Kansas has the best tax environment for small businesses in the nation, Gov. Sam Brownback declared Tuesday afternoon at a forum for small-business owners.
But a poll of business owners released hours earlier showed that 57 percent think state and local taxes are too high, a 7 percent increase from last year’s survey, despite recent state tax cuts that include elimination of non-wage income taxes for many businesses.
In the poll of 300 Kansas business owners released by the Kansas Chamber of Commerce a week before the Kansas Legislature convenes, 29 percent said taxes were the top issue facing Kansas businesses, a higher percentage than for any other issue.
Concern about taxes was higher in Wichita and the western part of the state, said Pat McFerron, director of survey research at Cole Hargrave Snodgrass & Associates, the firm that conducted the polling for the Chamber. Seventy percent of the Wichita business owners responding to the survey said it would help Kansas to lower taxes, compared with 64 percent statewide.
McFerron said it was possible that the increased attention to tax policy in last year’s legislative session increased business owners’ awareness.
Mike O’Neal, the chamber’s president and CEO, said it was possible that some of the respondents in the poll may not yet fully understand the extent of the governor’s tax reforms. “We’ve frankly been surprised at the delay in the realization at what this tax reform act has really meant,” O’Neal said.
But he also said that overall tax burden on business owners is a concern, citing unemployment tax and property taxes.
“We need to keep plowing ahead, and our business community is telling us that,” he said.
Secretary of Revenue Nick Jordan said he could not comment on the report’s findings Tuesday.
The state is on the right path toward growing the private sector through tax reform, said three presenters at the small business forum: Neeli Bendapudi, dean of the University of Kansas School of Business; Stan Ahlerich, one of the governor’s economic advisers; and Gary Allerheiligen, a certified public accountant from Wichita.
“Many small businesses in Kansas can now say I am no longer a Kansas taxpayer,” Allerheiligen said at the forum sponsored by the Kansas Department of Commerce and held at the Sporting Park in Kansas City, Kan.
Ken Kriz, a professor at Wichita State University who studies public finance, said companies that would benefit from the changes to the tax code are not necessarily small businesses, and that the exemption could encourage “tax gamesmanship” from large companies.
In general, Kriz said the impact of tax reductions on business growth has been overstated by proponents. “Is there a marginal effect? Yes. Is there a large effect? Probably not,” he said in a phone interview after the conference.
Brownback told forum attendees the state needs to reverse its trend of population decline and can do so only through job creation.
“It’s early but I’m very encouraged by what we’re seeing in the Kansas City area,” Brownback said. “I’m very encouraged by what we’re seeing in rural areas.” He said growth on the Kansas side of the Kansas City metro area had outpaced growth on the Missouri side.
He asked small-business owners for their recommendations on how to spur growth beyond tax cuts.
Mike Bosch, CEO of Reflective Group, a software development firm in Baldwin City in Douglas County, said tax cuts helped dissuade him from moving his business to Texas last year. But he said the state needed do more to foster an entrepreneurial culture in small towns.
“What I ultimately want the state to recognize is that when we talk about the amazing things that are happening in Kansas City, that’s not representative of the entire state,” Bosch said.
“What I’m asking them to do is look at the rest of us in Kansas, because the charts you’re showing about Kansas City don’t apply in small-town America. It’s a totally different market.”
Jeremy Hill, director of Wichita State University Center for Economic Development and Business Research, said in a phone interview that the movement of jobs from Kansas City, Mo., to Johnson County has a marginal impact on the state’s overall economy.
Cole Herder, a resident of Humboldt, said the state wastes one of its biggest resources: its educated youth.
“You talk about Kansas resources. We grow some of the best-educated young people in the world, and we export them,” Herder said.
Brownback joked that he hoped Herder wasn’t running for governor.
“My real feel for this is if we can create the jobs at a real wage and scale, you’ll attract the people,” the governor said later.
Asked how the public sector could encourage economic development in the Wichita area specifically, the governor emphasized the importance of technical education. “If you’re going to work on an airplane, you’ve really got to have high technical skill,” he said.
“I think it’s also something we ought to think about for people who are on public assistance, what we can do to get them more technically trained,” Brownback said. The governor said his administration had yet to develop a formal policy on the matter, but that success in technical training at the high school level could provide a template.
One challenge that Brownback, or any governor looking to spur growth, faces is that innovation must come from the market, Hill said. Research shows government can hinder growth but has a limited effect in encouraging it, Hill said.
He added that the governor’s policies of limiting taxes and regulation can create opportunity but don’t guarantee growth.