Wichita new home tax rebate program: The analysis

From March 2012, a reminder of the inability of the City of Wichita to be truthful with taxpayers.

A document released by the City of Wichita casts strong doubt on the wisdom of a new home property tax rebate program. The document also lets us know that city staff are not being entirely honest with the citizens of Wichita.

The new home tax rebate program, according to city documents prepared for the February 14, 2012 city council meeting, provides free Wichita city property taxes to buyers of qualifying new homes: “To promote additional new home construction and new home ownership, the City of Wichita, after extensive coordination and discussion with WABA, is proposing a New HOME (New Home Ownership Made Easy) Program. The program will provide a 5 year rebate of City property taxes for eligible property. To be eligible, property must be in a participating development, with all taxes through 2010 (general and special assessment) current in the development. In addition, to be eligible, the special assessment and general taxes must be paid current at the date of sale and closing of a property.”

WABA is The Wichita Area Builders Association , a trade association for home builders. The document recently released is a study or analysis of the program dated February 1 from Wichita State University Center for Economic Development and Business Research.

During the period of the tax rebate program, the study estimates that 787 homes would be built and sold even if there was no rebate program. It is assumed that 1,000 homes would be sold during that period with the rebate program, but that is not certain.

Following is an excerpt from a table that presents the results of analysis. The benefits and costs are to the City of Wichita General Fund. Benefits are, according to the study, “sales tax revenues, from construction worker spending and construction material purchases, and property tax revenues.” The costs are the lost revenue due to the tax rebates.

                   No Incentives    Incentives
Public Benefits       $2,364,429    $3,004,315
Public Costs                  $0    $2,032,312
Net Public Benefits   $2,364,429      $730,457
Return on Investment      N/A           1.48

Some, undoubtedly, will focus on the return on investment (ROI) ratio of 1.48 if the tax rebate incentive is used. (There is no such ratio if there are no incentives, as there is no investment.) The study explains the ratio this way: “for every dollar invested, the city will receive the initial dollar plus an additional 48 cents in return.”

That sounds like a good deal, and the ratios like this that are calculated by CEDBR are often used by the city to justify incentives.

But there is another way to look at this deal: the net value to the city. In this case, if the city doesn’t offer the incentives, the benefits to the city are $2,364,429. If incentives are used, the benefits are $730,457. This means that if the city does nothing, it is $1,633,972 to the better.

That’s right: Even though the city has an opportunity to make an investment with a purportedly high ROI, it would be better off, dollar-wise, if it did not make the investment.

The analysis concludes that with the tax rebate program, there will be more construction jobs. But, caution the study authors: “Please note, the jobs supported in 2012 and 2013 are not net new jobs — they are jobs that already exist. The analysis simply identifies a funding stream for these jobs.”

In a separate but similar analysis dated March 22, 2012 prepared for Sedgwick County, some limitations of the analysis were itemized, as follows:

It was beyond the scope of this analysis to account for:

  • Changes in household consumption due to a change in homeownership.
  • The impact of renters who become owners. The program would likely encourage renters to become homebuyers. As these individuals leave the rental market, there may be adverse effects, including falling rental rates.
  • An increase in demand. Although an increase in new home purchases, above existing demand, is likely if incentives are offered, the actual increase in demand has not been quantified.
  • Any increase in demand that offsets future home purchases. It is likely that any increase in new home purchases will simply offset future home purchases as seen in the national Cash for Clunkers program.
  • A change in the price of new homes due to additional supply or higher demand.
  • A fall in home prices, or the associated tax collections, from existing homes. There is a strong likelihood that the increased demand in new homes could lower the value of existing homes.
  • Sunk costs. All costs associated with the creation of a new development, including specials, are viewed as sunk costs. Because they have already occurred, these sunk costs are not included in the analysis.
  • Increased cost of public services. Incentives provided to rural areas could increase public costs as new services are required, including roads, sewer, fire and the like. These increased costs are location specific and not included in the analysis.
  • Cost associated with not providing incentives. The costs associated with a poor new home market have not been analyzed. Without incentives, new home purchases are expected to be lower. This could have negative consequences to builders, developers and taxing entities.

Some of these problems I presented to the city council in my testimony delivered at the February 14th council meeting. Specifically, I warned council members of the devaluing of existing homes, the “cash for clunkers” effect, the costs of providing city services to homes that aren’t contributing property tax to pay for them, and the question of how much new activity will be induced: “Related to this is the question as to how much new activity this program will induce. Often government takes credit for all economic activity that takes place. This ignores the economic activity that was going to take place naturally — in this case, new homes that are going to be built even without this subsidy program … But, the city has to give up collecting property tax on all these homes — even the ones that would be built anyway.

In the case of a new home property tax rebate program for Sedgwick County, the study concludes that the benefit of the program to the county is negative $1,832,294 — a huge cost.

Missing candor

Now that the CEDBR study is released, we can see how city staff failed to present the entire economic impact of the tax rebate program to citizens. Here’s what city staff presented to council members, and by extension, all Wichitans:

“The Center for Economic Development and Business Research at Wichita State University analyzed the fiscal impact of the proposed New HOME incentive program on the City’s General Fund. The analysis compares the present value cost of incentives to the present value benefits of direct and indirect jobs created and construction expenditures. In this case, a 1.48 to one ratio of benefits-to costs is reported.”

Every word in this statement is true. But what’s missing is that if the city does nothing, it is $1,633,972 better off.

City staff had this information. Sources tell me, however, that staff did not present it to council members or the public before the council voted on the program. We are left with this conclusion: City staff presented only the information from the study that promoted the result the city wanted. This is lying by omission.

This is not the first time city staff has misled the council and the public. Regarding the economic impact of subsidies to the Ambassador Hotel, the city touted a positive cost-benefit ratio to one fund, while ignoring a negative impact to a much larger fund. The difference was a factor of 23 times. See Fact checking the Wichita Ambassador Hotel campaign.

At some time council members and citizens need to demand that someone be held accountable for this behavior. Demands for accountability are not likely to come from the city council, as many members have shown themselves willing to overlook all facts and reason in order to promote their goals. The editorial board of the Wichita Eagle does the same. It remains important for citizens to perform this watchdog function.

Wichita Eagle reporting on this matter is at Sedgwick County won’t join property tax rebate for new-home buyers.

Kansas newspapers against the children

apple-wormA Kansas newspaper editorial illustrates that for the establishment, schools — the institution of public schools, that is — are more important than students. From March 2014. The issues are the same today.

An unsigned editorial in the Garden City Telegram proclaimed “Another attempt to undermine public schools materialized last week in the Kansas Statehouse.” (Legislators turn to ALEC for poor plan on schools, March 25, 2014.)

What was in a bill that so worried the Telegram editorial writers? According to the op-ed, the dangerous provisions are “expansion of charter schools, overhaul of teacher licensing and tax breaks for private school scholarships.”

To the Telegram, these ideas are “radical” and would “undermine” public schools. These ideas are from American Legislative Exchange Council (ALEC), purportedly funded by Charles and David Koch. To low-information newspaper editorialists, the source of an idea alone is sufficient evidence to condemn it. To buttress its argument, the Telegram mentions the Koch Brothers several times along with Americans for Prosperity, the tea party, and other “special interests.”

What’s curious is that the op-ed says “ALEC promotes concepts of free-market enterprise and limited government, which are worthy of discussion in legislative pursuits.” It’s good that the op-ed writers realize this. Very good.

But the next sentence criticizes ALEC’s “one-size-fits-all approach.” That’s a strange claim to make. The education reforms that ALEC supports — and the public school establishment hates — are centered around providing more choices for students and parents. The public schools that the Telegram defends are the “one-size-fits-all approach.” School choice programs foster diversity, creativity, and entrepreneurship in education. Government schools are the opposite.

Further, these school choice programs do not “target” public schools, as claimed in this op-ed. It is true that school choice programs provide competition for public schools. But to say that giving choices to parents and students is targeting public schools assumes a few things: First, it assumes that the institution of public schools is more important than Kansas schoolchildren.

Second, it assumes that public schools are somehow more worthy of taxpayer funds than are charter schools and private schools. But should taxpayer funds be spent where government school bureaucrats want, or where parents believe their children will get the best education?

Third, allowing and encouraging competition is not “targeting.” Proclaiming this reveals a lack of understanding of economic competition in markets. In the jungle, the winners kill and eat the losers. But in markets, competition is a discovery process. Competition spurs people to innovate with new products, or become more efficient. As new products and services are discovered and refined through competition, the old products and services must adapt or fall by the wayside. But the old stuff doesn’t die, as do animals in the jungles. People and capital assets from failing enterprises are recycled into the new successful enterprises, and life goes on — except everything is better.

That’s the real problem. Kansas schools are not getting better. Editorials like this are part of the problem. It doesn’t help that the Wichita Eagle excerpted this editorial.

Wichita Eagle, where are you?

The state’s largest newspaper has no good reason to avoid reporting and editorializing on an important issue. But that’s what the Wichita Eagle has done.The following is from March 2016. Since then, the Eagle has not reported or editorialized on this issue, to the best of my knowledge.

In November 2014 Wichita voters rejected a proposed Wichita city sales tax. The largest portion of that tax, $250 million, would have gone towards expanding the capacity of the Aquifer Storage and Recharge, or ASR, project.

The Wichita Eagle editorial board urged voters to approve the tax. It told readers that spending $250 million on ASR would “assure a future for Wichita with enough water.” “The needs are clear,” the editors wrote, adding “Investing in the aquifer project seems the best thing to do to anticipate and meet Wichita’s water needs.” The Eagle warned of “much higher water rates” if the sales tax is not passed.

Since voters rejected the tax to support that spending, the cost of providing adequate water has dropped, and dropped a lot. But you wouldn’t know that by reading the Wichita Eagle or by relying on our city’s other mainstream news media.

If you viewed a Wichita City Council workshop on December 1, however, you’d have learned that the city can provide adequate water for much less than $250 million. The rise in water bills will also be much less than what the Eagle and the city used to frighten voters into approving the sales tax.

So why hasn’t the Wichita Eagle reported on the December 1, 2015 workshop, in which Director of Public Works and Utilities Alan King presented the new plans — plans which will cost much less? Why have there been no editorials celebrating that we can provide adequate water at much less expense?

I can understand the editorial writers not wanting to admit they had been duped. That’s human nature. But for the news division of the Eagle: Why no reporting on this?

As it happens, the newsroom of the Eagle was also a cheerleader for the sales tax and ASR project. As an example, the Eagle printed a fact check article that disputed claims made by opponents of the tax. When asked why there was not a similar fact check article on the proponents, the reporter said there were no errors to be found. Nothing. That was incredulous — unbelievable — at the time. There were many questionable claims made by sales tax proponents. In hindsight, we are even more certain of that.

Tubs of ink the Wichita Eagle could be using to tell us what we need to know.
Tubs of ink the Wichita Eagle could be using to tell us what we need to know.
The Eagle has plenty of reporting capacity, barrels of ink, and lots of online bandwith to report and editorialize on issues like who gets free parking at the Wichita airport. That’s important, perhaps, but trivial in terms of financial impact. But on this issue involving over $100 million in savings, there is silence.

The state’s largest newspaper has no good reason to avoid reporting and editorializing on an important issue. But that’s what the Wichita Eagle has done. We wonder why.

Public choice offers insight into government

Public Choice - A PrimerIf you’ve wondered why government is as it is, the school of public choice economics offers insight and explanation. The Institute of Economic Affairs, a London think tank, has published Public Choice — A Primer. This short book explains this concept, and by understanding it, we can learn more about how government and its actors operate.

Here’s a description of public choice from the book’s web page:

“Market failure” is a term widely used by politicians, journalists and university and A-level economics students and teachers. However, those who use the term often lack any sense of proportion about the ability of government to correct market failures. This arises from the lack of general knowledge — and the lack of coverage in economics syllabuses — of Public Choice economics.

Public Choice economics applies realistic insights about human behaviour to the process of government, and is extremely helpful for all those who have an interest in — or work in — public policy to understand this discipline. If we assumes that at least some of those involved in the political process — whether elected representatives, bureaucrats, regulators, public sector workers or electors — will act in their own self-interest rather than in the general public interest, it should give us much less confidence that the government can “correct” market failure.”

Here is the executive summary of the book:

  • Public Choice applies the methods of economics to the theory and practice of politics and government. This approach has given us important insights into the nature of democratic decision-making.
  • Just as self-interest motivates people’s private commercial choices, it also affects their communal decisions. People also “economise” as voters, lobby groups, politicians and officials, aiming to maximise the outcome they personally desire, for minimum effort. Consequently the well-developed tools of economics — such as profit and loss, price and efficiency — can be used to analyse politics too.
  • Collective decision-making is necessary in some areas. However, the fact that the market may fail to provide adequately in such areas does not necessarily mean that government can do things better. There is “government failure” too. Political decision-making is not a dispassionate pursuit of the “public interest,” but can involve a struggle between different personal and group interests.
  • There is no single “public interest” anyway. We live in a world of value-pluralism: different people have different values and different interests. Competition between competing interests is inevitable. This makes it vital to study how such competing interests and demands are resolved by the political process.
  • The self-interest of political parties lies in getting the votes they need to win power and position. They may pursue the “median voter” — the position at the centre, where voters bunch. Government officials will also have their own interests, which may include maximising their budgets.
  • In this struggle between interests, small groups with sharply focused interests have more influence in decision-making than much larger groups with more diffused concerns, such as consumers and taxpayers. The influence of interest groups may be further increased because electors are “rationally ignorant” of the political debate, knowing that their single vote is unlikely to make a difference, and that the future effects of any policy are unpredictable.
  • Because of the enormous benefits that can be won from the political process, it is rational for interest groups to spend large sums on lobbying for special privileges — an activity known as “rent seeking.”
  • Interest groups can increase their effect still further by “logrolling” — agreeing to trade votes and support each other’s favoured initiatives. These factors make interest group minorities particularly powerful in systems of representative democracy, such as legislatures.
  • In direct democracy, using mechanisms such as referenda, the majority voting rule that is commonly adopted allows just 51 per cent of the population to exploit the other 49 per cent — as in the old joke that “democracy is two wolves and a sheep deciding who shall eat whom for dinner.” In representative democracies, much smaller proportions of the electorate can have undue influence.
  • Because of the problem of minorities being exploited — or minorities exploiting majorities — many Public Choice theorists argue that political decision-making needs to be constrained by constitutional rules.

The book may be purchased, or downloaded at no cost in several formats.

Kansas and Colorado, compared

News that a Wichita-based company is moving to Colorado sparked a round of Kansas-bashing, most not based on facts. From March 2016.

When a Kansas company announced moving its headquarters to Denver, comments left to a newspaper article made several statements that deserve closer examination.1

One reader wrote “Yup another example that the tax relief for businesses is working in Kansas.” Another wrote “The biggest takeaway here is that then didn’t bother to mention the benefits of lower taxes meaning the tax policy Kansas touts really has no bearing on company decisions.” Another wrote “Just low taxes is not a magnet for business or people wanting to move here.” Let’s look at a few statistics regarding Kansas and Colorado business taxation.

In the 2016 State Business Tax Climate Index from the Tax Foundation, Colorado ranked 18 overall, while Kansas ranked 22.2 According to this measure, Colorado has a better tax environment for business, even after Kansas tax reform.

Data from the U.S. Census Bureau for 2014 shows that Colorado collects $2,195 in taxes from each of its citizens. Kansas collects $2,526.3 That’s after the Kansas tax cuts took effect. Kansas would have to cut taxes much more before it reaches the low level of taxation in Colorado.

The takeaway: Even after Kansas tax reform, Colorado has lower taxes.

Another commenter stated “People want to live and businesses want to be located … where education is important and supported.” The writer didn’t elaborate, but generally when people say “support” education, they mean “spend” a lot on public schools. Another commenter wrote “Public schools are treated as an afterthought by our Governor and Legislature.” So let’s look at spending.

Colorado and Kansas schools, according to NEA. Click for larger.
Colorado and Kansas schools, according to NEA. Click for larger.
Regarding school spending, the National Education Association collects statistics from a variety of sources and uses some of its own transformations.4 A collection of statistics from that source is nearby. Note that Colorado teacher salaries are higher, while revenue per pupil is lower. Colorado spends more per student when considering current expenditures. Colorado has a higher student-teacher ratio than Kansas.

Colorado and Kansas NAEP scores by ethnicity. Click for larger.
Colorado and Kansas NAEP scores by ethnicity. Click for larger.
The U.S. Census Bureau has different figures on spending. In a table titled “Per Pupil Amounts for Current Spending of Public Elementary-Secondary School Systems by State: Fiscal Year 2013” we see Colorado spending $8,647, and Kansas $9,828.5 This tabulation has Kansas spending 13.7 percent more than Colorado.

Looking at scores on the National Assessment of Educational Progress (NAEP) — a test that is the same in all states — we see that when considering all students, Kansas and Colorado scores are very close, when measuring the percent of students scoring proficient or better. White students in Colorado, however, generally score higher than in Kansas.

Colorado and Kansas NAEP scores by free/reduced lunch eligibility. Click for larger.
Colorado and Kansas NAEP scores by free/reduced lunch eligibility. Click for larger.
For NAEP scores by eligibility for free or reduced lunches, we see that Kansas and Colorado are similar, except that Colorado has made progress with eligible students in math, catching up with Kansas. (Eligible students are students from low-income households.)

For what it’s worth, in Colorado 10.4 percent of students who attend public schools attend public charter schools. In Kansas the figure is 0.6 percent, due to Kansas law being specifically designed to limit charter school formation and survival.6

A writer expressed this in his comment: “Colorado also presents a more stable political environment as well.” While this is something that probably can’t be quantified, a recent New York Times article disagrees, quoting a former governor:7

“Colorado is subjected to extremes,” said Roy Romer, a former governor. “It’s not just blue and red. It’s also urban and rural. We have a history to this.”

Of note, Colorado has initiative and referendum. Citizens may, by petition, propose new laws and veto laws the legislature passed.8 Kansas does not have initiative and referendum at the state level. This is one way that Kansas has a more stable political environment than Colorado: Citizens have less political power in Kansas. For example, the law that made marijuana legal in Colorado was passed through citizen initiative. I think it’s safe to say that it will be a long time — if ever — before Kansas has medical marijuana, much less full legalization.

Further, Colorado has TABOR, or Taxpayer Bill of Rights. This is a measure designed to limit the growth of taxation and spending. Whether one likes the idea or not, it has had a tumultuous history in Colorado, according to a Colorado progressive public policy institute.9 And if you thought Kansas was the only state that — purportedly — underfunds education, welcome to Colorado. The same report holds: “As 2016 approached, the [Colorado] General Fund remained nearly $900 million short of what it needed to fully fund K-12 education and well below what it needed to restore postsecondary education and other programs to historic levels.” This is in line with the amount Kansas school spending advocates say Kansas needs to spend, adjusted for population.

Colorado also has term limits on its state legislature and elected members of the state executive department (governor, lieutenant governor, secretary of state, attorney general, and treasurer.)10 Kansas has term limits on its governor, but on no other offices. This argues in favor of Colorado having a more dynamic and less stable government.


Notes

  1. Carrie Rengers. Viega to move corporate headquarters and 113 jobs to Denver. Wichita Eagle, March 18, 2016. Available at: http://www.kansas.com/news/business/biz-columns-blogs/carrie-rengers/article66851717.html.
  2. 2016 State Business Tax Climate Index. (2016). Tax Foundation. Available at: http://taxfoundation.org/article/2016-state-business-tax-climate-index.
  3. State Government Tax Collections – Business & Industry. US Census Bureau. Available at: http://www.census.gov/govs/statetax/.
  4. Rankings of the States 2014 and Estimates of School Statistics 2015, National Education Association Research, March 2015. Available at http://www.nea.org/assets/docs/NEA_Rankings_And_Estimates-2015-03-11a.pdf.
  5. U.S. Census Bureau. (2016). Public Elementary–Secondary Education Finance Data. Census.gov. Available at: https://www.census.gov/govs/school/.
  6. National Center for Education Statistics. Public elementary and secondary charter schools and enrollment, by state: Selected years, 1999-2000 through 2012-13. Available at http://nces.ed.gov/programs/digest/d14/tables/dt14_216.90.asp.
  7. Healy, J. (2014). Tracing the Line in Colorado, a State Split Left and Right. Nytimes.com. Available at: http://www.nytimes.com/2014/10/24/us/politics/in-colorado-ever-in-transition-a-fight-for-power.html.
  8. Laws governing the initiative process in Colorado – Ballotpedia. (2016). Ballotpedia.org. Available at: https://ballotpedia.org/Laws_governing_the_initiative_process_in_Colorado.
  9. Bell Policy Center. The road to 2016: More than three decades of constitutional amendments, legislative acts and economic ups and downs. Available at http://www.bellpolicy.org/research/road-2016.
  10. Term Limits in Colorado, Colorado.gov. Available at https://www.colorado.gov/pacific/sites/default/files/Term%20Limits%20in%20Colorado.pdf.

Legislator’s guide to delivering better service at a better price

Service bell

From Kansas Policy Institute, March 2013:

How can Kansas get to the point of lowering spending, lowering taxes, and allowing for more job creation? It is not an easy process, but “A Legislator’s Guide to Delivering Better Service at a Better Price” offers an outline. This road map from KPI was recently released and will be updated as new analysis is added and ideas are refined.

A few of the ideas from the guide:

  • Use the $2.5 billion held in cash reserves by state agencies to manage the process of lowering spending (Page 3).
  • Review discretionary spending. For instance, State agencies spent $5.8 million on Advertising in 2012 (Page 6).
  • Set up a privatization panel to deliver higher quality service at lower prices (Page 7).
  • Utilize priority-based budgeting that requires each agency to prioritize every program or service from most to least effective. Those on the bottom of the list can be considered for possible elimination and/or being scaled back (Page 7).

The report is at A Legislator’s Guide to Delivering Better Service at a Better Price: How to reduce government spending and create a better taxpayer experience.

Recommended reading: Foundations of a Free Society

institute-economic-affairs-logo

Described as “An introduction to the core principles that define a free society,” I highly recommend this short book. It’s written by Eamonn Butler and published by Institute of Economic Affairs, a British think tank whose mission is to “improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems.” (Being written in British English, a few words are spelled wrongly now and then.)

The book may be purchased or downloaded at no charge at Foundations of a Free Society. Here is the summary of the book, as provided by the author:

  • Freedom creates prosperity. It unleashes human talent, invention and innovation, creating wealth where none existed before. Societies that have embraced freedom have made themselves rich. Those that have not have remained poor.
  • People in a free society do not become rich by exploiting others, as the elites of less-free countries do. They cannot become rich by making others poorer. They become rich only by providing others with what they want and making other people’s lives better.
  • The chief beneficiaries of the economic dynamism of free societies are the poor. Free societies are economically more equal than non-free societies. The poor in the most-free societies enjoy luxuries that were undreamed of just a few years ago, luxuries available only to the ruling elites of non- free countries.
  • International trade gives entrepreneurs new market opportunities and has helped lift more than a billion people out of abject poverty in the last twenty years. Freedom is truly one of the most benign and productive forces in human history.
  • Attempts by governments to equalise wealth or income are counter-productive. They destroy the incentives for hard work and enterprise and discourage people from building up the capital that boosts the productivity of the whole society.
  • A free society is a spontaneous society. It builds up from the actions of individuals, following the rules that promote peaceful cooperation. It is not imposed from above by political authorities.
  • Government has a very limited role in a free society. It exists to prevent harm being done to its citizens by maintaining and enforcing justice. It does not try to impose material equality and it does not prohibit activities just because some people consider them disagreeable or offensive. Leaders cannot plunder citizens for their own benefit, grant favours to their friends, or use their power against their enemies.
  • The government of a free society is constrained by the rule of law. Its laws apply to everyone equally. There must be?due process of law in all cases, with fair trials and no lengthy detention without trial. People accused of offences must be treated as innocent until proved guilty, and individuals must not be harassed by being prosecuted several times for the same offence.
  • Tolerating other people’s ideas and lifestyles benefits society. Truth is not always obvious; it emerges in the battle of ideas. We cannot trust censors to suppress only wrong ideas. They may mistakenly suppress ideas and ways of acting that would greatly benefit society in the future.
  • Communications technology is making it more difficult for authoritarian governments to hide their actions from the rest of the world. As a result, more and more countries are opening up to trade and tourism, and new ideas are spreading. More people see the benefits of economic and social freedom, and are demanding them.

Kansas conservatives call for repeal of death penalty

From Kansas Coalition Against the Death Penalty in March 2015.

Kansas Conservatives Call for Repeal of Death Penalty

TOPEKA, Kan. — Today at the Capitol, Representative Bill Sutton, R–Gardner, joined a group of conservative leaders calling for support of HB 2129. This bill would replace the death penalty in Kansas with life in prison without the possibility of parole.

Their case is straightforward: the death penalty is at odds with core conservative values — a commitment to fiscal responsibility, limited government, and valuing life.

 Ron Keine, Anthony Brown, Laura Peredo, Rep. Bill Sutton, Jill Craven, Ray Krone
Ron Keine, Anthony Brown, Laura Peredo, Rep. Bill Sutton, Jill Craven, Ray Krone
“There are millions of dollars spent on trials and appeals and we have nothing to show for it,” said Sutton. “There is absolutely zero utility for the tax dollars spent.” Earlier this year, Rep. Sutton detailed the high cost of Kansas’ death penalty in an op-ed appearing in Watchdog.org.

“More Kansas conservatives like myself are recognizing that the death penalty is unnecessary and in many ways harmful to the state,” said former Republican State Representative Anthony Brown. “Because of this growing conservative support, red states like Kansas are considering ending the death penalty.”

In addition to Kansas, Nebraska is also considering legislation to repeal the death penalty. A bill repealing the death penalty and replacing it with life without parole passed the Nebraska Judiciary Committee unanimously earlier this month.

Two individuals wrongfully sentenced to death and later found innocent, Ray Krone and Ron Keine of Witness to Innocence, also spoke at today’s event. Keine, who has been active in Republican politics since his release, does not trust government with the power to execute. “The government almost killed me and dozens of other innocent individuals across the country who were wrongfully sentenced to death. Kansas has an opportunity this year to ensure that the state never runs that risk.”

Krone said, “If it can happen to me, it can happen to anybody.” Krone was the 100th person in America to have faced the death penalty and to be later proven innocent. Since 1973, 150 people have been wrongfully sentenced to death and later exonerated.

Young conservatives also call for repealing the death penalty. Laura Peredo, president of Ravens Respect Life at Benedictine College, explained her rationale for opposing the death penalty: “No crime can change the fundamental truth that every human life possesses dignity from the moment of conception until natural death. I am one of a growing number of young people who support repealing the death penalty — a reform that demonstrates our unwavering commitment to safeguarding life at all stages, without exceptions.”

Jill Craven, Secretary of the Fourth District of the Kansas Republican Party, said it’s time that Republicans take a stand on the death penalty consistent with party values. “I challenge conservatives to take a fresh look at all the details surrounding this issue — moral implications and fiscal impact — and again stand boldly for what is right,” said Craven.

The call for repeal is stated in an open letter signed by Craven, Sutton, Brown and other prominent conservatives from across Kansas. Speakers are hopeful that the growing conservative support in Kansas for repeal of the death penalty will lead to a hearing and a vote on HB 2129, which currently is in the House Appropriations Committee.

More information about the death penalty can be found online at ksabolition.org and conservativesconcerned.org.

Special interests struggle to keep special tax treatment

Detail of stairway in Kansas Capitol.
Detail of stairway in Kansas Capitol.
When a legislature is willing to grant special tax treatment, it sets up a battle to keep — or obtain — that status. Once a special class acquires preferential treatment, others will seek it too. From March 2014.

When preferential tax treatment is granted, that is, when government says someone doesn’t have to pay taxes, it’s usually the case that someone else has to pay. That’s because governmental bodies usually don’t reduce their spending in response to the tax breaks they give. Spending stays the same (or rises), but someone isn’t paying their share. Therefore, others have to make up the missing tax revenue.

In Kansas, SB 72 has been passed by the Senate and may be considered by the House of Representatives. This bill would, according to its supplemental note “provide a property or ad valorem tax exemption on all property owned and operated by a health club.” In effect, this bill would give all health clubs the same property tax exemption that the YMCA enjoys on its fitness centers.

When the legislature uses tax law to achieve goals, the statute book becomes complicated as illustrated by the many special sales tax exemptions in Kansas. K.S.A. 79-3606 details the special sales tax exemptions that the legislature has granted. In order to list them all, the statute has sections labeled from (a) through (z), then from (aa) through (zz), then from (aaa) through (zzz), and finally from (aaaa) through (gggg).

Some of these sections are needed and valuable, such as the section that exempts manufacturers from paying sales tax on component parts and ingredients used to build final products. It is supposed to be a retail sales tax, after all.

But then there are sections like this: “(vv) (18) the Ottawa Suzuki Strings, Inc., for the purpose of providing students and families with education and resources necessary to enable each child to develop fine character and musical ability to the fullest potential.”

I have no doubt that this organization is engaged in useful work and that there should be more of this. But what about all the other organizations engaged in similar activities, and which are undoubtedly as deserving of the same tax break? Should they be penalized because they did not have the temerity to ask?

In the area of property taxation, we find many similar circumstances, where two businesses that seem to be similarly situated are treated very differently by the tax collector.

For example, Wesley Medical Center, one of Wichita’s principal hospitals, is Wichita’s second-largest property taxpayer, with taxable assessed value representing 0.90 percent of the total of such property in Wichita.

One hospital has many millions in property, but is not taxed on that property.
One hospital has many millions in property, but is not taxed on that property.

But another large Wichita Hospital, Via Christi Hospital on St. Francis, has assets valued at over $115 million, yet pays no property tax. For the mill levy rate that applies to its address, this represents about $3.5 million in property tax savings. (It did pay a Sedgwick County Solid Waste User Fee of $8.91.)

How can we meaningfully distinguish between Wesley and St. Francis Hospitals? Does one provide more charity care than the other? Does the non-profit hospital charge lower rates? (I’d be surprised if so.) Does St. Francis impose less of a burden on city and county resources such as fire and police protection than does Wesley? Since Wesley attempts to earn a profit and St. Francis purportedly does not, does that make Wesley evil and St. Francis saintly? Why do we exempt St. Francis from millions of property tax, yet insist it pay $8.91 in solid waste user fees?

A scene from a non-profit retirement living center.
A scene from a non-profit retirement living center.

We find other examples: A luxury retirement community (Larksfield Place) with real property valued at $27,491,440 pays no property tax, except for $5.95 in the solid waste user fee. Less than a mile away, Sedgwick Plaza, a senior living center, has a valuation of $5,067,350 for its real property, and was billed $70,080.51 in property tax, including its solid waste user fee of $972. Despite — or perhaps due to — its non-profit status, Larksfield Place is able to provide its president a salary of over $130,000.

A Goodwill thrift store on West Central in Wichita has real property valued at $696,600, but paid no property taxes except for $5.94 solid waste user fee. On the other side of town, a small thrift store on East Douglas has real property valued at $113,800. It pays $3,437 in property tax, including its solid waste user fee.

These differences in what seem to be properties in similar situations are not justifiable under any theory of taxation, one of which is that similar situations are taxed similarly. The YMCA’s fitness centers are difficult to distinguish from others in Wichita — except for the YMCA’s rarefied tax-exempt status.

The slippery slope

Here’s the danger: Should SB 72 pass and all health clubs start enjoying the same tax privileges as the YMCA, shouldn’t we then expect to see for-profit hospitals like Wesley Medical Center ask to be relieved of their tax burden, using the same logic? If the legislature were to deny that request, how could it possibly explain its reasoning to citizens?

In defense of its tax exempt status, the YMCA says it engages in many charitable activities. I’m sure that’s true, and we’d like to keep those activities. Perhaps the YMCA would consider separating its fitness centers from the rest of its operations. Separate the business-like activities from the charitable. The YMCA can use the “profits” from its fitness centers to finance its charitable activities. To the extent it does that, it will avoid paying state and federal income tax on its profits.

But property taxes are something different from income taxes. The YMCA benefits from all the things the city (and other taxing jurisdictions) provide, ranging from public safety to schools to security for the mayor’s trip to Ghana. When it doesn’t pay its share, others have to pay. That means that others — you and me, for example — have less money available for the charitable (and other) activities they feel important. Even worse, I am forced to subsidize the charitable activities that the YMCA (or the Methodist Church, Boy Scouts, Girl Scouts, etc.) chooses to fund. This is especially true in Kansas, where low-income households pay a regressive sales tax on food.

When the YMCA — or any non-profit, for that matter — escapes taxation that other similar organizations must pay, it means that we all subsidize the charitable activities of these non-profits. It sustains a system in which special interest groups lobby to keep their advantages, and those who are not similarly blessed spend lavishly on campaign contributions and other lobbyists. Even when the organization is widely respected, as is the YMCA, this is wrong. It leads to cynicism as citizens realize that our laws are not applied uniformly, and that special interests feel they can buy their way to special treatment.

For their business-like activities, the YMCA, Larksfield Place, and Goodwill thrift stores should pay property taxes so they shoulder the same burden that the rest of us struggle under. That will spread the cost of government fairly, and let ordinary people themselves decide how to contribute their after-tax dollars.

In Wichita, citizens want more transparency in city government

From February 2014.

Wichita city hallIn a videographed meeting that is part of a comprehensive planning process, Wichitans openly question the process, repeatedly asking for an end to cronyism and secrecy at city hall.

As part of the Wichita-Sedgwick County Comprehensive Plan, the City of Wichita held a number of focus groups meetings. Their purpose, according to city documents, was to provide “information on the components of the Plan and provide input on a draft survey.”

(Some indication of the reverence given to the plan to city planners may be inferred by the city’s use of capitalization when referring to it.)

The community meetings were structured in a way reminiscent of the Delphi method, described in Wikipedia as “a structured communication technique, originally developed as a systematic, interactive forecasting method which relies on a panel of experts.” Others have a more skeptical view, believing that the Delphi technique leads citizens to believe they have participated in community democratic decision-making when in reality, that is not the goal of the process.

In October Americans for Prosperity-Kansas invited the city to hold a focus group meeting. Video from the meeting is below, or click here to view at YouTube.

Dave Barber, who is Advanced Plans Manager at Wichita-Sedgwick County Metropolitan Area Planning Department, facilitated the meeting. Susan Estes of AFP was the meeting organizer and host. Mike Shatz is the videographer. His description of the meeting is “The City of Wichita is holding a series of meetings to gain input from the public on future spending plans. The meetings are based off a survey the city conducted, which, by all accounts, was full of loaded questions geared towards promoting the programs that city officials want to see. In this meeting, one of the first in the series, citizens openly question the process and repeatedly ask for an end to cronyism and secrecy at city hall.”