Believe it or not, Wichita voters are being told they will pay lower taxes overall if they vote for a new 1% sales tax. Yes, you read that correctly; the message is ‘Pay more taxes so you can pay less tax.’
That’s the essence of the pitch the City of Wichita is making to encourage residents to approve a new 1% sales tax. Over five years, the tax is estimated to generate $850 million, with $150 million purportedly earmarked for property tax relief, and the rest for public safety, infrastructure, and a few other services.
The table below is from a website run by Michael Austin on the Watch Wichita Win page for a resident with a $250,000 home. The direct city tax savings line of $113 annually is for a theoretical property tax reduction. It’s theoretical because it will never happen. We’ve seen this movie before.
The Legislature used to give cities and counties money for property tax relief. Over the last five years that the program was funded (1999 to 2003), the average county property tax increase was 7.6%; now, more than 20 years after the program was last funded, the average is 3.8%.
Also, the ballot language doesn’t specify how property tax relief would be accomplished. Wichita Forward, a 501(c)4, told City Council members that the city property tax mill levy could be reduced by 4 mills by dedicating $150 million of the $850 million total that the new sales tax is expected to generate over five years. The ballot merely says, “An amount not to exceed $150 million dollars of such tax applied for Property Tax Relief.” That means the City could allocate $10 million…or even $10 and satisfy the legal requirements of the ballot language. Nothing in the ballot language says new sales tax money cannot be spent on anything other than the projects listed.
There’s also no stipulation preventing taxes from increasing. For example, the Wichita mill levy today is about 32 mills (equivalent to $1 in tax for every $1,000 of assessed value). Next year, the City Council could vote to cut 1 mill related to the sales tax revenue but then add two mills to meet next year’s budget.
Tax increase sleight of hand
The other big (alleged) savings of $479 is for “avoided future tax and fee increases,” described in Austin’s methodology as “$700 million as funded obligations that would otherwise place upward pressure on City revenues across typical revenue sources.”
Sometimes economists get stuck talking their own language. So we asked Austin if that means he is assuming the Wichita City Council would spend that $700 regardless of whether there is a new sales tax.
“Correct. It’s an opportunity cost to financing with the 1% sales tax. Before I made this assumption, I asked city staff and Council members about the $700M. The consensus was that about $350M was an expenditure not financed with ongoing spending that will need to (be) financed, while another $350 would be an expenditure they thought the city would have to make at some point in the 7-year time frame.”
I like Michael Austin. He once worked for us, and he’s a smart guy, but he shouldn’t have counted the City’s unfounded ‘we’re going to raise your taxes and fees if you don’t approve the sales’ as a savings.
The city’s response seems like a ransom note to taxpayers, saying, “Give us what we want, or we will raise your taxes even more.” It’s also an admission that Wichita officials are planning to spend $700 million on those projects regardless of whether the sales tax passes.
No appetite for efficiency reviews
Last year, Austin worked with some Wichita residents to propose a package of spending reductions to make the city more efficient. So why couldn’t the city adjust spending to accommodate the $700 million in new spending?
Austin explains:
“I spoke to the city about spending, specifically about the WOGE proposals I and my team had. No one on the city council felt like there were the votes to do anything more than the consolidation of services we proposed.”
So instead of rolling up their sleeves to find efficiencies (and maybe asking taxpayers whether they want to increase spending by $700 million on those projects), it appears that City Council and staff prefer to push for a tax increase and threaten residents with even larger increases if they don’t go along. It’s Vito Corleone’s offer that cannot be refused.
Higher sales taxes is the only guarantee
The intentions of all involved may be good, but rushing the vote just before Christmas to put the sales tax on the ballot in a low-turnout March election at least gives the impression that there is something to hide.
For example, does Wichita Forward’s underlying math account for the shift in economic behavior? Local businesses express fear that some residents may shop outside the city to avoid the higher sales tax, which most certainly will happen to some extent and that opportunity cost should be taken into account.
Whether the new 1% tax will apply to food is another unanswered question.
The property tax and other savings are wishful thinking at best, but one thing is certain: Wichitans will pay higher sales tax if the proposal goes through.
