As the Kansas Legislature tackles the state budget, Gov. Mark Park-inson’s proposed three-year one-penny increase in the state sales tax will be on the table.
The budget is out of balance by $400 million, or more, depending on the spending levels agreed upon. An added penny on the sales tax would raise about $351 million. That’s not enough to cover all of the projected shortfall, but it is enough to keep funding for the public schools level and make it unnecessary to force still larger reductions in school budgets.
Critics claim raising the sales tax would cost jobs and slow economic recovery. Proponents say spending the additional money on schools, social services and highways would create more jobs than the higher tax would cost.
What are the facts?
Dr. John D. Wong of Wichita State University, a specialist in state and local government revenue forecasting and interim director of its Hugo Wall School of Urban and Public Affairs, was commissioned to answer that question. His report was completed early this month.
Dr. Wong concluded that both arguments are valid. Raising taxes costs jobs.
Spending money on schools, etc., creates jobs. But it isn’t a wash. His detailed examination demonstrates that the sales tax increase would save and create more jobs than it would eliminate. Here are his conclusions, word for word:
“A $350 million reduction in state spending would result in the loss of approximately $420 million in output. This would also result in the loss of 5,177 jobs across the state.
“A one-cent state sales tax increase would generate approximately $350 million in additional revenue, but would result in the loss of approximately $363 million in output. This would result in the loss of 3,231 jobs across the state.
“Thus the combined effect of maintaining $350 million in state spending with a one-cent sales tax increase is maintaining $57 million in total state output, $84 million in total value added, $102 million in labor income and 1,946 jobs.
“There are at least three reasons why a sales tax increase would have a lesser negative impact than state spending reductions. First, a high percentage of government expenditures initially stay within the state’s economy, going either to employees in the form of salaries or to local businesses for the purchase of goods and services. Second, the revenue enhancement scenario spreads the negative effects throughout the state, both geographically and across all residents. Third, a portion of the sales tax revenue will be exported to tourists and other visitors to the state.”
Dr. Wong further ob-served that the impact of the one-penny sales tax increase on any single resident of the state is small, whereas the im-pact of cutting state spending by $350 million — the unavoidable alternative to raising revenues — would severely affect a small number of state residents and businesses: those state em-ployees who lose their jobs and the businesses that sell goods and services to state entities and which suffer severe losses when state purchases stop.
WHAT IS MISSING in Dr. Wong’s technical analysis is the human factor, which, of course, he was not asked to evaluate. How do you measure the cost to Kansas children and their families of having more children in a classroom and, therefore, less teacher time for each student? How much do kids suffer for not having the textbooks they need? What is the cost of trimming back the quality of in-struction in music, art and drama? What is it worth to a community for a school district to have the funds to hire teacher aides?
What is the value to a community and to the state to build and maintain the highways that economic progress re-quires?
Dr. Wong demonstrates that money spent on essential state services directly creates more economic value to Kan-sas than the tax increase required subtracts. But that’s just half of the value question. The other half is what Kansas and its people lose by refusing to pay what it costs to provide a first class education for its children, to build and maintain a superior highway system, to provide full-time courts, to take proper care of all of its disabled and indigent, and so on down the list of what the state does for its residents.
The bottom line is that Kansas can afford to meet its people’s needs. That’s what being civilized — of being a moral society — is all about.
— Emerson Lynn, jr.
