By Lee White
I received some messages this morning from a friend who lives in El Dorado. She and her husband work for a business that requires them to travel to distant states for heavy construction projects. My friend asked why everyone seemed happy that the Kansas Legislature overrode Gov. Sam Brownback’s veto of the tax bill — a bill that is sure to increase income taxes for most Kansans, especially those whose limited liability companies (LLCs) have enjoyed a tax exemption since 2012.
To understand why so many people are happy about a tax increase, I told her, one need only look at the number of folks in El Dorado who depend on government for their livelihood, to wit:
- USD 490 has 350 employees.
- Butler County has 488 employees, according to 2016 data from KansasOpenGov.org.
- Butler Community College, in this annual report, claims its staff and students created 8,558 “job equivalents.” Other sources list the academic staff alone at 1,200. Any way you cut it, BCC is a large employer.
- The City of El Dorado has 140 full-time staff and 200 temporary or seasonal employees.
- The El Dorado Correctional Facility had 446 full-time employees in 2010 (and that probably doesn’t include contractors such as nurses and psychologists).
Then you have others who depend on government indirectly. Consider all those who work in health care. How many of them do you think there would be if Medicare and Medicaid didn’t exist? Just ask the folks in Sumner County, who are at risk of losing their hospital, what the Legislature’s failure to expand Medicaid is about to cost them.
You see, folks, even in a “Red State,” the economy is positively and irrevocably addicted to government cheese. When Gov. Brownback and his supporters in the Legislature slashed and burned taxes and spending, they sent the state’s economy into a tailspin. The sad reality is, the overall economy of Kansas will probably benefit from the tax increases and higher (or at least stable) state spending.
This is not to say that reinstating taxes on LLCs and boosting income taxes won’t hurt some people. It definitely will and some of the hardest hit will be farmers. At least some Kansas farmers organized their businesses as LLCs to take advantage of the tax break, which is soon to be gone. Crop prices are low and President Trump wants to cut farm subsidies. There will likely be even harder times in the agricultural sector and energy is likely to feel the pinch, as well, because oil and gas prices are low. Maybe these folks can get government jobs.
Kansas was just a bit late to the party in restructuring its tax system. The Brownback reforms might have worked had he implemented them three decades ago when the overall Kansas and U.S. private sectors were stronger. They clearly didn’t work this time — or at least voters believed they didn’t and elected or frightened enough legislators in 2016 to force a change.
Those who don’t like the new taxes will vote with their feet. My El Dorado friend and her husband are moving to Texas later this year. Texas has no state income tax. Most Texas corporations are taxed at only one percent. The move is really a no-brainer — keep more of their money, prepare for retirement, and still be close enough to visit the grandkids. It will remain to be seen how many others follow suit and what effect their outmigration will have on Kansas’ already-weakened private sector.