Why should raising taxes on farm land surprise anyone?

by Jack Wempe

Alarm is being expressed in agriculture circles concerning a couple of tax proposals being considered in Topeka. They would dramatically increase the property tax on farm land and the sales tax on farm machinery.

But a question seems in order: Why is anyone surprised? Tax policy in Kan?sas for four years has been designed to shift budget support from income to property and sales. Those who have promoted this shift have been supported by those now concerned about the result. And no one has misled anyone. What is happening is exactly what was promised.

Many warnings about this result have been delivered in this column and by numerous other commentators. The response has been to attempt to discredit those delivering the warnings. And, of course, to sugarcoat the message by offering the tempting notion that budget shortfalls would be made up by reducing waste and stimulating the economy. Getting something for nothing appeals to everyone.

Rural decimation

The problem is that those who are belatedly discovering the reality of tax policy are exactly right. Doing what is suggested would decimate rural Kansas. It would cripple farm investment even worse than commercial investment on rural Main Street has been crippled.

And those who have enjoyed the relief from paying state income tax will have to deal with a much more onerous tax situation, one that bears little relationship to income or ability to pay. One would think the more thoughtful heads would prevail in Topeka, but, to date, denial is ascendant. And the underlying policy was endorsed at the polls last fall. Elections do have results.

Three-legged stool

Over nearly 30 years, since the amendments in 1986, the state of Kansas, on a truly bipartisan basis, carefully constructed a balanced system of state and local taxation. The so-called three-legged stool of tax support was carefully crafted and was confirmed by many legislatures and study groups over the years.

The final piece in the policy construction was the 1992 school finance bill which shifted significant support from property to income and sales. Fine-tuning has occurred since.

For a few years the third-third-third policy objective relating to the source of state income was almost realized. And those who carefully followed tax burden statistics, including both state and local taxes, were gratified to see the total remain at the mid-point of the 50 states even though there had been a subtle shift from local to state.

But along came the so-called conservative revolution with the blunderbuss approach to tax legislation. It included the rejection of analysis by those who had long considered the nuance of tax policy and who had contributed to its application in Kansas.

Although mostly rejected by experience, appealing theories by a group of imported ?experts? peddled the notion that major reductions in taxes would pay for themselves. It remains unknown as to whether they really believed their own rhetoric or were simply attempting to shift tax liability from a progressive tax to a regressive tax. That, of course, helps the well-off and hurts those of less means.

All this, obviously, is in the past. The situation is what it is and the genie is out of the bottle. The 191,000 business entities excused from paying income tax have grown to 333,000. The rush to reconstitute business organization to take advantage of the policy was highly predictable, although it has been portrayed as ?new? business formation.

Outside influences

Special interest groups have played a huge role in creating the current conundrum. Several are no doubt delighted with the current state of affairs. The Kansas Chamber of Commerce, Kansans for Life and the NRA seem to be well pleased.

But those involved with agriculture, as we are seeing, are extremely concerned. And rightly so. Election support for those who have created the problem is having its very predictable result. Those proverbial chickens are returning to the roost.

Uncertain ending

How this ends is beyond anyone?s capacity to predict. What is worrisome is that a tipping point may be reached that deters people from moving to Kansas and encourages current residents to move away.

The national press concerning the Kansas situation is almost uniformly negative and out-migration is already occurring. We are now the poster child for how not to conduct state tax policy, and blaming it all on the damned liberals has lost its punch.

But last fall?s election guaranteed that the thinking which has created the debacle will now be relied upon to deal with the result. Moderate Republicans and Democrats are out of the loop even though at some point in the future they will be required to pick up the pieces.

An agricultural state will surely not act in a way to significantly harm our agriculture sector. Surely we can assume the current proposals will not survive, at least in their current devastating form. But it is difficult to see how continuing pressure will not continue on both sales and property tax.

Tax shifting

As one would predict, tax reducing has become tax shifting. Long-supported programs are suffering and our state is in trouble. The free lunch has disappeared and buyer?s remorse is surfacing.

It does become a bit personal. I am a Kansan to the core, with roots deep in the 19th century. It is difficult to watch the greatness of Kansas affected negatively. But we?ve survived other bruising crises from depression to drought to those pesky grasshoppers.

This crisis, however, seems different. This one is self-inflicted.

Jack Wempe grew up in the Hutchinson area and is a former educator, state legislator and member of the Kansas Board of Regents now living in Lyons. Email: jwempe1@cox.net.

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