Expected, saddening news
Published on -11/17/2013, 1:02 PM
The "government is greedy and piggish" crowd was pleased by the October reports of less revenue flowing to the state's coffers. The Kansas Department of Revenue reported year-to-date income tax revenues as of Oct. 31 were $42.5 million less than forecast and nearly $175 million less than the same period last year. For others who value government services -- and know reduced revenue and services mean smaller public payrolls, and shrunken public sector resources -- the news is both expected and saddening.
The revenue news provides evidence of the effectiveness of the majority's political strategy. The spokespersons for the governor, majority legislators and Department of Revenue are taking turns proclaiming Kansans now are receiving just what they wanted -- more money in citizens' pockets and less being "confiscated" by government. The remarkable effect of this exactly as intended outcome appears to be a widespread lack of enthusiasm. As the "ancient Chinese saying" goes: "Be careful what you wish for. You may get it."
Why so little joy? One way to get at an explanation is to consider the intent and result of the cuts the Kansas Legislature has made to the state's taxing capabilities. While all wage-earners in Kansas have enjoyed some reduction in their tax burden, the largest share has gone to businesses, self-employed professionals and successful entrepreneurs.
The reductions are allowing these "job generators" to keep more of their private-sector rewards. The talking points are earnings retained by these economically virtuous persons will lead to new business investments, more hiring, more commerce, and more income and profits with each succeeding cycle.
But, here's the rub. These untaxed earnings are a windfall for many, if not most, of these happy capitalists. Since this reduction in tax adds back to the profits of these individuals and entrepreneurs, it is clear their economic activity already was generating profits, or there would have been no profit to tax. So, the reduction in taxes makes the money available for whatever the entrepreneur chooses.
This untaxed profit for these successful folks provides options. What the recipient does with it is unrestricted by need. If the demand is there, the money might expand the business and new jobs might result. In the absence of additional demand, however, the job generators are more likely to park their money and wait for the sound of feet beating paths to their doors.
Most Kansans have received modest gains from the reductions; however, those gains require reduced public spending. Payrolls, programs and projects of government contribute much more to the private sector than most of us are willing to admit. School teachers and education administrators keep Main Streets alive in rural Kansas. Public agencies employ blue-collar wage-earners and provide services for all of us from pot-hole repair to clean water and working potties.
Even WIC mothers and the disabled spend everything they receive on stuff they need to subsist. In fact, the lower down the socio-economic scale the more necessary and the less optional consumption becomes. A reasonably successful self-employed lawyer receiving $5,000 in state tax relief might hire a new para-legal, but she's more likely to put it in her rainy day fund and wait to see if the trusts and wills business picks up. The public health aide to be laid off next month would have spent every penny of her paycheck for her household. While the lawyer might create a job one day, the public worker has learned hers terminates mid-December, and every penny she made went to feed her family while giving somebody's cash register a little ka-ching.
Mark Peterson teaches political science at the college level in Topeka.