A few days ago the Star’s Rick Montgomery took an important look at the continuing controversy over the income tax exemption for owners of more than 300,000 small companies in Kansas.
The so-called “LLC exemption” remains the most criticized part of the state’s 2012 tax reform package, and will undoubtedly be the focus of intense repeal efforts when new legislators take their seats next year. Even some small-business owners believe the exemption — which eliminates state income taxes for many of them — is unfair, and costs Kansas needed revenue.
They may or may not be right. Supporters of the exemption still think it will goose the state’s employment, and economy, which was the point in the first place. It hasn’t worked so far.
But the most dispiriting reaction to Rick’s story came from a handful of Kansans who said the small-business owners opposed to the break were free to donate extra money to the state if they thought their taxes were too low.
A similar argument is common whenever tax increases are on the table. It’s depressing, because it misconstrues how government works.
Taxes aren’t donations. And voluntarily giving extra money to the state treasury accomplishes nothing.
Here’s an easy way to see this. Let’s say you and the other workers in your office decide to purchase a new coffee machine. Since no one can afford the cost alone, each employee agrees to throw $10 into a hat for the purchase.
You could contribute $15, of course. But if everyone gives $10, as agreed, your extra $5 is wasted and unnecessary.
On the other hand, the office may want to see if there’s a cheaper coffee machine available, reducing the levy for everyone. Or perhaps you and your colleagues decide to base the contribution on the ability to pay — higher earners pay $15, lower earners pay $7.50.
Perhaps you want coffee drinkers to pay for the machine a cup at a time. All are valid solutions.
But the political mathematics remain the same: if someone gives more than the agreed-upon amount, the cash is wasted. If anyone gives less, the coffee pot remains on the store’s shelf.
The Kansas business owners who think their taxes are too low aren’t anxious to waste their money. They think Kansas should buy things — more teachers, maybe, or better roads.
Those purchases, though, are only possible if everyone contributes at the needed level, not just those unhappy with current state policy. A $500 donation to the state from one Kansas business owner is meaningless. An extra $500 from every business owner means more money for state policy priorities.
Now, we argue bitterly over what to buy with our taxes, and how high those taxes should be, and how fairly the tax burden should be distributed. Those are all valid and important discussions.
In fact, that’s what representative democracy is all about. We elect people to make those choices, and if we don’t like what they decide, we can throw them out of office.
But once our elected officials make their call, we aren’t allowed to decide which taxes we want to pay and which we don’t.
Anything more is unnecessary waste. Anything less is chaos, and no coffee.