Policy Memo

Introduction

The assessment of the nature of tax policies in states leads to the realization of the fact that state governments are more inclined than their local counterparts to rely on taxes that are not property, sales, and personal income taxes. Some of the alternative sources of tax for these states include excises on alcohol, tobacco, beer, gambling as well as the imposition of user fees. It follows that the degree to which states have been relying on some of these aggregate taxes has declined over the years albeit the existing of more and new tax sources. One explanation for the reduction in the reliance on these taxes is the ever-increasing competitive pressures between the states and the federal government. Additionally, it is these competitive pressures that have contributed to the reshaping of corporate taxes, leading to them operating more like consumption taxes instead of the traditional focus on corporation taxes. Further, states have become more committed to enhancing their sets of taxpayers to entail the individuals who exploit the state’s market as well as non-corporate businesses.

Traditionally, Kansas has been boasting of a broad-based state as well as local tax structures that have been in existence since the 1930s whereby there was the adoption of sales, incomes as well as other taxes. Since the 1930s, there has been an increased in the tax bases until 1980s, which saw the adoption of an assortment of privileges, gross receipts as well as severance taxes (Alm, Buschman & Sjoquist, 2011).  One of the implications of these tax changes is the fact that in general property tax, which existed as one of the most important sources of tax for the local governments has since become less significant in the vases of the role it plays in the overall state as well as local tax mix.

Most of Kansas state revenue is generated from the three major revenue sources that include general sales, property tax, and the personal income tax. The remainder of the state revenue sources includes an assortment of tax instruments, the majority of which offer relatively little revenue. The excise duty that is imposed on the sale of beer, alcohol, gasoline, tobacco as well as gambling is responsible for approximately 15% of the revenue that is generated at state levels (Lutz, Molloy & Shan, 2011). The overall assertion, however, that is these sources represent a huge assortment of diverse taxes. The state further uses corporate income along with the other business taxes, property transfer taxes, gift and inheritance among others.

It follows that the significant revenue declines that experienced during the great recession generated the needed motivation for the state governments to expand their existing revenue sources and at the same time look for new ones. The best example is seen in the fact that the state resulted in increasing their income and sales tax rates (Kansas Tax Facts, 2016). In addition to this, there has been an increase in the search for alternatives to these taxes in view that accessing other taxes is going to increase stability in addition to the fact that it is going to be politically easier to broaden or raise the alternative revenue sources. The best example of this is seen in the fact that there have been constant increments in cigarette tax rates and other cases; there has been the broadening of the taxation to include new types of gambling (Martin, Levey & Cawley, 2012). 

Tax Sources for Local Government

Traditionally, property taxes were the most prominent source of revenue for the state. However, considering that a lid has been placed on the extent to which these taxes can be used, it has become imperative that there is an assessment of alternative sources of revenue. While most local governments in some states as Louisiana and New York rely on sales tax heavily, the majority of the other cities are only able to access little revenues from these taxes (Alm, Buschman & Sjoquist, 2011). Motels and hotels have been known to raise modest revenue in most of the cities, an attribute that contributed to some states increases these taxes. In the conferences hosted by the Lincoln institute addressing the subject of land policy assessed some of the options that local governments can use in raising their revenue (Slack, 2016).  One of the prevailing assertions is that most of the variant on the main taxes are better considered as means of earmarking revenue instead of new revenue sources.

Most of the local administrations were seen to be offsetting the limited tax options through the dependence on user fees. An assortment of charges that encompasses ones for accessing education, sewerage, as well as hospitals, accounted for just a quarter of the overall local revenues. The local utility revenues that are not taken into consideration in the overall state revenues are approximately half as high as the current local charges, an attribute that has been found to add to the dependence on user fees (Lutz, Molloy & Shan, 2011).

 Examples of revenue alternatives for the state of Kansas include:

The Sales and Gross Receipts Taxes

The sales, as well as gross receipts taxes, entail an additional source of revenue for the state tax. The category should comprise of both the general sales as well as the selective sales taxes. General sales ought to be levied on all the types of goods and services, taking into consideration the types that are exempt (Slack, 2016). These selective taxes in most instances will be collected on alcoholic beverages, insurance, amusements, motor fuels, tobacco, and public utilities among others.

Personal Income Taxes

The use of personal income tax is the additional source of revenue that Kansas can use to increase their revenue base. Through the subjection of people’s incomes to progressive tax, Kansas will be able to access the needed taxes for their development and innovation purposes (Slack, 2016). 

Taxing Gambling

One of the underlying assertions is that more and more states are relying heavily on the imposition of an assortment of selective excises on goods as well as services that are believed to be unique options for taxation. Gasoline, alcohol, and tobacco have traditionally been the core focus of specialized taxation. It, however, follows that gambling has since taken over, becoming a target following the expansion of gambling options (Martin, Levey & Cawley, 2012). The idea behind the focus on promoting the taxation of gambling is the fact that taxpayer considers increase in taxation on this options as being more politically acceptable than the other broad-based taxes. The assertion is that people tend to consider “sin taxes” more acceptable than other broad-based taxes.

Cigarette and Alcohol Taxes

State, as well as local government alcohol and tobacco taxes, can present a significant source of revenue for the administration. These taxes should be imposed almost exclusively by the state as the local administration is not able to generate adequate revenue from the option. As is the case with gambling taxes, the use of alcohol and cigarette taxes are considered to harbor an assortment if taxation goals, that include the desire to discourage smoking and drinking in addition to collecting general revenue on a considerable price inelastic commodity (Alm, Buschman & Sjoquist, 2011).

Other sources of taxes for the state and local government, in this case, are the subjections of taxes on the issuance of motor vehicle licenses. The assertion is that while the revenue from this tax is small, the state will be able to enhance their overall revenue base (Alm, Buschman & Sjoquist, 2011). It is further possible for the state to access revenue from an assortment of other sources that include severance taxes on the natural resources within the state as well as the issuance of an assortment of license taxes. These license taxes will be issued on businesses, motor vehicles, corporations, fishing as well as hunting licenses.

Effects of the Taxes

Overall, the underlying implication of using taxation as a way of increasing revenue for Kansas state is the fact that there is going to be an increase in the number of revenues the state has to meet its diverse objectives. It, however, follows that businesses and individuals will have access to fewer savings and consequent investment options as they taxes subjected will leave them with less purchasing power and income (Jaimovich & Rebelo, 2017). On an issue as gambling, smoking, and alcoholism, the imposition of taxes will serve to curtail the rate and degree of engagement in the vices, they leading to the production of a healthy population. 

References

Alm, J., Buschman, R. D., & Sjoquist, D. L. (2011). Rethinking local government reliance on the property tax. Regional Science and Urban Economics, 41(4), 320-331.

Jaimovich, N., & Rebelo, S. (2017). Nonlinear effects of taxation on growth. Journal of Political Economy, 125(1), 265-291.

Kansas Tax Facts (2016). 2016 Supplement to the Eighth Edition 

Lutz, B., Molloy, R., & Shan, H. (2011). The housing crisis and state and local government tax revenue: Five channels. Regional Science and Urban Economics, 41(4), 306-319.

Martin, L. L., Levey, R., & Cawley, J. (2012). The “new normal” for local government. State and Local Government Review, 44(1_suppl), 17S-28S.

Slack, E. (2016). Improving local government revenue in NSW: What are the options.

Sherry Roberts is the author of this paper. A senior editor at MeldaResearch.Com in legitimate custom writing services Texas. If you need a similar paper you can place your order from research paper writing service Florida services.