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Archive for Wednesday, February 15, 2006

House gives initial approval to ending business equipment tax

February 15, 2006

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— The House gave first-round approval Tuesday to a pair of bills that would phase out property taxes on business equipment and machinery.

The House is expected to approve both bills today, sending them to the Senate. The measures would affect purchases made after June 30.

The first bill covers all machinery and equipment purchased or leased by companies, while a companion bill covers telecommunications and railroads specifically. The proposals are patterned after an initiative Gov. Kathleen Sebelius outlined during her State of the State address, designed to stimulate the economy and improve the business climate by encouraging investment in new machinery and equipment.

"We are sending a message that Kansas is open for business," said Rep. Arlen Siegfried, R-Olathe.

The tax on machinery and equipment raises more than $234 million annually. Existing equipment would continue to be taxed until it was replaced. Counties and cities would receive state payments for five years to mitigate the loss of property tax revenue.

Local governments would be reimbursed for the difference between the taxes levied in 2005 and 2007. After that, the reimbursement would drop 20 percent each year through 2013.

The reimbursement would cost the state roughly $177 million in total through 2013.

Amendments to increase the reimbursement to rural counties by $50 million annually were defeated Tuesday, largely by urban representatives.

The bill was amended to increase tax breaks for residential property owners. The first expands a state homestead exemption to cover about 20,000 homeowners age 65 and older with incomes of $50,000 or less.

The second increases the exemption on residential property that is assessed for the statewide school tax. That exemption would increase to $30,000 from $20,000, providing about $20 million in tax relief, or $23 per home owner, annually.

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