Tax Study Released Today

A new study on the ramifications of lowering the state income tax was released today at a statehouse news conference. Bernie Koch, executive director of KEPC, and study author Dr. John Wong presented findings at the statehouse today. The study finds that, for every 1 job created, 1.63 are lost due to study released today finds that a lowering of the income tax would result in a loss of 1.63 jobs due to a reduction in overall state spending. The study was commissioned by the Kansas Economic Progress Council.

The press release is available here, and the ful text of the study is available here.

Dr. Wong’s slide deck is available here.

KEPC UPDATE: Employment problems, anemic revenue, efficiency consultant, revenues incoming, KS Statistical Abstract, odds & ends

In this issue …

  • More problems for Kansas employment
  • Study:  Replacing income tax with sales tax risks more anemic revenue growth
  • Negotiations begin with efficiency consultant
  • Lawmakers holding their breath on revenues
  • Kansas Statistical Abstract has a wealth of information
  • Some odds and ends


More problems for Kansas employment

The Kansas Department of Labor monthly employment report released Friday indicates a steep decline in the state’s labor force over the summer.  There are jobs, but not the people to work in them.

This trend is the opposite of the nation as a whole, where jobs have been growing along with the work force.

Here’s a link to the September jobs report, which looks at the latest data available from August.

Total nonfarm Kansas jobs grew only 0.2 percent between August of 2014 and August of 2015.  That’s an increase of 3,000 jobs.

However, between July and August of 2015, employment dropped 4,000 jobs.  About a thousand of those jobs were in the Wichita MSA.

The report says Kansas seasonally adjusted unemployment rate was 4.6 percent, an increase from 4.3 percent in August of 2014.

A story on the employment numbers in last week’s Wichita Eagle quoted Friends University economist Malcolm Harris as saying the decline in people seeking work is a serious problem.

The report suggests Wichita’s problems are bleeding into the rest of Kansas and calls it a Wichita “jobs recession.”

Here’s a link to the September 18th story which appeared in the Eagle.

Harris says many people have retired, but many lost their jobs and have stayed unemployment for a long period.   He added, “One of the consequences of such a weak recovery is that they are out of the labor force so long that they are no longer employable, which is a tragedy.”


Study:  Replacing income tax with sales tax risks more anemic revenue growth

The Urban Institute, a Washington D.C.- based think tank, has released a new report on long term trends in state finances that warns of problems when state’s replace income taxes with sales taxes.  It’s not the major conclusion of the report, entitled “Governing with Tight Budgets,” but it’s a major element.

Reading the report, one can’t help but conclude that Kansas’ movement toward eliminating the income tax (while relying on sales tax revenue) will inevitably result in more misery going forward.

Here are some direct quotes from the report:

“Sales taxes account for about 30 percent of state tax revenue, about the same as in 1977.  Though general sales taxes were the largest source of state revenue 30 years ago, they are now eclipsed by individual income tax revenue.”

“General sales tax revenue tends to grow more slowly than personal income because households typically save a greater portion of their income as it increases.  Erosion of the sales tax base has exacerbated that lag.”

“A number of economic studies have measured the growth potential of income and sales taxes by estimating how responsive tax revenue is to changes in personal income.  Those studies have generally found that individual income tax revenue is more responsive and sales tax revenue is less responsive.”

“Though income tax revenue generally grows faster than sales tax revenue when the economy is expanding, it also tends to be more volatile.”

“Overall, however, the income tax is a more powerful tax than the sales tax and faces less erosion over time.  The sales tax has become less efficient because of consumer patterns shifting more toward services, eroding the tax base.  Replacing income taxes with sales taxes would risk even more anemic revenue growth.  A better solution to the volatility of the income tax might be to increase rainy-day funds or smooth spending growth during boom periods.”

The study explores the challenges facing states in the post-Recessionary period when revenues are flaccid and expenses are increasing.

You can read the full study here.


Negotiations begin with efficiency consultant

After two days of meetings last week, the Legislative Budget Committee voted to begin negotiations with an international consulting firm over finding efficiencies in state government.  Alvarez & Marsal Public Sector Services has offices in Kansas City, but is also in London, Hong Kong, and Brazil.

The activity is the result of a $3 million provision the 2015 Kansas Legislature put in the budget to hire someone to find ways to save money in state government.

There were four bidders considered.

Alvarez & Marsal worked for the State of Louisiana in 2014.  Reports indicate the firm recommended $500 million in savings, which were controversial.  The Louisiana contract was for a reported $4.2 million.


Lawmakers holding their breath on revenues

At that same Legislative Budget Committee meeting, legislators got an update on the budget and revenues from J.G. Scott, the Assistant Director for Fiscal Affairs in the Kansas Legislative Research Department.

As most are aware, revenues are down compared to estimates.  Scott said corporate income taxes are off almost 60 percent, partially due to some old HPIP (High Performance Incentive Program) tax credits being utilized.

Scott said September will be especially telling because quarterly estimated payments are being made to the state.

He added there is some concern about retail sales revenues and the severance tax estimates (due to low petroleum prices).


Kansas Statistical Abstract has a wealth of information

Want to know how many cattle there are in Haskell County or the number of farms in Kansas?  How about average rainfall over the past 50 years or statistics on crime, employment, energy consumption, and state revenue collections by county?

This and a wealth of additional information about our state is in the Kansas Statistical Abstract for 2014, published online this month by the Institute for Policy and Social Research at the University of Kansas.

Here’s the link that will get you there.

A word to the wise:  Don’t accidently click on print because it’s 585 pages long.


Some odds and ends:

Ethics to meet on elections  – Local government organizations are saying the first interim committee meeting of the Ethics, Elections, and Local Government Committee will be October 6th.  The big issue for the day will be the new legislation that moves local elections.  There will be some consideration of whether a “trailer” bill is needed to fix problems in the legislation.

School finance arguments scheduled- Mark your calendar for November 6th.  That’s the day the Kansas Supreme Court will hear arguments in the big school finance lawsuit.

KEPC UPDATE: Moody’s moves KSU to negative, KEPC predicted tax probs, international interest

In this issue … Few noticed Moody’s move of KSU to “negative” 2012 KEPC study predicted income tax problems International financial interest in Kansas revenue problems   Few noticed Moody’s move of KSU to “negative” Moody’s Investors Service downgraded Kansas State University bonds last April and assigned a negative outlook to what had previously been […]

[Continue reading…]

KEPC UPDATE: Moody’s on structural imbalance, cuts, transfers, Brookings on tax cuts

In this issue … Moody’s weighs in on state’s “structural imbalance” Cuts combined with revenue transfers to balance Kansas budget Brookings on tax cuts   Moody’s weighs in on state’s “structural imbalance” Moody’s Investor Services has given a below-average rating to Kansas pension bonds, saying the outlook for them is stable, but they make note […]

[Continue reading…]


Takeaways from the school finance decision By now, you’ve heard about the 87 page ruling on Kansas school finance by a three-judge panel on Friday.  The court ordered the state to pay about $50 million to local school districts by July 1. Many are still scratching their heads over what this means, particularly considering the […]

[Continue reading…]

KEPC UPDATE: Property tax problem, Kansas economy shaky

In this issue… Lawmakers face property tax problem at Friday session Kansas economy still shaky   Lawmakers face property tax problem at Friday session The tax package of two bills designed to balance the budget (including the sales tax increase) has an error that could have a significant impact on cities and counties and their […]

[Continue reading…]

KEPC UPDATE: Senate passes tax increase bill & budget, House returns on Monday

In this issue… Senate passes tax increase bill Senate passes a budget House returns Monday afternoon   Senate passes tax increase bill The Kansas Senate met Sunday afternoon and passed a sales tax increase and several other revenue enhancements that fill the hole in the state’s budget, at least for the time being. The bill […]

[Continue reading…]

KEPC UPDATE: House rejects tax bill, emergency budget, furloughs

In this issue… House overwhelmingly rejects tax bill Emergency budget waits in the Senate wings State prepares for weekend furloughs of state workers   House overwhelmingly rejects tax bill A compromise tax increase bill was overwhelmingly defeated in the Kansas House of Representatives Thursday by a vote of three to 108. A meeting of negotiators […]

[Continue reading…]

KEPC UPDATE: Legislature works through wknd, tax overview, tax debate Friday, running out of time, labor report, ed clean-up

In this issue… Legislature plans to work through the weekend The tax overview House tax debate scheduled for Friday Is the legislature running out of time? Monthly Kansas Labor Report indicates continued lackluster economy Education clean-up sent to the Governor   Legislature plans to work through the weekend After a week filled with stumbled starts, […]

[Continue reading…]

KEPC UPDATE: Tax debate Wednesday, tax overview, budget agreement, bioscience hearing

In this issue… Senate Cancels tax bill debate until Wednesday The tax overview Budget agreement tentatively reached Senate holds Bioscience Authority hearing   Senate cancels tax bill debate until Wednesday The Kansas Legislature went home Thursday and will return to Topeka Tuesday after a four-day Memorial Day weekend. The Kansas Senate had been scheduled to […]

[Continue reading…]

KEPC UPDATE: Biz tax cuts not working, cmte struggles with tax increas, block grant arguments & appeals, renewable energy, outlook

In this issue … Business tax cuts not working says Rep. Hutton Senate Committee struggles with tax increase Judges hear block grant arguments Block grant appeals Renewable energy compromise passes House The outlook for next week   Business tax cuts not working says Rep. Hutton In what many deemed an extraordinary hearing on HB 2430, […]

[Continue reading…]