Archive for Thursday, September 29, 2016

Pro-business think tank not impressed with Kansas tax cuts

In this Jan. 12, 2016 file photo, Kansas Gov. Sam Brownback speaks to the Legislature in Topeka. (AP Photo/Orlin Wagner, File)

In this Jan. 12, 2016 file photo, Kansas Gov. Sam Brownback speaks to the Legislature in Topeka. (AP Photo/Orlin Wagner, File)

September 29, 2016

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— A conservative, pro-business think tank in Washington, D.C., said this week that Kansas did little to improve its competitive business climate by enacting sweeping tax cuts in 2012 that lowered tax rates across the board and eliminated income taxes entirely for more than 330,000 business owners.

In its latest ranking of state business tax climates, the Tax Foundation, one of the nation's oldest nonpartisan think tanks, said Kansas has only the 22nd most competitive tax code in the nation, and its individual income tax structure ranks only 18th.

"Broadly speaking, good tax structure involves broad bases and low rates," said Jared Walczak, a policy analyst at the foundation and a coauthor of the report. "Kansas departed from the idea of a broad base in this pass-through exemption where you have some individuals who are able to escape income taxes entirely."

The pass-through exemption refers to certain kinds of business structures in which the income of the business is, in fact, the personal income of the owners. That includes everything from the person who runs a cottage industry out of his or her home to large law firms and medical practices that are owned by the lawyers or doctors in those firms. It also applies to most farming operations.

In 2012, Republican Gov. Sam Brownback championed sweeping changes to the Kansas income tax code that included significant cuts in individual income tax rates, and a complete exemption for income derived from those "pass-through" business operations.

Since then, however, the state has experienced severe revenue shortfalls as it collected less money from income taxes, while revenue from other tax sources such as sales taxes have remained stagnant.

Since 2012, the year the tax cuts were enacted, total revenues from individual income taxes have fallen 23 percent, to less than $2.5 billion in the fiscal year that just ended June 30. That's down from $2.9 billion the year before the tax cuts took effect.

Meanwhile, sales tax revenues have remained flat, growing only 6 percent over that same period, to about $2.3 billion last year. And that was largely because the Legislature passed a major hike in the sales tax rate last year in hopes of making up for revenue shortfalls.

Total general fund revenues from all sources have fallen 1.2 percent, or about $79 million, over that period, while total general fund spending has grown by 3.7 percent, or $224 million a year.

Walczak said one thing that has happened in Kansas as a result of the tax cuts is that some number of businesses have changed their corporate structure in order to take advantage of the pass-through exemption.

"The best tax policies try to avoid changing decision-making," he said. "Taxes are necessary, but taxes should have the least impact possible on economic decisions, and that’s not what we see happening in Kansas."

Topping the Tax Foundation's list as having the most competitive tax code was Wyoming, which does not levy corporate or individual income taxes. Also in the top 10 states were Florida, which has no individual income tax, and Oregon, which has no state sales tax.

Brownback's press secretary Eileen Hawley said that indicates Kansas should continue working to reduce income taxes.

“Many states ranked higher than Kansas have lower income taxes, or no income taxes at all, indicating Kansas should continue its work to maintain a low-income tax, stable policy that attracts businesses and families to Kansas, operate government efficiently and control the growth of government spending,” she said.

But Walczak said states like Wyoming, which relies heavily on severance taxes from the coal and oil industries, and Florida, with its large retirement-age population, are unique cases.

"There are, however, states that have much more typical economies and levy all of the major taxes that also do very well on the Business Climate Index," he said.

He pointed to Indiana and Utah, both of which are also in the top 10, as well as North Carolina as examples of states that have recently adopted substantial, but "neutral" tax reforms.

"They're not exempting certain classes of income or providing large incentives for particular business activities," he said. "Instead, they're creating a more level playing field where the state allows its tax code to reflect and adjust to a dynamic economy."

Walczak said Kansas got credit for having low income tax rates overall, and for collapsing what had been three tax brackets into two, both of which were part of Brownback's 2012 tax overhaul.

"But, in significant part because the state adopted this pass-through exemption, there’s actually been pressure to raise taxes elsewhere," he said. "For instance the sales tax increase that we’ve seen recently, and pressure perhaps to raise taxes further to offset the very substantial revenue losses that were associated with tax cuts that were not offset by spending reductions, and the continued losses associated with that pass-through exemption. So ultimately that does not reflect sound policy and is not something that we would reward."

The Tax Foundation was established in 1937. According to its website, its mission is to educate taxpayers, the media and policymakers about state and federal tax policies.

"At the state level, we use our research to foster competition between the states and advise policymakers on how to improve their tax systems," the foundation's website states.

According to its most recent annual report, it had a budget of about $3.7 million in 2015. Of that, 35 percent came from direct corporate contributions, 37 percent came from philanthropic foundations, and 14 percent came from individual donations.

According to the website Sourcewatch, in 2009 the Tax Foundation's board of directors was chaired by Wayne Gable, who is managing director of federal affairs at Wichita-based Koch Industries.

Gable is no longer listed on the Tax Foundation's board. But the current board does include former Texas Congressman Bill Archer, a Republican who chaired the House Ways and Means Committee from 1996 to 2001.

Comments

Gary Pomeroy 1 year, 2 months ago

"The sun is shining in Kansas and don't let anybody tell you different." - The Guv.

Bob Forer 1 year, 2 months ago

"The Sun will come up......not tomorrow, but when Brownback leaves office"

Shane Cheung 1 year, 2 months ago

Like I said many times, tax cuts are good for a limited time. You keep them in place too long and it robs government of revenues needed for services the people need. Brownback has never ran a economy with surpluses, so why did he offer multiple year tax cuts? It just does not make economical sense at all. Because of him, Kansans are suffering dire financial hardships.

David Luesley 1 year, 2 months ago

It was never about economic sense. It was about conservative magical fantasy,being the first to make it "work" and become a conservative demigod. Like Jindal, who also failed the conservative magic test leaving a state in financial shambles for his successor, a democrat, to clean up.

Michael Kort 1 year, 2 months ago

Ya, Ya, Ya ?

Same old stupid stuff that Kansans are stuck on in the name of "BUSINESS WHATEVER POLITICS" ( corporate welfare for the successful ) ?

Some people will just never be satisfied unless they wring the neck of the social chicken for every last drop of blood .

They need your business and your sales taxes to pay for their whatever ? Greed knows no bounds and the poor paying sales taxes can pay for the tab of the business men and women.........maybe they should just give up and go to work for Valiant, Mylan, Wells Fargo, etc and play a bigger game of getting your greed on !

James Oss 1 year, 2 months ago

No big deal for Brownback, Kobach, Moran or Robert as it's western Kansas good 'ole boy farmers, ranchers and too lazy to vote DEMs that elect and reelect those KOCH suckers.

Bob Summers 1 year, 2 months ago

Experts. Think tank. Washington D.C.

Spare me the biggety.

Washington D.C. is all that is needed to understand.

The collective in D.C. are all about taking money from the working stiff.

The service Kansas offers is too expensive.

Cut the overpaid people that sponge off the working folk.

Amazingly, the remaining government service providers will have more money.

Michael Kaufman 1 year, 2 months ago

Did you read that this is a GOP conservative think tank? I didn't think so.
What company would want to move to a state that won't adequately fund it's schools, universities, and raids all kind of infrastructure funds, trying to balance the states budget. Poor roads and bridges will not support the transportation needed to run a company in any state. Kansas is just f-ed. Election day will tell if they like being bent over, or if they now know that Browndick is not the economic guru he thought he was. He is just another Koch sucker.

Bob Summers 1 year, 2 months ago

Club Washington D. C.

Members of the club follow the rules else membership will ban them from club functions.

Have you ever been a member of a club?

Theodore Calvin 1 year, 2 months ago

Big Washington politics is exactly what you & yours brought to this state. Spare me the BS.

Jim Slade 1 year, 2 months ago

"Cut the overpaid people that sponge off the working folk."

You're talking about CEOs, right?

Mark Kostner 1 year, 2 months ago

So this plan even bombed with the people it was supposed to impress.

Fred Whitehead Jr. 1 year, 2 months ago

Wow I had something to say but most of you beat me to it. My question is when do the impeachment proceedings for gross negligence in destroying the Kansas budget begin??

Anyone??

Richard Heckler 1 year, 2 months ago

New, whopping loss of jobs sabotages Gov. Sam Brownback’s tax-cut strategy 
Read more here: http://www.kansascity.com/opinion/opn-columns-blogs/yael-t-abouhalkah/article24965164.html#storylink=cpy

--- The Brownback ALEC Scam on Kansas stinks to high heaven!

Ray Merrick a American Legislative Exchange Council board member works for the ALEC agenda not Kansas or the USA!! = Sam's boy.

GOP austerity is a disaster of Greek proportions: Sam Brownback, Bobby Jindal & the economic scam of the century. America isn't Greece, but we can see in Kansas and Louisiana the disastrous consequences of Greek-style austerity

http://www.salon.com/2015/07/02/gop_austerity_is_a_disaster_of_greek_proportions_sam_brownback_bobby_jindal_the_economic_scam_of_the_century/

Kansas Is Totally Screwed http://www.motherjones.com/politics/2015/01/sam-brownback-kansas-tax-cuts-failing

Mussolini deregulated all Italian industry ... then he privatized everything the government owned. It was the PATH to fascism which is exactly what the republican party is doing.

If the legislature decides to privatize many of the state services a 24/7 audit will be required to counteract fraud. The most reliable source of fraud against taxpayers is corporate America.

--- “What I got from the Legislature was a naked tax cut with none of the pay-fors,” Brownback said. “I took it because it was the best we were going to get.”

Some would call that galling.

Absolutely read more here: http://www.kansascity.com/news/local/news-columns-blogs/local-columnists/article23230965.html#storylink=cpy

--- More Proof Brownback Tax Cuts Are Not Working http://www.kansascity.com/opinion/editorials/article3209717.html

--- New jobs report shows Brownback tax cut promises still failing http://www.kansascity.com/opinion/opn-columns-blogs/yael-t-abouhalkah/article1246852.html#/tabPane=tabs-3eebbd11-2

--- Brownback Tax Cuts Now Full Blown Disaster for Kansas http://www.kansascity.com/2014/05/30/5056283/brownbacks-tax-cuts-now-full-blown.html#storylink=cpy

Worker's taxes siphoned off by their bosses http://www.jimhightower.com/node/7723#.UkS9vBaTOX0

Bob Summers 1 year, 2 months ago

So according to the complex government masterminds and their surrogates, the issue is on the accounts receivable side of the ledger, not expenses.

This sound like that common core credit debit accounting where 3 - 7 = confiscate more money from the working stiff and tell them it's Koch's fault.

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