State of the Week: KANSAS
By SBE Council at 4 March, 2017, 9:12 am
Huge Tax Hike Narrowly Avoided
by Raymond J. Keating-
Small Business Policy Index 2017: Kansas ranked 25th among the 50 states.
SBE Council’s “Small Business Policy Index 2017” ranks the 50 states according to 55 different policy measures, including a wide array of tax, regulatory and government spending and performance measurements.
Small Business Tax Index 2016: Kansas ranked 24th among the 50 states.
SBE Council’s “Small Business Tax Index 2016” ranks the states according to 25 different tax measures. Among the taxes included are income, capital gains, property, death, unemployment, and various consumption-based taxes, including state gas and diesel levies.
Governor Brownback Leading the Way: Strengthening Policy for Small Businesses
Led by Governor Sam Brownback, policy in the state of Kansas generally has moved in a positive direction in terms of reducing taxes and boosting the climate for small business, entrepreneurship and investment.
For example, the top personal and individual capital gains tax rate has been reduced from 6.45 percent to 4.6 percent, and is scheduled to drop to 3.9 percent in 2018. In addition, the income tax was eliminated for pass-through business enterprises (such as LLCs and S-Corps).
There have been many complaints from the Left against these tax measures, claiming that they caused big budget shortfalls and economic ills. Previously, SBE Council countered such charges.
Unfortunately, an unwillingness to address budget challenges on the spending side of the Kansas budget equation led to a massive tax increase – largest in the state’s history – passing the state legislature in February. That tax increase included re-imposing income taxes on pass-through businesses; hiking personal income and capital gains taxes, with the top rate jumping to 5.25 percent; and killing future tax relief tied to state revenue growth above 2.5 percent per year starting in 2020 (those additional revenues are to be fed into reducing individual and corporate income tax rates).
Tax Increase Vetoed
Governor Brownback vetoed the tax increase. The Kansas House overrode the veto, but the Senate did not – coming up only three votes short of override. Kudos to Governor Brownback and the Senate.
Make no mistake, with its tax relief measures in recent years, Kansas is in a more competitive and positive position in terms of how public policy affects entrepreneurs, small businesses and investment – which, of course, are all essential to economic growth and job creation.
By the way, it is certainly worth noting that real economic growth in Kansas over the most recent three quarters for which we have data has run well ahead of national economic growth. While national growth averaged 1.9 percent through the first three quarters of 2016, Kansas experienced an average growth rate of 2.6 percent – and that was 37 percent faster growth in Kansas.
In his statement declaring that he would veto the tax increase, Governor Brownback declared:
“Above all else, we must remember that tax dollars do not belong to the government. They belong to the families, individuals, and job-creators who earn a paycheck. It is wrong for government to take more tax dollars than are absolutely necessary to provide for the core functions of the state.”
That’s the governing philosophy that should prevail in Kansas, and across the entire nation.
Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.
Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP: The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.