Government & Politics

Wagnon blames tax cuts for state woes

Kansas would not have a budget crisis if the state Legislature had been less generous with tax cuts and exemptions, according to figures presented Friday by Secretary of Revenue Joan Wagnon.

In a keynote speech at a Wichita State University event, Wagnon said her staff calculated that without tax cuts and exemptions passed since 1995 by the Republican-controlled Legislature, the state would have $1 billion more in income this year. That's the same amount as the 2010 budget shortfall.

Overall, tax cuts and exemptions have cost the state $10.9 billion since 1995, said Wagnon, a Democrat.

"That's our rainy day fund, or would have been our rainy day fund; we don't have a rainy day fund and it sure is raining," she said. "It's hard to get that lesson across that you can't keep doing tax cuts and waiting for it to produce more revenue, because at this point, it's producing less revenue."

Wagnon said tax-base erosion is "likely to continue to accelerate" as lawmakers attempt to placate anti-tax constituents and dole out exemptions to special interests.

In an effort to stop or at least slow the trend, Wagnon has prepared a guide she hopes legislators will use to evaluate future tax exemptions.

It contains 21 yes-no questions related to costs and public benefits of exemptions. If any answer is "no," the exemption should be denied, the guide says.

Question No. 1 is whether lawmakers would be willing to reduce something else in the budget to pay for the exemption.

Wagnon also criticized the 2009 Legislature for continuing to phase out estate and franchise taxes and continuing reductions in the severance taxes on oil and gas.

Those reductions, passed in 2005 and 2006, will cost the state about $90 million in 2011 and $100 million in 2012.

"It just seems so obvious to me that in a time of crisis, you don't give away your revenues," Wagnon said.

She said the burden of cuts will fall hard on local government, especially in a recession when people need more public services.

"You're going to find more poor, more elderly, more disabled people on your doorsteps than you've ever had before and you're not going to find any money from us," she said in remarks directed at city and county officials in the audience.

Wagnon said her staff's analysis showed that from 1995 to 2009, the biggest cuts were in property taxes, totaling $602 million a year by fiscal 2009.

Income tax cuts cost the state $298.7 million a year and sales tax exemptions accounted for another $116 million in lost annual revenue, she said.

Wagnon was keynote speaker at Hugo Wall Day, honoring the namesake of WSU's School of Urban and Public Affairs.

The audience was primarily made up of government employees and public-administration professors and students.

Not everyone in the group agreed with Wagnon, including Sedgwick County Commissioner Karl Peterjohn.

Before his election last year, Peterjohn headed the Kansas Taxpayers Network and lobbied the Legislature for tax cuts.

"I've seen similar presentations in the past and I'm not convinced," Peterjohn said. "Certainly there are problems in the tax system, but growth in tax revenue has been a lot faster than the average Kansan's income."

Terry Somers, the mayor of Mount Hope, was more sympathetic to Wagnon's position.

He said his small city had lost significant revenue — especially for roads and streets — when the state had to cut its support to municipalities to balance its budget.

"On the outside looking in, it appears they didn't look far enough forward and count the cost," he said.