

The policy also states that if the 1.3 to one threshold is not met, the incentive could nonetheless be granted if two of three mitigating factors are found to apply. But there is a limit, according to the policy: “Regardless of mitigating factors, the ratio cannot be less than 1.0:1.”

In September 2011 the city council passed a multi-layer incentive package for Douglas Place, now better known as the Ambassador Hotel and Block One. Here’s what the material accompanying the letter of intent that the council passed on August 9, 2011 held: “As part of the evaluation team process, the WSU Center for Economic Development and Business Research studied the fiscal impact of the Douglas Place project on the City’s General Fund, taking into account the requested incentives and the direct, indirect and induced generation of new tax revenue. The study shows a ratio of benefits to costs for the City’s General Fund of 2.62 to one.

The same 2.62 to one ratio is cited as a positive factor in the material prepared by the city for Tuesday’s meeting.

So far, so good. 2.62 is greater than the 1.3 that city policy requires. But the policy applies to both the general fund and the debt service fund. So what is the impact to the debt service fund? Here’s the complete story from the WSU CEDBR report (the report may be viewed at Wichita State University Center for Economic Development and Business Research Study of Ambassador Hotel):

                                   Cost-benefit ratio
City Fiscal Impacts General Fund         2.63
City Fiscal Impacts Debt Service Fund    0.83
City Fiscal Impacts                      0.90

We can see that the impact on the debt service fund is negative, and the impact in total is negative. (A cost-benefit ratio of less than one is “negative.”)

Furthermore, the cost of the Ambassador Hotel subsidy program to the general fund is $290,895, while the cost to the debt service fund is $7,077,831 — a cost factor 23 times as large. That’s why even though the general fund impact is positive, the negative impact of the much larger debt service fund cost causes the overall impact to be unfavorable.

The city didn’t make this negative information available to the public in 2011, and it isn’t making it available now. It was made public only after I requested the report from WSU CEDBR. It is not known whether council members were aware of this information when they voted in 2011.

So the matter before the council this week doesn’t meet the city’s economic development policy standards. It’s not even close.

There are, however, other factors that may allow the city to grant an incentive: “In addition to the above provisions, the City Council and/or County Commission may consider the following information when deciding whether to approve an incentive.” A list of 12 factors follows, some so open-ended that the city can find a way to approve almost any incentive it wants.

A note: The policy cited above was passed in August 2012, after the Ambassador Hotel incentives package passed. But the 1.3 to one threshold was de facto policy before then, and whether a proposed incentive package met that standard was often a concern for council members, according to meeting minutes.

Timing and campaign contributions

Citizens might wonder why industrial revenue bonds are being issued for a hotel that’s complete and has been operating for over three months. The truly cynical might wonder why this matter is being handled just two weeks after the city’s general election on April 2, in which four city council positions were on the ballot. Would citizens disagree with giving a hotel $703,017 in sales tax forgiveness? Would that have an effect on the election?

Campaign contributions received by James Clendinin from parties associated with Key Construction. Clendenin will vote tomorrow whether to grant sales tax forgiveness worth $703,017 to some of these donors.Campaign contributions received by James Clendinin from parties associated with Key Construction. Clendenin will vote tomorrow whether to grant sales tax forgiveness worth $703,017 to some of these donors. (Click for larger view.)

Combine this timing with the practice of part of the hotel’s ownership team of engaging in cronyism at the highest level. Dave Burk and the principals and executives of Key Construction have a history of making campaign contributions to almost all city council candidates. Then the council rewards them with overpriced no-bid contracts, sweetheart lease deals, tax abatements, rebates of taxes their customers pay, and other benefits. The largesse dished out for the Ambassador Hotel is detailed here. This hotel, however, was not the first — or the last time — these parties have benefited from council action.

Campaign contributions received by Lavonta Williams from parties associated with Key Construction. Williams will vote tomorrow whether to grant sales tax forgiveness worth $703,017 to some of these donors.Campaign contributions received by Lavonta Williams from parties associated with Key Construction. Williams will vote tomorrow whether to grant sales tax forgiveness worth $703,017 to some of these donors. (Click for larger view.)

Campaign finance reports filed by two incumbent candidates illustrate the lengths to which Key Construction seeks to influence council members. Wichita City Council Member James Clendenin (district 3, southeast and south Wichita) and Wichita City Council Member Lavonta Williams (district 1, northeast Wichita) received a total of $7,000 from Key Construction affiliates in 2012. Williams received $4,000, and $3,000 went to Clendenin. For Williams, these were the only contributions she received in 2012.

A table of campaign contributions received by city council members and the mayor from those associated with the Ambassador Hotel is available here.

Wichita mayor Carl Brewer with major campaign donor Dave Wells of Key Construction. Brewer will vote tomorrow whether to grant a company Wells is part owner of sales tax forgiveness worth $703,017.

This environment calls out for campaign finance reform, in particular laws that would prohibit what appears to be the practice of pay-to-play at Wichita City Hall.

There was a time when newspapers crusaded against this type of governance. Unfortunately for Wichitans, the Wichita Eagle doesn’t report very often on this issue, and the editorial board is almost totally silent. Television and radio news outlets don’t cover this type of issue. It’s left to someone else to speak out.

From April 2014.

The Wichita Business Journal reports today:

When it comes to having good conditions to support small businesses, well, Wichita isn’t exactly at the top of the list, according to a new ranking from The Business Journals.

In fact, the Wichita metro area’s small-business vitality score is nearly at the bottom — 99th out of the 101 U.S. metro areas included in the study. (Wichita near bottom for small-business vitality score, April 2, 2014)

Many in Wichita don’t want to recognize and confront the bad news about the performance of the Wichita-area economy. Last year, when presenting its annual report to local governmental bodies, the leaders of Visioneering Wichita would not present benchmark data to elected officials.

wichita-peer-job-growth-1990-2014-01

So what is the record of the Wichita metropolitan area regarding job creation, that seeming to be the most popular statistic our leaders cite and promote? I’ve prepared statistics from the Bureau of Labor Statistics, U.S. Department of Labor for Wichita and a broad group of peer cities. I included our Visioneering peer cities, cities that Visioneers traveled to on official visits, and a few others. The result, shown nearby, is not pretty. (Click on charts for larger versions, or click here to use the interactive visualization)

wichita-peer-job-growth-2007-2014-01

If we look at job creation starting in 1990, Wichita lags behind our Visioneering peers, but not behind all the peer cities that I selected. Wichita does better than Springfield, Illinois, for example. I chose to include that as a peer metropolitan area because that’s the immediate past city that Gary Plummer worked in. He was president of that city’s Chamber of Commerce, and is now president of the Wichita Chamber. Note the position of Springfield: Last place.

In next-to-last place we see Wichita Falls, Texas. I chose to include it because it is the immediate past home of Tim Chase. He was the head of Wichita Falls Economic Development Corporation. He’s now president of Greater Wichita Economic Development Coalition, the primary organization in charge of economic development for the Wichita area.

In second-to-last place we see Pittsburgh, which I added because Visioneering leaders recently made a visit there.

Then, we come to Wichita.

If we look at job creation since 2007 we find Wichita in a common position: Last place in job creation, and by a wide margin except for two cities. One is Wichita Falls, where our present GWEDC president recently worked. The other city that barely out-performs Wichita is Chattanooga, which I included because Visioneering civic leaders recently traveled there to learn from that city.

Over the decades in which Wichita has performed poorly, there have been a few common threads. Carl Brewer has been council member or mayor since 2001. Economic development director Allen Bell has been working for the city since 1992. City Attorney Gary Rebenstorf has served for decades. At Sedgwick County, manager William Buchanan has held that position for more than two decades. On the Sedgwick County Commission, Dave Unruh has been in office since 2003, and Tim Norton since 2001. It is these officials who have presided over the dismal record of Wichita.

Wichita City Manager Robert Layton has had less time to influence the course of economic development in Wichita. But he’s becoming part of the legacy of Wichita’s efforts in economic development.

toolbox-29058_640

These leaders often complain that Wichita does not have enough “tools in the toolbox” to compete with other cities in economic development. Wichita does, however, have and use incentives. The State of Kansas regularly offers incentives so generous that Kansas business leaders told the governor that they value these incentives more than they would value elimination of the state corporate income tax.

Incentives: We have them. They haven’t worked for us.

It is nearly certain that this year Wichitans will be asked to approve a higher sales tax in order to pay for many things, including the more aggressive approach to job creation that Brewer mentioned. Based on the track record of our elected officials and bureaucrats, we need to do this: Before approving the tax and expenditures, Wichitans need to take a long look at the people who have been in charge, and ask what will be different going forward.

From August 2012.

Two weeks ago the Wichita Eagle editorialized that “appearance matters” on city contracts: “There will be an elephant in the Wichita City Council chambers today as Mayor Carl Brewer and the rest of the council formally consider Dondlinger and Sons’ long-shot final appeal of its loss of the contract to build the new airport terminal — the close ties of Brewer and other City Council members to Key Construction, including a letter Brewer wrote last year recommending Key to build the Cabela’s store in northeast Wichita.” (Eagle editorial: Appearance matters on city contracts, July 17, 2012)

The Eagle probably didn’t know at that time what we learned this week: There was unusual interest in Michigan about the airport contract decision, and the campaign bank account of Wichita City Council Member Jeff Longwell benefited financially.

On July 16 — the day before the Wichita City Council heard the appeal that resulted in Key Construction apparently winning the airport contract — John Rakolta, Chairman and Chief Executive Officer of Walbridge and his wife contributed $1,000 to Longwell’s campaign for Sedgwick county commissioner. Walbridge is a Michigan-based construction company that is partnering with Key Construction on the airport job. The contract is worth about $100 million.

Then on July 20, three days after the council’s decision in favor of Key/Walbridge, other Walbridge executives contributed $2,250 to Longwell’s campaign. Key Construction and its executives contributed $6,500 to Longwell’s county commission campaign, and they’ve also been heavy contributors to Longwell’s other campaigns.

It is wrong to accept thousands in contributions from those who benefit directly from your vote. In many states it is illegal. But not in Kansas.

This is not the first time Jeff Longwell has placed the interests of his campaign contributors ahead of taxpayers. Last August the council, with Longwell’s vote, decided to award Key a no-bid contract to build the parking garage that is part of the Ambassador Hotel project. The no-bid cost of the garage was to be $6 million, according to a letter of intent. Later the city decided to place the contract for competitive bid. Key Construction won the bidding, but for a price $1.3 million less.

What citizens need to know is that the Wichita City Council, including Longwell, was willing to spend an extra $1.3 million of taxpayer funds to reward a politically-connected construction firm that makes heavy campaign contributions to Longwell and other council members. Only one council member voted against this no-bid contract.

Later that year when citizens exercised their constitutional right to challenge a taxpayer-funded giveaway to the special interests that fund his campaigns, Jeff Longwell said it was “disappointing,” and a “stunt.” He said that using this fundamental aspect of democracy causes citizens to “lose credibility.” (Wichita Eagle, September 14, 2011)

After Wichita voters rejected this special tax deal, the Wall Street Journal in a column titled “A Wichita Shocker: You can beat city hall” wrote: “Local politicians like to get in bed with local business, and taxpayers are usually the losers. So three cheers for a voter revolt in Wichita, Kansas last week that shows such sweetheart deals can be defeated.” (Review & Outlook, March 6, 2012)

It’s no wonder Longwell was disappointed when citizens petitioned their government. Voters soundly rejected the political cronyism and sweetheart deals that are Longwell’s legacy.

It’s all part of Longwell’s disregard for citizens in favor of his campaign contributors. In 2008 the city council, with Longwell approving, made a $6 million no-interest and low-interest loan to movie theater owner Bill Warren. The contracts were not made available until just hours before the meeting where the loan was voted on. When a reporter asked about journalist and citizen access to these documents in a timely fashion, the reporter wrote “It’s unlikely many residents would read the full contract even if it had been made public earlier, Longwell said.” (Little time to review Warren loan terms, July 1, 2008 Wichita Eagle)

Companies Bill Warren controls contributed at least $7,500 to Longwell’s current campaign.

In 2011, when discussing signage policy at merchants that charge an extra community improvement district sales tax, Longwell said that including the specific add-on tax rate would be confusing to shoppers, because different CIDs may charge different add-on rates. Again, disregard for citizens.

Jeff Longwell defends these giveaways by saying they create jobs. But Wichita economic development is failing. Our city is not doing well. We won’t create prosperity and jobs by over-spending on no-bid city contracts that provide out-size profits for Longwell’s political sponsors.

Additionally, when it is apparent that a “pay-to-play” environment exists at Wichita City Hall, it creates a toxic and corrosive political and business environment. Companies are reluctant to expand into areas where they don’t have confidence in the integrity of local government. Will I find my company bidding against a company that made bigger campaign contributions than I did? If I don’t make the right campaign contributions, will I get my zoning approved? Will my building permits be slow-walked through the approval process? Will my projects face unwarranted and harsh inspections?

Wichita and Kansas need pay-to-play laws to reign in the practices of Jeff Longwell, Carl Brewer, and other city council members. For the good of our city and state, we must end the “pay-to-play” system of votes for political campaign contributions.

A press release from the Sam Williams campaign for Wichita mayor.

Sean and Maggie Hatfield

Sean and Maggie Hatfield

Primary mayoral candidate Sean Hatfield today endorsed Sam Williams for Wichita Mayor. Hatfield, a Republican attorney involved with national, state and local politics, impressed voters with his strong performance in the March 3rd ten-way primary.

“I entered the race for mayor because Wichita is at a critical crossroads. Wichita can’t afford to rely on the same tired promises and policies that have stagnated private sector job growth and progress in our community for far too long. Wichita needs new, strong leadership in city hall and I believe Sam Williams is the candidate to move Wichita forward again.” Hatfield said.

Sam Williams, a retired business executive said “I couldn’t be more thrilled to have Sean Hatfield’s support. Sean ran a race based on opening up city hall, leveling the playing field so that all Wichitans can prosper, and providing oversight and transparency in how tax dollars are allocated. These are key cornerstones of my campaign.”

Hatfield is looking forward to working with Williams to enact meaningful ethics and financial contribution reform for city government, something Williams has said must happen in Wichita.

By John Todd. A version of this appeared in the Wichita Eagle.

Now that the “Minnesota Guys” are facing felony charges for fraud related to downtown redevelopment, will the Wichita City Council members who were involved also be held accountable?

I read the February 23 Eagle article, “Kansas securities officials files suit against Minnesota developers” with great interest. I remember Michael Elzufon and David Lundberg speaking at a Wichita Independent Business Association luncheon in 2004. They boasted that they purchased their first building in downtown Wichita for $0.89 cents per square foot and that after rehabilitation costs they were selling the same space for $200.00 per square foot. 

Like many in the crowd, I was pleased to see a privately-driven market-based solution to downtown redevelopment and thanked the Minnesota Guys for the economic uplift. I asked, “Will you be tapping into the Wichita public treasury asking for taxpayer incentive programs to make these projects work?” Their answer was an emphatic “No!” 

It didn’t take long for the City of Wichita’s economic development staff to begin working on millions of dollars in incentive programs for the Minnesota Guys that a majority of our City Council members and the Mayor approved.

Citizens who questioned the incentives before the City Council were put in our place and told that we did not understand the need for public incentives for downtown redevelopment to occur, and were often labeled in newspaper editorials as the usual “anti-tax” group opposed to progress.

Will any of our elected city officials who were responsible for checking the credibility of the Minnesota Guys be held publicly accountable for their role in promoting their lavish projects through generous public incentive programs?

It will be interesting to see if Wichita voters have better memory than those who are supposed to safeguard the public trust and whether they will re-elect the City Council members who were in office during this time period or vote them out of office in the April 7 municipal election. 

John Todd
Wichita

Estate and Inheritance Taxes around the World

Stingrays and Police Secrecy

Three transparency laws Hillary may have violated: Column

From the office of Congressman Mike Pompeo.

Pompeo Comments on McCarthy’s Visit to Kansas

EPA Administrator needs a little Kansas common sense.

Mike Pompeo

Mike Pompeo

Wichita, Kan. – The Environmental Protection Agency (EPA) Administrator, Ms. Gina McCarthy, is in town today to speak at the National Farmers Union’s annual national convention. Congressman Mike Pompeo had the following to say about her visit:

“I am pleased to welcome Ms. McCarthy to Wichita, Kansas. As the leader of an agency that continues to inflict enormous costs – and thereby reduced opportunity for jobs for Kansas – I am looking forward to learning what message Ms. McCarthy is going to share with her audience. Those who produce our food, more often than not, find themselves negatively impacted by the rules her organization has implemented. The EPA has, under Ms. McCarthy’s leadership, killed jobs, raised energy prices, and is now trying to regulate ponds and streams over which it has no authority. Kansas farmers know how to take care of their land better than bureaucrats in Washington. I am proud that she will today have an opportunity to pick up some Kansas common sense that she can take back and apply inside the elitist bubble in Washington, D.C. in which she spends most all of her time.”

Little tracking of results from state corporate incentives

David Boaz: “What a great time to be a libertarian!”

We All Deserve Better Than Single-Payer Health Care