Politics & Government

Experts skeptical of movers' tax break in Kansas

Kansas Gov. Sam Brownback is trolling for people, but with bait that may not work.

Trying to rebuild rural Kansas, the Brownback administration is offering income tax breaks and student loan subsidies to lure people into areas with dwindling populations.

The Legislature approved the tax breaks this year, giving Brownback one of his first legislative victories.

Brownback touts the incentives as a key tool for fostering economic growth, but experts wonder how many people would move just to avoid state taxes.

"I have a hard time seeing this as being immediately persuasive in setting in motion a large population movement," said Mike White, a demographer at Brown University in Rhode Island.

While economic factors motivate people to move — and taxes are part of that — much of it has to do with job opportunities and the cultural and recreational amenities a community offers.

"In the prime working ages, people not only emphasize issues like the finances of taxes ... but also the availability of employment and the quality and growth prospects for that employment," White said.

The idea of tax incentives germinated on the campaign trail as Brownback met with rural leaders worried about their shrinking populations.

At Brownback's behest, the Legislature agreed to waive state income taxes for five years for anyone moving from outside Kansas to one of 50 rural counties — known as rural opportunity zones. Kansans pay an average of about $1,800 a year in state income taxes.

The plan also allows the state to join with those counties to repay 20 percent of an outstanding student loan — up to $3,000 a year for five years — for college graduates who choose to move to one of those counties, whether they're from outside the state or not.

"This is a risk-free opportunity for us to draw attention to parts of our state that are losing population and offer another incentive to get people to move to Kansas," said Brownback's spokeswoman, Sherriene Jones-Sontag.

Why people move

State officials hope to lure back people who left Kansas and might want to return. Or they might attract others who want to trade busy city life for rural life in Kansas. They say they are already getting nibbles.

But experts — while praising the idea as innovative — doubt it will reverse migration trends seen not only in Kansas but throughout the Midwest and the nation.

"On the face of it, I would say you're better off making tax breaks for companies to move somewhere to create jobs," said William Frey, a demographer at the Brookings Institution.

"There's not much of a downside if people aren't going there anyway," Frey said. "But to me, it's employment that tends to attract people."

Census figures underscore that notion.

The census reported in May that the No. 1 reason people move is for housing — cited in 2010 by 44 percent of those who had moved in the previous year. They were searching for a better and cheaper home, or they wanted a nicer neighborhood.

About 30 percent moved for family reasons such as getting married. And about 16 percent moved for employment reasons such as taking a new job or arranging a shorter commute.

"People simply do not make migration decisions based on income tax issues," said Laszlo Kulcsar, a demographer at Kansas State University.

State Revenue Secretary Nick Jordan said the policy was designed to follow the success of states like Florida, Texas and South Dakota that don't have income taxes and have seen their populations grow.

"No personal income tax is a pretty doggone strong incentive for people," Jordan said.

But if it's jobs that people are after, Kearny County in western Kansas might benefit from the program. Kearny County is just west of where Sunflower Electric Power Corp. wants to build its coal-fired power plant near Holcomb.

"We do feel we have an opportunity to grow, but that hinges on other things happening," said Ralph Goodnight, the county's director for community development.

Meshing the tax incentives and the student loan subsidy with jobs created by the power plant could help a county where the population dropped 12 percent in the past decade, Goodnight said.

Goodnight praised the governor for using his incentive plan to spotlight the population decline.

"This is the first administration in some time that has proposed a program that actually benefits rural counties in Kansas," Goodnight said.

Some counties wait

The state's plan requires counties to match the student loan subsidy dollar for dollar.

So far, 23 of the 50 counties have agreed to participate in the loan program, which has received 24 applications since July 1.

Counties are committing anywhere from $3,000 to $26,000 to the program. The state has set aside $1.3 million.

But not every county is on board.

Leaders in Washington County, for instance, have seen the state cut funds before, and they are afraid what might happen to this program. Some officials would like to gauge how the program does before committing money.

Washington County Commissioner Gene Helms says it's not fair to use general tax dollars to supplement student loans.

"I think they can pay for it themselves if they're making a living on their own," Helms said.

Christy L'Ecuyer, Washington County's business coordinator, couldn't say for sure what effect the program would have on the county.

Another approach, she said, might be to offer more incentives for middle-income housing. Washington County has a lot of jobs — its unemployment rate is 4.2 percent — but it doesn't have enough rental and affordable housing, she said.

Potential workers often have too much money to qualify for low-income housing credits, she said, but can't afford the higher-end housing that's available.

"It's kind of a Catch-22."

Nearby Republic County is also taking a wait-and-see attitude.

"It's unproven," Commissioner Frank Rytych. "It's not that we're against the program. We don't know that it's going to pan out OK. We don't want to get caught holding the bag."

State officials point out that neither a county nor the state has to continue paying the benefits if the program is halted, which is unlikely to happen while Brownback is governor.

"I don't know if we're going to see a tremendous swell of people coming back to Kansas on the program, but I think it will help start changing some of the economic situations in these rural communities," Jordan said.