The evolving tax-cutting proposal being debated in the Statehouse won’t create the flood of new jobs that conservative lawmakers suggest, says Joan Wagnon, a former secretary of revenue and current chair of the Kansas Democratic Party.
Wagnon showed state documents listing 24 business entities that appear to be related to and are headquartered at Koch Industries Inc. as an example of how the plan, often noted for how it bolsters small businesses, benefits large businesses.
“Certainly the public would not believe this tax break should be targeted to one of the largest and wealthiest businesses in our state,” she wrote in a letter to members of the tax conference committee that is tweaking the tax reduction bill.
That critique is aimed at the core of the tax plan, which would phase out nonwage income taxes for limited liability companies, subchapter S corporations and sole proprietorships by 2018.
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Rep. Richard Carlson, R-St. Marys, a leader on the tax debate, acknowledged that some large businesses would get a break, but he said it doesn’t make sense to penalize success.
He said 82 percent of businesses that would be exempt from nonwage taxes have less than $100,000 of taxable income, which has become a working definition for what a “small business” is in the context of the tax debate.
The tax plan is intended to spur growth and create jobs, Carlson said. With more people working and more businesses drawing new people to the state, sales and property tax revenues should grow and bolster state revenues.
Wagnon, however, contends that many small businesses won’t hire anyone because of the tax break.
She said she works with Fed Tax, a small startup company. She said that not paying tax on her income won’t prompt her to hire anyone; it’ll just enhance her bottom line and maybe pay for a short vacation.
Carlson said there will likely be businesses that benefit from the tax cut that won’t hire. But he said it would probably be inefficient to hire more officials to verify whether a business hired new employees as a prerequisite for getting the tax exemption.
“Letting the free enterprise system work is by far the best policy,” he said.