Topeka A new study that says Kansas has a high tax burden on new business investment is being cited by House leaders as a reason to cut state income taxes.
But a Kansas public policy group said Tuesday that the study shows the need for more analysis of the state’s tax structure.
Study on state and local taxes ( .PDF )
The sides are facing off over tax policy as legislators return Wednesday to put together a state budget for the fiscal year that starts July 1 and how to pay for it.
The study showed that Kansas ranked 48th among states in competitive tax burden on new investments. The report was released recently by the Council on State Taxation, and conducted by the accounting firm of Ernst & Young.
In an interview with The Associated Press, House Speaker Mike O’Neal, R-Hutchinson, said of Kansas’ ranking, “It really points to the fact that Kansas needs to get more competitive.”
O’Neal is pushing legislation that would cut individual and corporate income taxes as tax revenues to the state grow. Under the bill, the top corporate tax rate could drop from 7 percent to 3.5 percent, and the individual income tax could be phased out completely.
But the Kansas Economic Progress Council said the tax burden study also recommends legislators examine the entire tax system instead of focusing on eliminating a single tax.
“Although Kansas did not rank well in this study, most states without an income tax did not rank high,” said Bernie Koch, executive director of the KEPC.
“A few are in the top 10, but many of the states without an individual income tax are ranked in the middle or the bottom of this study,” Koch said.
In fact, the top two states, Maine and Oregon, levy individual income taxes with top rates of 8.5 percent and 11 percent; higher than Kansas’ top rate of 6.45 percent.
Koch said KEPC supports strategically lowering taxes that affect business but only after careful study of the state’s tax structure.
Senate leaders have expressed concern over the House Republican plan, saying it would prevent the state from keeping up with funding needs for social service programs, education and pensions. The state is facing a projected revenue shortfall of approximately $500 million in the next fiscal year.