Kansas governor Kathleen Sebelius is acting not as if she were the leader of a conservative state with a history of limited government, but instead as if she were some Hillary Clinton of the prairie, looking to tax and spend at every opportunity.
Although Gov. Sebelius campaigned as a “fiscal conservative,” opposing state tax-hike proposals, the honeymoon for taxpayers was short-lived. Her first wrong move came shortly after taking office in 2003 when she signed legislation for developing a national-sales-tax collection cartel known as the “Streamlined Sales Tax Project.” (The bill also created a new local-use tax on business.) This supposedly “streamlined” law, which took effect in July 2003, is part of an effort to simplify sales-and-use tax collection for businesses in exchange for forcing them to collect online and catalog sales taxes.
The law has resulted in anything but simplicity. In fact it has been an unmitigated disaster for Kansas’s retail businesses, counties, and cities, which will now lose out on revenues brought in by urban and suburban shopping centers.
Several business groups immediately called for and received a six-month moratorium on the implementation of the plan. Upon expiration of the moratorium, Sebelius extended indefinitely a “period of relaxed enforcement” of the provision because so many businesses were struggling to implement the complicated software essential for “destination-based” tax collection.
Yet, even though she has disrupted the Kansas economy with a brand new sales-tax collection scheme and a new use tax, the governor hasn’t had enough. Now she is attempting to raise property, income, and sales taxes.
Sebelius introduced her plan to the state legislature during her 2004 state-of-the-state address. It was a truly Clintonian moment for the governor. She never even mentioned her desire to increase taxes during her address. Instead, her staff distributed details of the tax-hike proposal to legislators while she was speaking. So, rather than coming clean to Kansas voters on live television to tell them that her plan will take more than $1.7 billion out of their pockets over the next five years, she let taxpayers read all about it in the newspapers the next day.
When fully implemented, Sebelius’s tax increase would have a $450 million annual price tag. According to economic modeling data produced by the Flint Hills Center for Public Policy, the tax hikes would cost Kansas more than 3,700 jobs and would reduce its gross state product by more than $200 million, thus reducing investment and income in the state as well.
Although tax increases are always harmful to economic growth, if Kansas had held the line on spending throughout the 1990s and suddenly faced a deficit, Sebelius’s proposal might be less difficult to fathom. But this is not the case. A 2003 study by Raymond Keating of the Small Business Survival Committee found that Kansas ranked 41st among the states in spending restraint between 1992 and 2000. Only nine states did a worse job of restraining the growth of state spending during this period. In fact, per capita state spending in Kansas increased by 54.4 percent while inflation over the same period registered 16.4 percent.
Rather than creating tax-and-spend policies in Kansas that would make Hillary Clinton proud, Gov. Sebelius should urge the legislature to pass a Taxpayer’s Bill of Rights (TABOR) that would place legal limits on spending and the government’s rate of growth. Colorado has the most effective TABOR in the nation; the budgetary restraint it demanded during boom times allowed the state to weather recent tough economic times with much less pain.
Unless Sebelius wants to create a high-tax, slow growth New York on the prairie, she should back a TABOR, stand down from her new tax hikes, and end the silly experiment in destination-based taxation.
– Paul Gessing is director of government affairs for the National Taxpayers Union. Write to him at 108 N. Alfred St., Alexandria, Va. 22314, or visit www.ntu.org.