Income tax cut is top legislative priority for Kansas businesses

Kansas business groups won’t be lobbying the state Legislature for a tweak here and there this session.

The leadership of Gov. Sam Brownback and a conservative Legislature presents the business community with a rare opportunity when the legislative session gets under way Monday.

Local and state business groups put at the top of their legislative wish list an effort to cut the state’s personal income tax. That’s a key issue for the great majority of small-businesses owners, who pay their company’s taxes at the personal income rate.

Brownback’s tax proposal won’t be made public until his State of the State speech Wednesday. The general expectation is that the governor will include a measure to gradually cut the personal income tax.

Cutting the personal income tax would affect all Kansas taxpayers, but it has a special benefit to the state when the rate is cut for small business, say the Kansas Chamber of Commerce, the Wichita Metro Chamber of Commerce and the Wichita Independent Business Association. All three strongly back a reduction.

The members of WIBA, overwhelmingly small businesses that pay taxes at the personal tax rate of the owners, objected most strongly to the personal income tax, and less strenuously to, in order, property tax, corporate income tax and sales tax.

The Kansas Chamber has surveyed hundreds of Kansas CEOs annually for the past decade and every year taxes are the top concern.

“They want to lower their cost of doing business,” said Kent Beisner, CEO of the Kansas Chamber.

Legislative prospects

The prospects are good for some kind of legislation, although the session promises to be extraordinarily busy.

“There will be a whole lot of different proposals,” said Les Donovan, R-Wichita, chairman of the Senate Assessment and Taxation Committee.

Donovan said the governor’s proposal will carry a lot of weight, but there will be other measures. He was appointed by Senate President Steve Morris to a committee made up of senators and citizens to develop a proposal based on what the public wants.

One possible proposal is last year’s Senate Bill 1, a bill that passed the Kansas House last year, but wasn’t voted on by the Senate. The bill called for phasing out income taxes over time.

“The goal is to flatten out the tax rate and encourage new businesses to open and help existing businesses expand, by making government a little leaner and meaner,” said Steve Brunk, R-Wichita, chair of the House Federal and State Affairs Committee.

The impact

The economic impact of a tax cut is difficult to gauge, cautioned Art Hall, executive director of the Center for Applied Economics at the University of Kansas School of Business.

But he said that eliminating financial incentives directed at a few large companies in favor of a general lowering of taxes only makes sense.

Overall, small businesses add jobs, while large companies cut, he said. But small businesses are often too small to attract the attention of economic development officials. Nor do economic development officials always recognize a promising company.

Lowering personal income taxes, he said, puts a little more money in the pocket of small-business owners.

Pete Schrepferman, owner of Johnstone Supply and head of WIBA’s governmental affairs committee, said his members certainly back a personal income tax cut, but a wide variety of factors go into whether to invest more in a business or hire more workers.

“A lot of the thinking of the politicians is that it will help economic development,” he said. “I wonder if they don’t place too much stock in the tax structure.”

Other issues

Other key issues for the business community include ones that are repeated from previous years, such as state funding to subsidize low-cost air service to Wichita Mid-Continent Airport. That issue has become trickier because of Southwest Airlines’ purchase of AirTran.

Other key issues for area businesses include:

This story was originally published January 4, 2012 at 5:00 AM with the headline "Income tax cut is top legislative priority for Kansas businesses."