Archive for Monday, February 20, 2006

Tax breaks under scrutiny

Officials study whether credits help economy

February 20, 2006


— It's a question that has nagged state legislators and taxpayers for a long time.

The state of Kansas provides businesses with millions of dollars of tax credits each year, and the question is whether the breaks do any good.

Do they lead to more jobs and investments, or are they corporate welfare?

Kansas Department of Revenue Secretary Joan Wagnon said state officials are starting to collect information that could lead to answers.

"What we have in a nutshell is a lot of preliminary data," Wagnon said. "In the past, we've only had opinions. Now the task is to formulate some kind of a policy framework that we can test a lot of these assumptions."

Wagnon's agency has been analyzing two major tax breaks offered to businesses - the high performance incentive program, which is taken mostly by manufacturers, and the business and job development program, which is taken primarily by retail businesses.

The high performance incentive program gives a tax credit to qualified companies that make cash investments in training and education of employees. The business and job development program allows tax credits for job creation.

Sixty-four businesses received $12 million in tax credits under the high performance program in the 2003 tax year, the latest for which statistics are provided.

"They told us they did invest $190 million," Wagnon said of the businesses. And nearly 500 businesses received $6 million in job development tax credits, leading to nearly 14,000 jobs, she said. The firms in the report are not revealed because of the confidentiality of tax information.

Lawmakers generally applauded the report.

"I would say our tax credits are growing jobs, growing businesses, which is translating into growing the economy," said Sen. Karin Brownlee, R-Olathe, and co-chair of the Senate Commerce Committee.

But Wagnon said the big question is whether the investments and jobs would have happened without the tax credits.

She turned to Arthur Hall, director of the Center for Applied Economics at Kansas University, to evaluate the two tax credits.

Information required to be reported to the state from the firms doesn't provide the detail needed to reach certain conclusions, Hall said.

But, he said, he used what information was available to try to determine whether the tax credits were enough to alter a business's decision to expand or increase.

He concluded the high performance investment credit had the greatest potential of pushing a company toward making an investment decision.

The job development credit, while helping businesses, was not producing the kinds of investment decisions that would benefit the general taxpayer, he said.

"My numbers show that the business and jobs credit is a very small credit," Hall said. "No one is saying, 'I don't want this money,' but it's not enough money to change the investment behavior," he said.

Wagnon said she would seek legislative approval to be able to mine more data from companies that get the tax breaks.

"I just would like to know where our money goes, and like to know that we're getting the kind of results that we need," she said.


Sigmund 12 years, 3 months ago

One would hope the added scrutiny the legistlature puts tax credits under they could also put the same level of scrutiny towards the uses of collected taxes. At the top of the list should be the Safe Harbor Prison Dog program at Lansing.

yourworstnightmare 12 years, 3 months ago

Sigmund, These are effectively uses of "collected" taxes. Tax credits just eliminate the middleman of the state. It is right and proper to study their effectiveness. Otherwise they are simply giveaways and handouts to corporations.

Agreed about the prison dog program, though.

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