TOPEKA | Where has Kansas’ money gone?

That was the question posed by Kansas Secretary of Revenue Joan Wagnon Wednesday night at a provocative – for state tax policy anyway – meeting at Washburn University.

Wagnon says the state has given too much away in the form of tax breaks and incentives, and urges lawmakers to enact a moratorium on any new sales tax exemptions until the state rights its fiscal ship.

“What happened to the money and where did it go?” Wagnon asked. “We’ve given it away. That’s the short answer.”

Since 1993, the state has given away nearly $10 billion in tax cuts and exemptions; that’s nearly the size of the entire $13 billion budget. 

Wednesday night’s event was sponsored by the Statewide Independent Living Council, a group that advocates for Kansans with disabilities. Shannon Jones, the group’s director, said she fears more and more cuts when lawmakers return in January.

 

“The Kansas state budget cannot sustain any more cuts,” she said. “There just simply is no more meat on the bone to cut.”

 

More cuts are already on the way. Gov. Mark Parkinson will announce $260 million in additional cuts next week to balance the budget. Those reductions come on top of more than $1 billion in cuts over the past year.

 

Wagnon argues the state wouldn’t be in quite the fiscal mess it’s in if lawmakers hadn’t given away so much in tax breaks. She said the state could raise hundreds of millions just by halting some sales tax breaks.

 

“In times of financial crisis, you don’t give away your revenue,” she said.

 

Wagnon was joined by Washburn Law School Professor Bradley Bordon, who said the state’s tax exemptions don’t even make sense. He noted that prescription drugs like Viagra aren’t subject to the sales tax; baby formula and diapers are.

 

“The purchase of the male-enhancement product arguable serves a limited state interest, if any,” he said.

 

By broadening the tax base – by eliminating some tax exemptions for special interests – the state could reduce its tax rate on everyone, he said.

 

If the state eliminated all its sales tax exemptions, he said, the state could cut the sales tax in half and still raise the same amount of money.

 

State lawmakers have, in recent years, eliminated the business machinery and equipment tax, the estate tax and the franchise tax. That’s on top of hundreds of millions in sales tax exemptions given to non-profit groups, religious organizations and various other special interests.

 

Wagnon was a ban on any new sales tax exemptions until lawmakers can review – and likely rescind – many of the existing exemptions.

 

“It’s kind of like locking the barn door after the horse is gone,” she said.

But failing that, she said lawmakers should look at requests for tax breaks just as they do a request for funding. She said giving a group a tax break is no different than giving them a handout.

 

“Ask some hard questions instead of saying oh, they sound like a nice organization,” she said. “Enough is enough; we can’t do any more of these. We need to stop. We’re just simply forcing that property tax higher and higher.”

 

Wagnon was quick to say that some tax breaks can spur job growth and investment in Kansas. But she said lawmakers should closely scrutinize these requests.

 

“There’s a point where you’re giving away more than you can ever hope to recover,” she said.

 

Like Wagnon, Bordon said there’s no real difference between giving a group a tax break and giving it cash from state coffers. The only distinction, he said, is that state funding choices are listed in the budget. Tax breaks aren’t.

 

Out of sight, out of mind, he said.

 

“Tax expenditures allow people to secretly manipulate state finances,” he said. “… When considering budget cuts, it is unfair to focus solely on organizations that receive direct funding from the state.”

 

He used religious groups as an example.

 

“Religious organizations can positively affect the moral character of the state’s population and some provide valuable state services, such as caring for the poor,” he said. “Those functions are also critical to the state’s future. The state cannot, however, subsidize religious organizations at the detriment of its educational institutions. If the state considers cutting funding for education, it should also consider the indirect expenditures going to religious organizations.”

 

Wagnon, who has served as secretary of revenue under two governors and was a lawmaker before that, had a dire forecast for the session to come.

 

“This is probably going to be the most difficult legislative session that we’re going to have to go through in certainly my 25 years in state government,” she said. “I think the task this year is going to be more difficult than ever.”