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Note to self: ‘Kentucky cannot tax, borrow and spend its way to the Promised Land’

May 29, 2013 By 1 Comment

(This article was published in the Lexington Herald-Leader on Monday, May 27, 2013)

By Brian Strow, Ph.D.

Jason Bailey, a member of the Governor’s Tax Reform Commission, argued that Kentucky needs to take “bold revenue action” to fund increased government spending. (Ky. Voices: Tax reform essential to Kentucky’s future, May 4).

Bailey is correct that Kentucky’s fiscal house is not in order. He is also correct that Kentucky’s tax code could stand to be improved with respect to both efficiency and fairness.

Unfortunately, Bailey’s policy prescription of higher taxes and more government spending will only make matters worse for the average Kentuckian.

According to the Federation of Tax Administrators, Kentucky ranked No. 13 in 2011 for tax burden as a percentage of personal income of any state government in the country. Of Kentucky’s neighboring states, only West Virginia ranked higher. Virginia, Tennessee and Missouri all ranked in the bottom 10 states for tax burden as a percentage of personal income.

If state taxes already are at the high end of the national average, why is Bailey suggesting that the state’s problem is a lack of revenue? In 2011, Kentucky ranked No. 9 for state government spending as a percentage of gross state product (GSP). Once again, the only neighboring state to rank higher was West Virginia. Illinois, Indiana, Tennessee and Virginia all ranked among the ten-lowest spending states. [Read more...]

Filed Under: Increase Free Markets, Reduce Government Spending Tagged With: , ,

The federal income tax centennial: No reason to celebrate

April 12, 2013 By Leave a Comment

By D. Eric Schansberg, Ph.D.

Despite establishing a blue ribbon commission, Gov. Beshear’s administration failed to make any progress in reforming Kentucky’s antiquated and burdensome tax code during this year’s General Assembly.

But Kentucky is not the only place where tax reform is needed. It’s badly needed on the federal level, as well.

This year marks the 100th anniversary of the federal income tax, which was implemented as the 16th Amendment to the Constitution in February 1913 during the final days of William Howard Taft’s administration.

It granted Congress “the power to lay and collect taxes on incomes, from whatever sources derived.” It was unprecedented and marked the first change to the U.S. Constitution since 1870.

At its inception, only 15 percent of households paid any income taxes at all, and they were grouped into one of only seven tax brackets; the highest marginal rate was 7 percent for incomes exceeding $500,000 (about $10 million in today’s dollars).

The number of brackets increased dramatically during World War I. Though the threshold to reach the top rates rose to $1 million (about $16 million today), the top marginal tax rate rose dramatically to 77 percent. By the 1920s, marginal tax rates decreased four times – bottoming out at 24 percent – but with a much lower threshold of $100,000.

The Great Depression saw government increase income taxes four times with a rate of 79 percent for the top bracket. [Read more...]

Filed Under: Reduce Government Spending, Smaller Government Tagged With: ,

Louisville Tea Party pushing BIPPS interest areas

April 1, 2013 By Leave a Comment

WFPL reports the Louisville Tea Party is pushing charter schools, a saner busing policy and more fiscal accountability in the school system – all items the Bluegrass Institute has supported for some time. The word about the need is getting out!

Filed Under: Education, News, Transparency and Accountability Tagged With: , , ,

Auditor, Education Commissioner call for school superintendent data to be more transparent to taxpayers

March 14, 2013 By Leave a Comment

 


The Bluegrass Institute has pointed to serious problems with the transparency of information about public school superintendents for several years now with our Rewarding Failure expose.

Our efforts are now being vindicated.

In a press conference today, Kentucky Auditor of Public Accounts Adam Edelen and Kentucky Commissioner of Education Terry Holliday called for greatly increased public access to information about local school superintendents. The auditor and commissioner want every superintendent’s employment contract, total benefits package and annual evaluations to be readily available in a one-stop source at the Kentucky Department of Education’s web site.

Holliday and Edelen also called for better training of local school board members regarding their duties to effectively oversee operations of their superintendent and schools. In the news release for the press conference, Holliday said:

“We’re seeing far too many cases where adults are making choices that are right for them rather than what’s really right for students and their future.”

The immediate impetus for these new public transparency improvements is a recent series of what the auditor has sometimes called “scandalous” audits. These audits found superintendents in several school districts were taking the taxpayer for a ride.

In the worst case uncovered so far, which involves the Dayton Independent School District’s former superintendent, Edelen’s findings are so bad that the case has been referred to the FBI. Edelen actually used the term “fraud” during his absolutely shocking Dayton Schools audit press conference.

As veterans of many open records requests for superintendent evaluations, the Bluegrass Institute is only too familiar with the difficulty the public has encountered in trying to obtain this critical information. We are also well aware of the vacuous and unrevealing reporting that has far too often been the hallmark of those annual superintendent evaluations.

Holliday also said:

“I have always been an advocate for openness and transparency. I welcome the auditor’s recommendations and hope this will result in a greater level of fiscal oversight and responsibility in our school districts. It is the duty of us all to be accountable and good stewards of the taxpayer’s money.”

As Edelen said at the Dayton audit press conference:

“The kids don’t exist to support the bureaucracy. The bureaucracy exists to support them.”

To all of this, we can only say, “Amen!”

Filed Under: Education, News, Transparency and Accountability Tagged With: , , , , , ,

Education Secretary called out over inflated claims about sequestration

March 1, 2013 By Leave a Comment

As Education Week points out, US Secretary of Education Arne Duncan has long been considered an asset for the Obama Administration.

But, Duncan made some incorrect claims recently about the impacts of the pending fiscal sequestration on education around the country, and he is being called out about it – NOT by Republicans, but the not exactly conservative Washington Post!

Writes EdWeek:

“…the Washington Post put Duncan through the fact-check ringer—giving him “Four Pinnochios” for his statements about pink slips already going out to teachers, which is what the education secretary told Politics K-12′s Michele and other reporters last week.”

Four Pinocchios (Spelling lesson for the Post, only one “n” but two “c”s in the name) – Ouch!

Getting Pinocchios from the Washington Post – Quadruple Ouch!

EdWeek continues:

“The Post even compared Duncan’s statements to Susan Rice’s comments on Libya, which ultimately doomed her bid for Secretary of State.” Super Ouch!

Bringing this closer to home, I wonder how many panic-inducing claims about the sequester’s impacts on Kentucky’s schools might also be suffering from the Duncan-Pinocchio effect. I seem to recall a few years back we heard all sorts of claims one spring about all the teachers we were going to lose due to supposed funding short-falls. Came the new school year, and hardly anyone lost a job. Maybe a reader can refresh my memory on that.

For sure, we know some districts could be doing their business a lot more economically. We talked about that in our Bang for the Buck 2012 report.

Flip back to page 18 in that report. Ask yourself how come Harlan Independent – even with a 53 percent free and reduced cost school lunch rate – can educate students at $8,639 a piece and get an ACT Composite Score average of 20.9 while Anderson County, with only a 43 percent lunch rate, spends over $3,440 more per pupil and gets a much lower ACT Composite Score of 18.3?

In any event, it looks like the nation’s head educator got himself caught, right by his growing nose, smack in the center of the sequester tornado. Given the amount of wind constantly being generated in Washington, a Washington “tornado” can be a really dangerous place to be!

Filed Under: Education, News, Transparency and Accountability Tagged With: , , ,

Wayne’s World crashes Kentucky taxpayers’ party

February 21, 2013 By Leave a Comment

Recycling is for old batteries and used motor oil, not failed economic ideas that should have been tossed long ago.

President Obama’s State of the Union speech was filled with such big-government policy retreads that failed to jumpstart sluggish economies in the past, including a recycled attempt to force companies to pay higher wages for low-skilled workers.  

Raising the minimum wage from the current $7.25 to $9 per hour – as Obama proposed – would do nothing to lower unemployment among Kentucky’s teens – more than a fourth of whom currently are unemployed with the jobless rates rising in recent months.

Instead, this recycled policy will only serve to deny teens access to that first bar of employment, and the experience it provides them to go higher.

“If you raise that first bar higher on the economic ladder, you make it harder for young people with fewer skills to grab ahold of that first rung – from which they can swing on up the ladder,” said Western Kentucky University economics professor Brian Strow. “Being able to grab ahold of that lower bar means getting a job where young people can gain valuable job skills and experience to help them climb.”

Other economic retreads that seep into the commonwealth’s political sewers from time to time include tax proposals exploiting the kind of class-warfare mentality all the rage in Washington nowadays.

The stench rose up again recently as Louisville Democratic Rep. Jim Wayne jauntily declared: he wants a “buoyant” tax system.

So what exactly does a “buoyant” tax policy look like?

It apparently means recognizing that, as Wayne scolded, “we have a tremendously unjust system” and need a bold and audacious attack on wealthy, successful Kentuckians.

“The top 5 percent income earners should be paying additional taxes,” Wayne said as he recycled the whole prosperous-Kentuckians-are-not-paying-their-fair-share shtick.

This might be considered “reform” in Wayne’s world, but, in reality, is nothing more than a defective retread that has shown up repeatedly in most of the 12 – yes, 12 – different tax studies ordered by Kentucky politicians since 1982.

This latest effort comes courtesy of the Governor’s Blue Ribbon Commission on Tax Reform, which recently issued the latest round of overplayed tax recommendations.

The nonpartisan Tax Foundation concludes the commission’s proposals would “raise income and excise taxes … and maintain a costly business property tax system with few changes.”

Wayne thinks that’s the right direction. So does his biggest enabler on the commission – Jason Bailey of the Kentucky Center for Economic Policy.

In a recent missive, Bailey cited a report by the Institute on Taxation and Economic Policy out of Washington, D.C. claiming Kentucky’s tax system is “upside down,” that wealthier Kentuckians’ incomes “have grown the most over the past couple of decades” and that “the wealthiest pay far less of their income in taxes.”

But Bailey ignores the report’s data on how much of the commonwealth’s tax burden already is carried by the wealthy.

According to the same report Bailey cites, individuals in the top 1 percent of Kentucky’s income earners already pay 55 times more in taxes than individuals in the bottom 20 percent.

He must have been out picking up aluminum cans the day his Econ 101 class learned that pro-growth policies are based on affordable tax rates.

Even though tax rates already are very high on upper-income Kentuckians, Bailey proposes adding yet another even higher rate. Bailey-and-Wayne’s universe revolves around riding up and down the same weary roads of economic fallacies rather than promoting the hard work, innovation and wise investing needed to swing to the top.

“In their world it’s only about fairness and not about economic growth,” Strow said. “It’s about how the pie is divided, not about growing the pie.”

Jim Waters is president of the Bluegrass Institute, Kentucky’s free-market think tank. Reach him at jwaters@freedomkentucky.com. Read previously published columns at www.freedomkentucky.org/bluegrassbeacon.

Filed Under: Reduce Government Spending, Smaller Government Tagged With: , ,

Moving Kentucky’s minimum dropout age to 18 will cost how much?

February 11, 2013 By Leave a Comment

One of the big question marks in the proposal to increase the minimum dropout age to 18 is how much it will cost to keep those students in school for two more years.

The problem starts with figuring out exactly how many dropouts we are talking about.

Officially, the dropout figure has been running around 6,000 students or so for some time. But, most researchers working with dropout data have little confidence in any state’s dropout reporting. Schools have no real inducement to report this accurately and obviously are happy with the lowest number possible. The fact that the dropouts are gone makes them difficult to impossible to track, which frustrates attempts to audit the situation.

There was an audit on the accuracy of Kentucky’s dropout rate reporting – way back in 2006.

No surprise to anyone doing research in the area, this now rather dated report found the state’s published dropout rates were considerably under-reporting the true situation.

I’d love to be able to use really recent data to do a better estimate of how much the Age 18 bill might cost, but I am finding some issues with the data on enrollment, dropouts, retentions and reported graduations for the Classes of 2010 and 2011. High-accuracy data is promised to us when the Class of 2013 graduates, but that is months away.

So, I am going to go with data I developed in a 2011 paper for the Class of 2009 as a way to get some sort of handle on what this legislation could cost. I wish I could use something more current, but that isn’t reasonable at this time.

If you look at Figure 1 in that 2011 paper, it shows that as the Class of 2009 wended its way through Kentucky’s public high schools, it accumulated a total of 6,272 officially reported dropouts.

However, in order to make the reported data for fall membership (enrollment), dropouts, retentions (students held back in the same grade at the end of the year) and total diplomas and certificates work out, there had to be an additional unreported loss of students summing 5,150 more students.

Now, other calculations found in the report show that some of those unknown 5,150 students were actually accounted for as 787 students who graduated early, in less than four years.

Put this all together, and I estimate we are talking about an extra 10,635 students who probably would have been retained in the school system if an Age 18 bill had been in place for this class.

The latest audited school finance data I have comes from the 2010-2011 Receipts and Expenditures Report (Excel) from the Kentucky Department of Education. That document says per pupil funding from local tax sources was $3,733. The state per pupil funding, which is mostly from SEEK, amounted to $4,442 per pupil. Finally, federal support averaged $1,935 per pupil.

If these kids remain in school, all those funding sources get zapped, not just state SEEK. It’s as if the Kentucky legislature can launch an unfunded mandate on both local school districts AND the US government!

For example, if the local tax dollars don’t track, locals risk a reduction in their SEEK dollars, for example. And, the feds are committed to support students in school, too.

So, let’s put all of this together.

As you can see, the increase in state funding is only part of what will happen to the taxpayer. Overall, taxpayers will have to have to cough up a pretty tidy sum – well over $100 million.

By the way, loading more than 10,000 students back into the system is probably going to burst the seams at some high schools. I don’t have a good handle on how to estimate that, but school facilities are not cheap.

Now, with all of this said, the expenditures would still be a good investment, IF IT WORKED! But, the research we’ve mentioned in a number of earlier blogs indicates this feel-good-for-adult-liberals idea that forces their will on unwilling kids doesn’t work. It just makes those kids more expensive dropouts at age 18 instead of age 16. It might even lead to more violence in school as these entrapped kids will be a lot older, a lot madder, and a lot more capable of causing mayhem.

What we really need to focus on here is how to re-engage these kids to make them want to stay. How can we re-fire their self-confidence and provide real hope they can get back on track. Just turning our schools into some sort of daytime stalag won’t do that. I want to see some imaginative programs that really work before we even think about going to simple coercion that apparently doesn’t function as intended.

Filed Under: Education Tagged With: , , , , ,

Bluegrass Poll shows Kentuckians don’t want higher taxes

February 4, 2013 By Leave a Comment

If you are reading this, you almost undoubtedly don’t want to ship more of your money to Frankfort.

According to a new poll from the Courier-Journal, neither do 69 percent of your fellow Kentuckians.

The problem here is our governor may not be listening. He thinks you need more education on the issue.

For sure, it looks like someone needs more education.

Filed Under: Media, News, Reduce Government Spending Tagged With:

Tax commission: Politicians ‘loathe’ to reduce spending

November 9, 2012 By Leave a Comment

“The only solution is to focus on reducing government spending, but politicians are loathe to do that. They’re reelected because they confiscated some private wealth, declared it to be public money, and then redistributed it to some voting constituents or to some financial contributors to their political campaigns.” –Bruce Layne (comment on Pure Politics tax commission story)

Filed Under: Reduce Government Spending Tagged With: ,

Schools show no mercy on taxes

August 31, 2012 By Leave a Comment

Over the past few weeks, local newspapers around the state have been loaded with stories about Kentucky school districts that are taking the maximum 4 percent increase in taxes allowed by law without having to go to a public referendum.

Sadly, at a time when nearly one in 10 in the state is out of work and the economic recovery is shaky, at best, these increases wear hard on the patience and understanding of many.

The latest to chime in is the Messenger-Inquirer’s editor from Owensboro. This paper’s editorial, “Schools show no mercy on taxes” (subscription), signals growing impatience with many school folks’ blindness to what is happening to the citizens of this state.

The editorial seems particularly irked that the tax increase is being implemented to give teachers a non-mandatory pay raise on top of step pay increases the teachers would get in any event. The editor is quick to point out that those who will have to pay those increased taxes have not seen any raise, step or otherwise, in years. Of course, that’s assuming they are even working.

The Owensboro paper is now calling for elimination of teacher tenure and implementation of a merit pay system to control costs in schools. That’s a great idea, one we’ve liked at the Bluegrass Institute for some time.

To be sure, not every local board of education is insensitive to the stress on its taxpayers, but it is clear that too many Kentucky school boards are turning a deaf ear and blind eye to the plight of their fellow citizens. That insensitivity will not increase support for schools among people who are struggling just to put food on the table, and that insensitivity may not be easily forgotten – or forgiven – by many whose suffering will increase as a consequence of tax raises in a stressed economy.

Filed Under: Education Tagged With: ,
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