Saturday, April 2, 2011

The Kansas City Earnings Tax: Another Part

This email was sent to Mike Shanin and Scott Parks of KMBZ and part of it was read on the air. It is one of the most fact filled opinions I have seen about the earnings tax situation. It's rather long, but well worth the read:
Hello Mike and Scott. Mike, I don't believe we've ever met in person but you may remember me as an occasional caller back in the day when my schedule permitted. I was "Frank, North of the River" then. I'm writing to share a perspective. Kansas City voters deserve anhonest discussion about the Earnings Tax. Instead, they have been targeted by a sound-bite advertising campaign that demonizes tax opponents while blackmailing voters with claims that draconian cuts will have to be made in police and fire protection, trash pickup and other basic services unless the Earnings Tax is retained. The Earnings Tax proponents' argument rests on the assumption that the cost of today's city-provided services is appropriate and that payment for today's costs must be maintained. That is, there is no waste, no corruption, etc. To say that this is a questionable assumption is an understatement. I benchmark complicated organizations for a living and have for nearly 30 years. Benchmarks are not predictive. They have no moral content. Benchmarks don't claim to suggest how any function or group of functions SHOULD be staffed or how much any function or department SHOULD cost to operate. Their best use is to identify areas that warrant further investigation. Kansas City is unique. ALL cities are unique in terms of population size, demographics, geographic area, revenue sources, history, and services provided. That is why comparisons at the grossest level (the highest level of aggregation) must be evaluated with those factors in mind. Here are some examples. Why does the City of Kansas City Missouri spend from $1,020 to $1,147 more per resident per year than its neighbors to deliver city services? Why does the City of Kansas City have 7,194 employees when Oklahoma City (which has 78,000 more residents) somehow gets by with only 4,327? Comparisons drawn at this level (the highest level of aggregation) are the most vulnerable to the "uniqueness argument" defense. That said, when the variance in observed performance at this gross level rises to the heights observed in Kansas City (1.7 to 2.0 times the peer group average per resident), it is up to The City of Kansas City to provide specific justification. There are always reasons for variance. The question is whether or not there are good reasons for variance. Simply claiming that variances are the result of "uniqueness" is not enough. It is much more difficult to use the uniqueness argument effectively when the comparison drills down to a specific department or service to which people can relate. For example Why does it cost Kansas City $273.45 per resident per year to provide fire department services when comparable costs in Oklahoma City, Tulsa, and Omaha are $140.73, $149. 02, and $155.45 respectively? Why does Kansas City need 1,370 fire department employees to cover 318 square miles and 482,299 residents when Oklahoma City covers 622 square miles and 560,333 residents with just 948 fire department employees? Why does it cost Kansas City $423.74 per resident per year to provide police services when comparable costs in Oklahoma City, Tulsa, and Omaha are $184.77, $199.98, and $234.82, respectively? The primary answer to these questions is straightforward. Government will spend the monies that are made available to it. Kansas City spends as much as it does because it can. The primary beneficiaries of the Earnings Tax have been Johnson and Wyandotte Counties on the Kansas side and Liberty and Blue Springs on the Missouri side. The Earnings Tax encourages waste, inhibits population growth, and kills jobs by discouraging new businesses from locating within the city limits. It is a fact that if the Earnings Tax went away entirely, the City of Kansas City would still have more money to spend on a per resident basis than its similarly-sized neighbors. It is time for the Earnings Tax to go away. Frank

I don't know how the writer found his numbers--probably through the wonder of the internets. By putting it out like this, I am sure that the pro E-tax crowd will have a counterpoint.

Just some more fodder for the brain before April 5th!

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