Over the past year, legislators have painted a picture of Kansas as a booming economy, pointing to subsidized business development and continually high tax revenues – more a sign of over-taxation than prosperity – as indicators of growth. However, the data about Kansas’s economic performance relative to taxation in our 2022 Green Book tells a different story.
According to the Bureau of Labor Statistics, from 1998 to 2021, Kansas’s total private-sector jobs grew by 4.4%, ranking 42nd in the nation for growth. Kansas similarly ranks in the bottom half of states when it comes to wage and GDP growth, and saw nearly 200,000 residents leave through domestic migration since 2000.
At the same time, Kansas shot from being the 21st lowest state for spending per resident in 2019 to 28th in 2020. Whereas last year Kansas was below the 50-state average, this year Kansas’s per capita spending of $4,887 is above the new 50-state average of $4,413. While all states saw increases in this metric as part of the government response to the COVID-19 pandemic in this year’s Green Book, this was still a 15% increase for Kansas. The Sunflower State remains at its previous positions as the second-highest state for state and local government employment and as the third-lowest rate of units of residents per unit of government in the nation.
67 of Kansas’s 105 counties saw county property tax collections more than double despite a decline in populations since 1997. While Truth in Taxation legislation has helped cut property taxes in 21 counties and keep increases below 3% in another 47 counties in 2022, overcoming the two-decade trend is no easy task. Property taxes are also high across the state. When compared with similarly sized rural towns across the country, a city the size of Iola has the highest property tax on commercial properties and the second-highest property tax on industrial properties in the nation.
The relationship between the size of government and economic growth is as true today as we first wrote for the Wall Street Journal in 2012 – States that spend less, tax less…and grow more. Kansas’s high taxes support the big size of state and local government. The consequence of these taxes is that people and businesses choose to move and establish their places of work elsewhere.
The Green Book focuses provides insight on state performance relative to income taxation. Since 2000, the nine states that don’t tax income gained almost the same amount of people as income taxing states have lost through domestic migration. The ten states with the highest tax burdens have lost 9% of their combined population over the same time. No income tax states’ private job numbers increased by 45.3% from 1998 to 2021 whereas income taxing states saw an increase of 18%. Wages and GDP in no income taxes states have both almost tripled since 1998, but the growth in income taxing states is 55 percentage points. As jobs and wages in a state grow, so do the opportunities for everyday people to find high-paying work that can support their families. Long-term growth is the best way states can create the best standards of living for its citizens.
State and local governments have to provide the same basket of goods – infrastructure, public safety, schools, social services, etc. Yet, income taxing states spend 52% more than non-income taxing states. The fact is that states can find ways to provide better products at a better price and not have to tax highly.