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Archive for Wednesday, May 10, 2006

Legislative leaders look to resolve tax, budget issues

May 10, 2006

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— Phasing out property taxes on business machinery and equipment remained on legislative leaders' to-do list Wednesday.

The business tax measure enjoyed bipartisan support, even though some legislators worried that it could prove expensive to cities and counties. Business groups have been pushing for relief for more than a decade, and Gov. Kathleen Sebelius submitted a proposal to lawmakers this year.

Sebelius and supporters of the business machinery bill promoted the measure as a way to stimulate economic development. Most of the tax goes to city and county governments.

"It will spur investment. The investment will spur growth. The growth will create jobs," said House Taxation Committee Chairman Kenny Wilk, R-Lansing. "It's as pure economic development as there comes."

The tax bill, also drafted by legislative negotiators, would grant an exemption from property taxes to businesses for the new machinery and equipment they buy, starting July 1. The exemption would apply not only to heavy industrial machinery, but also to office fixtures such as chairs, desks and computers.

Eventually, when all machinery and equipment purchased before July 1 was replaced, businesses would pay no property taxes on those items.

Legislative researchers estimated that cities and counties would lose $632 million in property tax revenues over the next six years. The measure promises local governments $269 million in state aid during the same period.

Wilk and other supporters of the bill argue that increased economic activity will generate enough tax revenues to make cities and counties whole.

But Sen. Pete Brungardt, R-Salina, questioned the theory. He said even if the tax break does spur massive investment, it's likely to generate income and sales tax revenues for the state - not property tax revenues for cities and counties.

"Overall, it's not a pretty package," he said. "Clearly, the counties and cities are going to take it in the shorts."

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