Rising Taxes And Tax Giveaways In Kansas City

In two weeks, Kansas City voters will consider a proposal which would eliminate the city’s land tax and replace it with a sales tax, an issue which Show-Me’s David Stokes and Joe Haslag wrote about last week. Beyond the policy points that Stokes and Haslag raise, this land tax/sales tax swap, as presented to voters, would result in a net tax increase for Kansas Citians. Unfortunately, some supporters of the change have been less than transparent in explaining that aspect of the measure.

Tax hikes are troubling under most circumstances anyway, but they are particularly troubling in the context of development cultures where tax incentives are running amok. As the Kansas City Star‘s Dave Helling astutely notes today, the proposed tax hike would not only apply to both struggling and prosperous Kansas City neighborhoods, but the tax revenue would not be wholly plowed back into improving public services. Rather, millions would go to supporting city Tax Increment Financing (TIF) projects that, in many instances, probably should not have received TIF anyway.

“The first TIF proposal that reaches my desk had darn well better be from the east side,” [former Kansas City Mayor Mark Funkhauser] thundered, promising to focus the subsidy on the city’s poorest neighborhoods.

Of course, the first TIF proposal to reach Funkhouser’s desk wasn’t really from the east side. He signed it anyway. […]

Never mind. His idea was sound. [ . . . ]

Boosters of Question 1 promise to eliminate several city levies in exchange for a half-cent sales tax hike. They don’t say it, but passing Question 1 would also unquestionably increase the city’s overall tax burden, by about $24 million a year, money that would come in part from the city’s poorest residents.

That might be a good deal if all that extra $24 million went for better streets or cleaner parks. Alas, about $4 million would go to — you guessed it — reimbursements for TIF projects, possibly including that new hotel near the Plaza.

For those unfamiliar with TIF, it allows incremental increases in taxes from a development to be dedicated to certain costs of that development. Originally intended to help struggling communities attract investment, TIF has grown to be used as a standard tax incentive regardless of the economic status of a development’s surrounding area.

Stokes and other Show-Me scholars have long suggested that TIF is overdue for a reform. This latest tax proposal serves to reaffirm that proposition. Raising taxes is typically a suspect proposition, but raising taxes and transferring some of that money to city projects in tony areas through tax incentives meant to help struggling communities is especially disappointing. Kansas City already has some of the highest tax rates in the Midwest, and along with the ballot proposition that would raise taxes, officials are considering raising taxes further for a vanity trolley car downtown.

Does this sound like a sustainable trajectory? Given the tax hike and transfer, does this even sound like a just trajectory, a trajectory that treats Kansas Citians and their hard-earned money appropriately?