Opponents of tax reform have tried to claim that oil and gas severance taxes in Texas make up for their lack on income tax, but that clearly isn’t true. Texas only has a $94 per-capita advantage over Kansas on severance taxes. Texas’ real advantage is that it simply doesn’t spend as much as Kansas.
Our dynamic analysis of Kansas’ 2012 tax reform showed that only a one-time reduction of $186 in General Fund per-capita spending was needed to balance the budget. Kansas could do that and still be the high-spender in the region. Instead, many legislators and the administration are trying to make up most of the budget gap by raising the sales tax and other revenue increases.
The argument is that consumption taxes are less damaging to the economy than income taxes. That’s true, but using a sales tax increase to avoid dealing with the real problem of excess spending is foisting an unnecessary tax on citizens that will damage the economy.
The House and Senate budget proposals do have some small spending reductions, and it is certainly a daunting task for legislators to lead real spending reform; they have to face unending requests for more spending and an entrenched bureaucracy that often makes it difficult for reform-minded legislators to get the information they need. And the prospect of re-election is ever-present for most.
But even this late in the session, solutions exist that would avoid a sales tax increase without arbitrary spending reductions. Our Legislator’s Guide to Delivering Better Service at a Better Price (published in February) shows how to use existing cash balances to close the budget gap and ‘buy time’ to implement thoughtful spending reforms.
Even if the current budget is balanced with a tax increase this year (which, at this writing, seems likely), the spending problem isn’t going away. There are some small spending reductions in the current plans but every plan allows overall spending to continue to increase…while further reducing income taxes in future years. Simply put, the problem only gets worse the longer it is ignored.