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Archive for Thursday, February 1, 1990

SMALL BIZ EDITION

February 1, 1990

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For many small-business owners, property reappraisal and classification meant one thing: higher taxes.

Douglas County Appraiser Don Gordon said that for many business owners, the removal of business inventories and more favorable tax rates on machinery and equipment was more than offset by higher real estate taxes.

Reappraisal didn't mean higher taxes for all local businesses. Coming out ahead were some of the big industrial plants in Lawrence, which rely heavily on machinery, and some retail outlets that have lots of money tied up in inventories.

"It just depends on what type of business and what type of inventory or equipment they have," Gordon said.

Gary Toebben, president of the Lawrence Chamber of Commerce, agreed with Gordon's assessment.

"I'd say the impacts of classification and reappraisal depended on the type of business," Toebben said. "Those firms that didn't have inventories that came off the tax rolls recognized some pretty significant increases in their property taxes. Those many firms that did have inventory that was taxed at 30 percent of its value in the past ended up with a tax bill that was fairly comparable to what they'd had in the past."

TOEBBEN SAID businesses that have experienced large property tax increases have no choice but to pass the cost onto consumers. Some business owners have leases where the property tax increase will be passed along immediately, Toebben said. Others won't feel the impact of reappraisal right away, he said.

The difficulty is that some business owners don't feel they're in a position to pass on the cost, Toebben said.

"In some cases it wipes out the profits," he said.

Toebben said that at the chamber's special membership meeting earlier this month, "we encouraged all members who have a grievance to go through the appeals process.

"We have also worked with our legislators to share our feelings about what needs to be done (to ensure) a taxing system that's fair for everyone that's involved," he said.

IN RECENT WEEKS, the chamber's board of directors announced its support for a long-term solution to funding local government that relies less on property taxes. The solution should include the revision of the state's property classification system to ease the tax load on commercial property, the board said.

On Jan. 10, The 25-member board of directors issued its recommendations, which included having lawmakers explore short-term remedies as well.

"There are individual taxpayers and small business owners who need immediate assistance. We do not, however, support reducing existing funding for current state programs to fund a circuit-breaker," the board said.

Any sales or income taxes used to fund local government should be collected by the state and returned to the city, county or school district where collected, the board said.

The board also said that the current level of property taxes on motor vehicles should be retained to avoid triggering another round of property tax shifts onto real estate in 1991.

ABOVE ALL, the chamber urged the Legislature to refrain from adopting a "knee-jerk reaction" to the problem.

There appears to be little chance of that from legislators, who are sorting through a multitude of proposals.

"My sense is we are groping," said Rep. Jessie Branson, D-Lawrence, who serves on the House Committee on Assessment and Taxation. "But we have to hear one at a time until we get down to the situation where the committee discusses each (bill). From there, it's difficult to say what will happen."

The House taxation committee began its discussions Jan. 23 of several circuit-breaker property tax relief plans, even as their supporters acknowledged they would not solve the real problems some businesses face in the form of large tax increases.

The circuit-breaker plans are designed to help financially strapped taxpayers by giving them direct tax refunds. The committee has before it a plan sponsored by House Speaker Jim Braden, R-Clay Center; one developed by nine House Republicans and one Democrat, and a plan approved by the House but rejected by the Senate during the December special session of the Legislature.

Braden's proposal would provide at least $40 million in tax relief to small businesses, paying for it by eliminating a sales tax exemption on mail-order catalog sales, accelerating the collection of some state taxes and placing a 25 percent tax on tax savings of businesses whose property tax liabilities decreased by $1,000 or more.

THE 10 House members' plan calls for $100 million in relief, paid for by accelerating the collection of some taxes, an excise tax on merchants' and manufacturers' inventories, and taxing mail-order catalog sales.

The House plan from the special session calls for $82 million in relief for businesses, paid for by an excise tax on inventories, the appropriation of economic development and highway funds and the acceleration of some tax collections.

Four state senators have said they plan to introduce a resolution proposing to submit to voters by May 1 a revised property classification amendment they think would have the effect of rolling back taxes to 1988 levels.

The goal of the amendment is to restore the property tax base by placing inventories back on the tax rolls, thus reducing mill levies for other taxpayers.

The senators called it a ``flexible'' amendment that would allow the Legislature to set property assessment rates by law.

The proposed amendment also would put all inventories back on the tax rolls, restore industrial machinery and equipment to its traditional depreciation schedule and allow the Legislature to classify utility property and tax it at different rates.

It would continue to appraise farmland on a use value basis and would continue to exempt farm machinery from taxation.

It is one of at least four proposed classification amendments expected to come before the Legislature this year.

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