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Provision in economic stimulus plan could mean $87M hit for Kansas

February 13, 2008

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— Battle lines formed Tuesday over news that the federal economic stimulus package could short Kansas' coffers by $87 million.

House Minority Leader Dennis McKinney, D-Greensburg, said losing that much tax revenue in a tight budget will "decimate" services for the disabled, elderly and education.

"There is no way we could correct an $87 million problem without major problems in those areas," McKinney said.

The stimulus package approved by Congress and President Bush will accelerate write-offs for business, such as the ability to depreciate the cost of new equipment and machinery.

Kansas' tax revenue is affected because it, along with 35 other states, links that portion of its tax code to the federal government's tax code.

McKinney said Kansas should consider "decoupling" from the federal tax code for this year so it can continue to collect the state revenue for one year. Under this plan, businesses would still get the federal tax break. State Sen. Marci Francisco, D-Lawrence, has filed legislation that would do that.

But state Rep. Kenny Wilk, R-Lansing, and chairman of the House Tax Committee, said that's a bad idea.

He said decoupling would result in Kansas businesses paying more in taxes than their counterparts in other states, putting them at an economic disadvantage.

"If you decouple, you drive investment out of state, and that would take us years to recover," Wilk said.

Alan Cobb, director of the Kansas chapter of Americans for Prosperity, said lawmakers should allow Kansas businesses the same tax break that businesses in other states will get under the federal plan.

"We shouldn't do anything to raise the tax burden on our businesses," Cobb said.

But McKinney said the Legislature has granted Kansas businesses tax breaks in recent years.

"It's not like we're unfriendly to businesses," he said.

An $87 million loss would wipe out the $81 million that Kansas officials have projected will come from expanded gambling next fiscal year. Gov. Kathleen Sebelius has banked on that money to propose a number of budget increases, including those for higher education and state retiree pensions.

Sebelius is gathering information at this point to determine the implications of the stimulus package on Kansas, her spokeswoman Nicole Corcoran said.

Sebelius' budget director, Duane Goossen, said it would be difficult for state government to take an $87 million hit.

"That's the question that is before us, should we decouple or should we in essence lose the $87 million from our revenue stream?" Goossen said.

"This will make putting the budget together very difficult for the Legislature," he said.

Goossen said the same debate will be going on in states across the nation.

"It's too early to know what the response will be at this time," he said.

Comments

jayhawklawrence 6 years, 10 months ago

Anything that helps manufacturers invest in new equipment to increase their productivity and competitiveness is a good thing and will give you a far greater return on your investment. I hope the Democrats in Kansas don't judge this legislation too harshly. We need growth to gain more tax revenue. Then I think this tax shortfall can be eliminated. The real problem is Neufeld and company and their shenanigans.

bd 6 years, 10 months ago

Maybe these manufacturers could tighten their belt and reduce a few CEO wages to offset these losses???

toefungus 6 years, 10 months ago

The Gov is studying the issue? What they mean is they are looking at taxes to raise. The only response the Democrats have is to raise taxes. No tax increase, after the Sunflower Energy debacle, will ever pass the house. Kind of makes you think what goes around comes around.

Christine Pennewell Davis 6 years, 10 months ago

I am lost... they approve the package then coplain about it?? or am I thinking of something else head hurts not seeing or thinking all that good. so if I got this wrong forgive me.

Mkh 6 years, 10 months ago

This is outrageous! This BS "economic stimulus plan" is already costing the people more than it's helping them...and now the government is crying for their money back because they had "projected" plans for the loot! Get a clue Kansas and don't tie in that portion of the tax code to the federal government if you want to avoid situations like this.

I just can't believe this anymore.

dirkleisure 6 years, 10 months ago

I believe the study of the issue would be to determine the actual effect on Kansas.

The 87 million figure is an estimate from a DC policy group.

The big problem is this tax cut was left in at the expense of funding for food stamps and unemployment benefits. Independent analysis by right leaning groups indicates those two additions would have had a postive benefit, while the machinery credit generates a negative return.

Sigmund 6 years, 10 months ago

Oppsie!!! Our bipartisan bad. We Democrats and Republicans were just attempting to bribe our voters like we do every year. It's not our fault, we can't be blamed!!!1

MyDogHoudini 6 years, 10 months ago

In a town like Lawrence, where so many people work at KU, it shocks me that anyone would think "decoupling" Kansas from the federal tax code is a bad idea. No decoupling would probably mean no raises for everyone who works for Lawrence's biggest employer. "JayhawkLawrence" if you really are a supporter of the college, you should come to your senses.

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