Archive for Wednesday, April 30, 2008

Budget change would bring in $79M

April 30, 2008


— Faced with a tightening budget, advocates for children and other social service programs are urging the Kansas Legislature to "decouple" from a federal tax cut.

The move would provide $79 million to state lawmakers as they prepare a final budget during the wrap-up session that starts today.

"Decoupling is a viable solution to our state's budget shortfalls, and will better position Kansas in case of further economic downturn," said April Holman, director of Fiscal Focus for Kansas Action for Children.

A provision known as bonus depreciation in the federal economic stimulus act is shorting Kansas $79 million because the state income tax code is tied directly to the federal income tax code. The bonus depreciation allows businesses to claim an immediate deduction of 50 percent of the cost of new equipment, rather than following the standard approach of depreciating that cost over the equipment's lifetime.

The result is that Kansas had to reduce its tax revenue projections for the current and next fiscal years by $79 million. The state could avoid this hit by decoupling the federal business depreciation rules from the state tax code.

Because of the loss of revenue, budget negotiators are wrestling with ways to address various needs such as early childhood education.

But state Rep. Kenny Wilk, R-Lansing, who is chairman of the House Tax Committee, said he would oppose any effort to decouple.

"My argument is that it's a national policy, and if we decouple we put our Kansas businesses at a disadvantage to their competitors in other states," Wilk said.

But Holman said studies have shown that the bonus depreciation is not an effective way to stimulate the economy. Kansas Action for Children said at least 17 states have decoupled from the federal bonus depreciation.


VTHawk 9 years, 10 months ago

Increasing taxes on capital might increase short-term tax revenue, but it will slow growth and worsen tax-revenue in the longer term. This would be a big mistake.

Richard Heckler 9 years, 10 months ago

This legislature pays way to much attention to the no tax people. The bills and demands can never be met with an empty cookie jar. The more they cut in Topeka in Washington D.C the more local taxpayers shell out. Another problem with listening to Washington D.C. and Topeka is when they say they want to reduce programs or get rid of them they never cut spending. If taxpayers want to do something for economic growth and create more tax revenue the Iraq war must come to a halt. Otherwise be prepared to pay more locally while never paying less at the state level or nationally.If Kenney Wilk is stating this $79 million dollar tool will not work he may not know one way or the other. For instance removing the tax on equipment without fully understanding the impact or knowing how to replace that revenue was not smart.

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