KANSAS TAXPAYERS NETWORK
P.O. Box 20050
Wichita, KS 67208
316-684-0082
FAX 316-684-7527
Weekly Editorial Column for the week of: January 9, 1998
ALL TAXES APPROACH 40 PERCENT
By Karl Peterjohn
Which of the following, led the way to causing higher taxes in this country in the last 10 years? First, federal income taxes? Second, individual federal payroll taxes? Or, state and local taxes? In the last twelve years the fastest rate of growth has been in state and local taxes according to a recent Tax Foundation study.
This study reported that state and local taxes, as a percentage of the median family's income, have continued to grow since 1985 and last year were 13 percent of family income. Federal income taxes were about nine percent and individual payroll taxes were over seven percent.
The Tax Foundation study also reported that the total tax burden on both single and double income families rose as a percentage of median income in 1997. For two income families the total tax burden of federal, state, and local taxes was 38.2 percent. Another 1997 study from the Institute for Policy Innovation reported that all federal taxes were still growing faster than citizens' personal income.
So there is a good reason why the federal budget is finally moving towards being balanced in Washington. A good economy combined with "progressive" tax rates have created the surprising news that the next federal budget might be the first in 30 years to be balanced. Of course, this does not mean that the federal deficit will not grow. A balanced federal budget will only be "balanced" in the sense that federal tax receipts will meet or exceed outlays. This includes social security funds which currently exceed payments to retirees by roughly $100 billion. Other federal trust funds which are included in these figures raise this figure to $140 billion.
In theory, these funds are supposed to be sacrosanct and dedicated for retirement, airport, highway or other trust fund spending. In practice, the administration and congress can shuffle this money around like a deck of cards spending it wherever they want. Look out for new federal spending programs and a return to new and increased spending schemes coming out of Washington.
Our state capitol often follows Washington trends and the state's windfall provides a once in a generation opportunity to reduce or eliminate unfair or inequitable Kansas taxes. Citizens are being pinched by automatic increases in property and income taxes that are growing faster than their ability to pay. Yet all the talk of state tax cuts may end up taking second place to increased state spending. It won't be the first time this occurs.
In 1996, after a heated legislative session, Governor Graves succeeded in beating back a conservative GOP proposal to cut the state's property taxes. Graves and his legislative supporters inaccurately claimed that state revenues were not adequate to support a tax cut then. Events proved the governor and his supporters wrong in 1996.
This year brings new opportunities and everyone at the state capitol at least nominally supports some form of tax "relief." Yet the bottom line for Kansas state finance is that there is between $350 million and $400 million in additional or windfall tax revenue which theoretically could be used to cut taxes and returned to Kansans. Or, these taxes can be used for additional state spending.
Liberal critics of state tax cuts have complained that "the out-year costs," in 1999 and beyond would be excessive for the GOP senators plan to cut only $190 million in taxes next year. Sadly, the so called "moderates" and forthright liberals supporting increased state spending never seem willing to apply out-year costs to their spending schemes. Expanding the state's Medicaid welfare program under Kennedy-Kassebaum has tremendous out-year costs.
State and local taxes have driven the growth in taxes nationally. This trend should at least be significantly reduced in Kansas in 1998.
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Karl Peterjohn is Executive Director of the Kansas Taxpayers Network. This year KTN and Peterjohn made Hawver's Capitol Report's "Earthmovers" list of the 100 most influential Kansans on state issues.
Click here to email Karl Peterjohn.