My first lesson in tax politics occurred shortly after the 1968 elections. I had just joined the staff of Kansas’ senior U.S. Senator, the late Jim Pearson, and we were having lunch in the Capitol. Tax maestro Russell Long of Louisiana, son of the legendary Huey Long, interrupted us. Long as chair of the Senate’s powerful tax writing committee (Finance) was recruiting Pearson to fill a vacancy on his committee. The conversation went like this:
Long: “Jim, you and I work together real well. [Eugene] McCarthy is going off my committee; thank God, he was nothing but a pain. I’d like you to come on the committee. I can make that happen.”
Pearson expressed reluctance: “Aw Russell, I was thinking about an opening on Foreign Relations.”
An exasperated Long: “Foreign Relations! Jim, all you do on Foreign Relations is make people mad! On Finance, you can make people happy. You can help the folks back home. On Finance, you can help old folks with social security. Doctors and hospitals with Medicare. Poor folks and rich, farmers, small business, big corporations….”
Now, 40 years later, the politics of making people happy has resulted in a national tax code that is a gift bag of special deals and requires an incomprehensible 3,586 pages of fine print. Moreover, the Internal Revenue Service has written another 15,000 pages trying to interpret what Congress intended.
Kansas state lawmakers have not yet matched this mass of tax law but show signs of racing to catch up. Our tax laws have been shot full of holes at an accelerating pace. Kansas tax writers have enacted hundreds of loopholes in the form of exemptions, credits, deducts, abatements, adjustments, and various other devices that give one group or another a gift. University finance experts testified in 2006 that only 24 percent of all Kansas sales are taxed and only 7 percent of all Kansas property is subject to taxation—reminding us of another Long witticism: “Don’t tax you, don’t tax me, tax that fellow behind the tree.”
Kansas Secretary of Revenue Joan Wagnon has brought this tax issue into focus with a simple table that tracks the “don’t-tax-me” gifts granted by state lawmakers over the past 15 years (see KDOR Web site). The table shows that the tax gifts granted over the period add up to an astounding $11 billion, a figure that represents nearly two years of state expenditures at current levels. Furthermore, in the current fiscal year these gifts represent a shocking $1.2 billion, which is three times the state’s current deficit. All in all Kansas policy makers been busy making people happy, except for those folks behind the tree.
Genuine free market advocates argue for a broader tax base with fewer exemptions, resulting in lower tax rates; they do not believe in an omniscient legislature choosing winners and losers when tax gifts are handed out. Every exemption narrows the tax base and thereby increases pressure for higher tax rates. The most fundamental reform of the national income tax was led by none other than President Ronald Reagan in 1986. Exemptions were eliminated, the tax base broadened, and tax rates were cut by nearly one-half.
No legislative leader in Kansas, however, appears up to this challenge. Indeed, those who hold Reagan in highest regard are running in the opposite direction and arguing that past gifts be preserved and even more gifts be granted. The spirit of Democrat Long, rather than Republican Reagan, guides the politics of tax happiness in Kansas.
Kansas lawmakers should embrace a “loophole closing commission” patterned after the base closing commissions at the national level and the hospital closing commissions in Kansas. Let’s eliminate unjustifiable tax loopholes, broaden the tax base, and cut tax rates for the folks behind the tree, that is the overwhelming majority of Kansas taxpayers.
Ed Flentje is a Wichita State University professor and co-author of a new book on Kansas politics
