KEPC NEWS RELEASE: Income tax bill will ultimately be good for the economy

The Kansas Legislature’s veto override means spending can improve on government services that aid economic growth

The Kansas Economic Progress Council (KEPC) welcomes passage of Senate Bill 30 by the House and Senate veto override Tuesday night.  KEPC opposed the 2012 income tax cuts and has worked to reverse them for the past five years.

KEPC issued the following statement from Executive Director Bernie Koch:

“Low taxes can be an important element in attracting and growing some businesses.  However, serious economic studies indicate other factors to be as important, if not more important.  Those include government investment in infrastructure, education, reliable legal systems, and support for business innovation and improvement.  All of these economic ingredients have been damaged in our state by the 2012 Kansas income tax cuts.

“Even with passage of Senate Bill 30, it will take years of work to recover.  The transportation program, T-WORKS, has been reduced to basic preservation which many believe to be inadequate for simple maintenance of our roads and bridges.  Transportation access is a vital factor in business location. Billions in transfers from the highway fund need to be reversed and the fund shored up.

“School finance is still a work in progress as we await the court’s verdict on a new formula, but cuts to higher education are particularly troubling.  A high level of education has been shown to be the strongest predictor of economic growth, yet enrollment in Kansas public higher education institutions was one percent lower this school year as state funding was reduced and yearly tuition hikes increasingly put post-secondary education out of reach for many families.

“Funding cuts have impacted reliable legal systems.  Effective law enforcement has suffered.  There’s a shortage of highway patrol officers and tremendous turnover rates of uniformed correctional officers at our prisons.

“Senate Bill 30 is not a magic bullet that will turn things around immediately, and returning the state income tax to business pass-through entities will be painful for many, but it’s a very good beginning to reversing our direction, rebuilding our state’s finances, and providing the necessary government services which are an important basis for the economy to succeed.”

Click here for a printable version of the press release.

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For more information, contact:  Bernie Koch at 316.207.3380 or berniekoch@yahoo.com.

The Kansas Economic Progress Council is a statewide business organization whose members include businesses, local chambers of commerce, trade organizations, and individuals.  KEPC is a 501(c) (4) not-for-profit organization.  The purpose of KEPC is to provide information, research and education on statewide issues that affect the economy of the State of Kansas as well as the quality of life of its citizens.

Kansas Economic Progress Council
www.ksepc.org
212 SW 8th Avenue, Suite 200
Topeka KS  66612
Bernie Koch, Executive Director

PRESS RELEASE: Kansas continues to lag the region in 10 separate measures

Governor’s Council of Economic Advisors report shows Kansas trailing in many economic growth categories.

Topeka, Kan. – The November, 2015 report, “Indicators of the Kansas Economy: A Review of Economic Trends and the Kansas Economy,” shows Kansas lagging in growth behind other states in the region in the following categories:

  • Population
  • Gross domestic product
  • Personal income
  • Total nonfarm employment
  • Private sector employment
  • Manufacturing employment
  • Service employment
  • Private industry wage level
  • Private establishment (business)
  • Building permits

Although total personal income growth lagged the region, per capita personal income growth outpaced the region on a percentage basis with a 1.5% increase compared to 1.2% for the region.

The report is the result of a system of measurements put together over four years ago to monitor key economic indicators in the state. At the time, Governor Brownback was quoted as saying, “These economic metrics will allow us to determine the state’s relative economic position as it relates to the six-state region and the nation, and to monitor in a timely manner if our policies and initiatives are having the desired economic effect.”

IKE_graph

One of many illustrations which indicate that Kansas is trailing other states on important economic indicators.

Kansas Economic Progress Council Executive Director Bernie Koch said, “This is the third time since 2014 we have called attention to this report, which uses benchmarks established specifically to measure the success or failure of the state’s economic policies.

“We believe the report shows what a growing number of the public and policy-makers have concluded: the facts do not corroborate that the 2012 and 2013 income tax cuts have had any significant or measurable positive influence on the Kansas economy. While per capita personal income is now above the region, that’s only one of many factors and is inconclusive,” said Koch.

Although the Governor’s Council of Economic Advisors Report states that it “continues the initiative as a service to its members and the public at large,” the reports have not been readily available online since March of 2014. Therefore, as a public service, the Kansas Economic Progress Council is making the report available online exclusively via our website.

A printable version of this press release is available here.

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The Kansas Economic Progress Council is a not for profit designed to draw together organizations and businesses interested in advancing sound public policy in Kansas to enhance our state’s quality of life.

Kansas Economic Progress Council
www.ksepc.org

212 SW 8th Avenue, Suite 200Topeka KS  66612
Bernie Koch, Executive Director

KEPC NEWS RELEASE: Kansas’ own benchmarks lag the region

Wichita, Kan. – Standards established by the State of Kansas and Governor Sam Brownback three years ago to measure the success of the Administration’s economic policies show the state’s economy trailing the rest of the region.

The Kansas Economic Progress Council (KEPC) obtained a copy of the February 2015 report from the Governor’s Council of Economic Advisors which shows Kansas continues to lag in growth behind six states in the region, using the Administration’s own stated benchmarks.

The report is based on standards established by Governor Sam Brownback three years ago to measure the success of the Administration’s economic policies.

The report shows that over the past year Kansas trails the region in the growth of:

  • Population
  • Gross State Product
  • Personal income
  • Building permits (declining while region is growing)
  • Total nonfarm employment (region is growing 2x as fast)
  • Private sector employment
  • Manufacturing employment (declining while region is growing)
  • Service employment
  • Total private establishments

Unemployment and initial claims for unemployment are down, but not as much as the rest of the region, according to the report.Indicators_Feb2015_nonfarm

Kansas growth in per capital personal income is one positive, but some economists have been pointing to government transfer payments (Social Security, student loans, etc) as the reason.

The report, Indicators of the Kansas Economy: A Review of Economic Trends and the Kansas Economy,” is posted on the Kansas Economic Progress Council web site.  Nine previous reports, beginning in February of 2012, were posted on the Kansas Department of Commerce web site.  However, none have been posted since March of 2014.

Governor Brownback said three years ago:

“These economic metrics will allow us to determine the state’s relative economic position as it relates to the six-state region and the nation, and to monitor in a timely manner if our policies and initiatives are having the desired economic effect.”

This report has implications for tax policy as the legislature looks at the state’s current budget dilemma and whether to revisit the 2012 and 2013 income tax cuts.

These are the Governor’s own measures of success and they don’t show significant progress.

The February 2015 report can be accessed here.

KEPC PRESS RELEASE: Kansas must revisit income tax cuts

Unprecedented budget crisis endangers education at all levels and all basic government functions

Topeka, Kan. – Kansas Economic Progress Council (KEPC) Executive Director Bernie Koch called on the legislature and governor to revisit the 2012 and 2013 Kansas income tax cuts as they wrestle with the state’s growing budget crisis. Building a working budget will be difficult – if not impossible – without restored revenue.

“It is evident that the 2012 and 2013 Kansas income tax changes went too far and will continue to result in severe cuts that impact the ability of government at the state and local levels to provide very basic services,” said Koch. “Stability and viability of public services are necessary to the functioning of the economy and society.”

With the Governor’s allotments and suggested reductions, the Fiscal Year 2016 shortfall becomes 10.2 percent of the Kansas general fund budget. Koch noted that if the recent Gannon school finance ruling is upheld, the FY 2016 shortfall could grow to between $1.196 and $1.419 billion, representing between 18.8 and 22.3 percent of the state general fund.

Such a large shortfall cannot be handled with budget reductions alone. At risk are K-12 education, higher education, transportation, services provided by local government, and other important basic government functions.

KEPC supports restoring a more balanced tax structure that will once again provide the services Kansas citizens need.

The Kansas Economic Progress Council pointed out last March that the governor’s own standards to measure economic success show the state’s income tax cuts are not growing the economy.

“In fact, it appears the standards established to judge the effectiveness of the policies are no longer being publicly benchmarked,” said Koch. “At one time the ‘Indicators of the Kansas Economy’ of the Governor’s Council of Economic Advisors were updated every three to four months. It appears they have not been publicly updated since March of 2014.”

At the time the standards were adopted, Governor Brownback stated the standards would be used “… to monitor in a timely manner if our policies and initiatives are having the desired economic effect.”

Koch said, “Facing this severely brutal budget crisis while clinging to income tax cuts that have little positive impact is imprudent.”

A printable PDF version of the press release is available by clicking here.

Tax Study Released Today

A new study on the ramifications of lowering the state income tax was released today at a statehouse news conference. Bernie Koch, executive director of KEPC, and study author Dr. John Wong presented findings at the statehouse today. The study finds that, for every 1 job created, 1.63 are lost due to study released today finds that a lowering of the income tax would result in a loss of 1.63 jobs due to a reduction in overall state spending. The study was commissioned by the Kansas Economic Progress Council.

The press release is available here, and the ful text of the study is available here.

Dr. Wong’s slide deck is available here.

PRESS RELEASE: Arkansas Chamber tax study has lessons for Kansas

FOR IMMEDIATE RELEASE
January 6, 2012

CONTACT
Bernie Koch: 316.207.3380 or berniekoch@yahoo.com

A detailed business tax study of eight states shows Missouri has the most competitive tax structure in the region, not Texas, according to Bernie Koch, Executive Director of the Kansas Economic Progress Council.

Koch says the study, done for the Arkansas Chamber of Commerce by Ernst & Young, shows Texas is competitive in a few areas, including business headquarters and support services.  But, the Lone Star State has the highest average effective property taxes on business in the region.

“There are some other surprises here that I hope the Kansas Legislature studies as it reviews the Kansas tax structure,” said Koch.  “I think anybody who looks at it will see that the Ernst & Young study is a very valuable analysis.”

The report looks at the effective tax rate after statutory tax credits on different kinds of businesses in eight states in the region, including Kansas.  The eight states are:  Arkansas, Kansas, Louisiana, Mississippi, Missouri, Oklahoma, Tennessee, and Texas.  The taxes included are corporate income taxes, franchise taxes, sales and use taxes on business purchases, and local property taxes.

The types of companies considered are corporate headquarters, research and development, manufacturing, food processing, renewable energy, and business support services.

Estimates of state and local business tax burdens by industry come from Ernst & Young’s business tax competitiveness model (BTCM).  The BTCM calculates current state and local business tax burdens imposed on new in-state capital investments, and projects these burdens by year over a 30-year life span.

Some of the findings:

  • Missouri is the real tax competitor in the region, not Texas.  Missouri ranks better than Kansas in competitive tax rates in all categories of business.  In fact, Missouri out-competes all of the other states studied in five of the eight categories: research and development, durable goods manufacturing, food product manufacturing, renewable energy equipment manufacturing, and motor vehicle parts manufacturing.
  • Texas is most competitive in the region for company headquarters and business support services, but scores poorly on tax burden for renewable energy equipment manufacturing.
  • Texas has the highest effective tax rate in the region for motor vehicle parts manufacturing.
  • Kansas beats Texas in both renewable energy equipment manufacturing and motor vehicle parts manufacturing.  Kansas beats all other states studied in these categories except Missouri.
  • Kansas beats Texas slightly on effective tax rate for durable goods manufacturing.
  • Kansas ranks worst in the region for state and local taxes on business support services.
  • Kansas ranks second worst in the region for state and local taxes on research and development operations
  • Effective tax rates vary widely in Kansas by business.  For example, Kansas business support services have an effective tax rate of 19.7% while durable goods manufacturing has an effective tax rate of 8.1%.  Kansas has the highest tax burden in the region for services, but among the lowest for manufacturing.
  • Tax credits in a state make a difference in competitiveness. Kansas’ rank jumps up one position among the states in durable goods manufacturing due to tax credits.  It appears that Kansas would be less competitive in tax structure among these states if business tax credits are eliminated, as some believe will be proposed when the Legislature convenes.
  • Missouri’s tax credits average 27%, the highest of the states studied, and have a significant impact on that state’s business tax rankings.
  • Texas has high effective property taxes in the region in six of the eight categories and is second-highest in the category of renewable energy equipment manufacturing.  The Kansas Economic Progress Council believes Texas high property taxes on business are, in part, the result of the lack of an individual income tax to help fund government services.

Ernst & Young is one of the largest professional services networks in the world and one of the “Big Four” accounting firms.  It says that the tax burden estimates in the study can be used to evaluate how competitive state and local business taxes are for new investments and job creation.  The estimates measure the “additional state and local taxes that a new or expanding business would pay on the capital investment and economic activity” added to a state’s economy.

An executive summary of the study was given to Arkansas lawmakers at an interim Joint Revenue and Tax Committee meeting on November 17.  The complete study was released December 6 to the media and is available online. (Note:  The cover page says DRAFT, but this is the version released to the media.)

Below are two charts from the study, including:

  • Effective tax ratings by industry after tax credits

  • A chart showing overall average effective tax rates, broken out by tax type (Note that in this chart Texas is the overall lowest, but has the highest property tax burden on business of the states in the study.  Kansas property tax burden overall is lower than Texas.)

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PRESS RELEASE: KEPC Reacts to ALEC ‘Rich States Poor States’ study

FOR IMMEDIATE RELEASE
June 22, 2011

Contact: Bernie Koch
316.207.3380

WICHITA, KAN. – Kansas Economic Progress Council Executive Director Bernie Koch reacted to the annual American Legislative Exchange Council Rich States Poor States study, which was released today. The study ranks Kansas 27th among the states in overall economic outlook and 34th in economic performance.

Koch’s statement:

“The Rich States Poor States study is an informative and useful document. It is important to review where a state stands on taxes and regulation. However this is a narrow approach to the overall evaluation of economic outlook. It gives heavy weight to taxes and regulations. Other factors not evaluated in the study have been shown by respected empirical studies to be as important, if not more important, including investment in infrastructure and equipment; labor efficiency; education; and innovation.

“KEPC recognizes the following elements are important to economic health and growth: The investment rate in plant and equipment, including efficient physical and communications infrastructure, has a strong positive impact on growth. The higher an economy’s capital intensity (machines, buildings, roads, bridges, etc.), the more prosperous the economy. Human capital and the efficiency of labor have also been shown to be significant to growth. Measures of human capital include the literacy rate, school enrollment ratios, and labor demographics. Linked to investment and human capital, there is substantial support for the contribution of continuing technological innovation and improvement in sustaining economic growth.

“This suggests that support for research and development and education is important. Public policy which supports economic freedom through open economies supports higher growth rates. We would include tax structure and business regulation in this category. Reliable legal systems are a significant basis for economic growth. These systems provide dependable enforcement of private contracts, protection of private property rights, effective law enforcement, and an absence of corruption. As a study for the Council on State Taxation (COST) noted earlier this year, ‘non-tax cost factors are usually more significant in determining the overall cost of operating a facility in each state… The Kansas Economic Progress Council believes there can be a positive impact on the economy by strategically lowering taxes. We believe Kansas needs to study tax structure changes very carefully, especially their impact on other factors that are clearly essential elements of a healthy, growing economy. We caution against concluding that simply lower taxes and spending cuts will lead to economic growth.”

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PRESS RELEASE: Study suggests eliminating income tax a mistake

Kansas Economic Progress Council Executive Director Bernie Koch said today a study released last week by the Council On State Taxation (COST) should serve as a warning to Kansas legislators who want to eliminate the Kansas individual income tax.

The study, prepared by Ernst & Young LLP, cautions legislators about examining just a single tax when attempting to be competitive in attracting new investments.

Kansas ranks 48th among states in competitive tax burden on new investments. Some legislators have pointed to the ranking as an indication that Kansas needs to pass income tax phase-out legislation already approved by the Kansas House of Representatives.

However, the study says:

The results also clearly show that legislators need to examine the entire system of state and local business taxes, not just a single tax, in evaluating their state’s tax competitiveness. In fact, the results suggest that legislators have not paid enough attention to the role of “sales” in understanding tax burdens imposed on business investments and on-going operations.”

“Although Kansas did not rank well in this study,” said Koch, “most states without an income tax did not rank high. A few are in the top ten, but many of the states without an individual income tax are ranked in the middle or the bottom of this study.”

The study shows New Hampshire and Wyoming are the only non-income tax states in the top ten. Tennessee is in the bottom ten. Of states with no individual income tax, here are their rankings in the COST study:

New Hampshire – #7
Wyoming – #9
South Dakota – #13
Texas – #20
Alaska – #25
Florida – #27
Nevada – #33
Washington – #40
Tennessee – #45

“Whether or not a state has an income tax seems to have no bearing on these rankings,” said Koch. “In fact, some states with high individual income taxes did very well in this study.”

Maine has an 8.5% top income tax rate and ranks first. Oregon has an 11% top rate and is ranked second. Also in the top ten are Wisconsin (7.75%), Delaware (6.95%) and Minnesota (7.85%).

Kansas top individual income tax rate is 6.45%.

Koch said, “The Kansas Economic Progress Council believes there can be a positive impact on the economy by strategically lowering taxes that affect business. We believe Kansas needs to study tax structure changes very carefully before moving forward.

The entire study is available online at the Council On State Taxation web site, www.cost.org.

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PRESS RELEASE: Statewide survey says ‘Don’t repeal sales tax’

Wichita, Kan. – Despite the results of the recent general election, Kansans still strongly support the one cent sales tax increase enacted by the Kansas Legislature and don’t want it repealed, according to Bernie Koch, Executive Director of the Kansas Economic Progress Council.

“A Wichita television station’s independent statewide survey shows most Kansans oppose repeal if it will lead to more cuts in education, social services and public safety,” said Koch.

“Even those who initially supported repeal changed their mind when asked about the cuts scenario.” Koch added, “When voters realize the consequences of those cuts – reductions in the services they depend on and support – they are significantly less supportive of repeal.”

He added, “The poll shows that the election results for the legislature were not a referendum on the sales tax.”

Conducted by the national polling firm Survey USA for television station KWCH, 500 Kansans were asked, “Would you support or oppose repealing the one cent sales tax that went into effect in July?”

38% said support, 47% said oppose, while 14% were not sure.

However, the 38% who supported repeal were then asked, “If repealing the sales tax meant further cuts to education, social services and public safety, would you still want to see it repealed?”

The opposition then melted away, with 67% saying no, 29% yes, and 4% being undecided.

Remember, these were the people surveyed who originally said they would support repeal, but over 2/3rds of the 38% changed their answer to opposing repeal when it was tied to further cuts.

Survey USA’s polls were the most widely quoted statewide in the recent primary and general elections and are known for their general accuracy.

On July 1, the Kansas sales tax increased by one cent to 6.3 percent. In 2013, the sales tax will drop to 5.7 percent, with 0.4 percent going to the state highway fund.

The survey results were released by the television station on its newscasts Wednesday. CLICK HERE to read the full story.

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PRESS RELEASE: Legislative voting record scorecard

Wichita, Kan. – The Kansas Economic Progress Council has released its House and Senate voting scorecards for the 2010 Kansas legislative session. The KEPC is highlights five votes in both the House and Senate that represent our major issue areas during the session.

KEPC Executive Director Bernie Koch said, “We were successful in achieving our goals in all five of these areas. That’s extremely gratifying for such a young organization. We believe all of these issues are important matters for the future economic prosperity of Kansas.

1. Long term transportation plan
KEPC supports pro-growth policies for communities and the state. Ample research shows that statewide transportation funding is vitally important to both existing and expanding business and is an important component to economic growth because of the jobs that such programs generate. Without a new transportation plan, Kansas spending for roads would have dropped to 1971 levels when adjusted for inflation.

2. One cent sales tax increase
KEPC supported a sales tax increase after our own study showed it would result in fewer Kansas job losses than a comparable reduction in state spending. The study was prepared for the Kansas Economic Progress Council by the Center for Urban Studies and Kansas Public Finance Center at Wichita State University. The study indicated 1,946 jobs could be maintained through a 1% sales tax increase and concluded that a sales tax spreads the negative effects broadly while budget cuts would have a more severe impact on businesses and jobs. Beginning in 3 years, a portion of the increase will support the transportation plan.

3. FY 2011 Budget
When government-provided services such as education, transportation, and public safety are not sound, it doesn’t take long for the economy to falter. Faced with the difficult choice of raising revenue or supporting more budget cuts, KEPC supported a budget funded with a revenue enhancement. The alternate proposals would have forced local school districts to increase property taxes. With education over 60 percent of the state general fund, other possible choices included cutting Medicaid, prisons, public safety, and social services.

4. Require supermajority to raise taxes
KEPC was originally founded in 2005 to oppose unreasonable spending and tax limitation legislation. The experiences of Colorado (where the Taxpayer Bill of Rights was suspended due to its impractical affect on government), and Missouri (where the Hancock Amendment has forced damaging state cuts to higher education and roads) have been warnings to Kansans. Amendments offered during Kansas House and Senate debate in 2011 would have required a supermajority to raise taxes. KEPC opposes these mechanisms.

5. Promoting Employment Across Kansas (PEAK)
KEPC believes the Kansas must continually evaluate its economic development tools so the state is able to quickly and effectively respond to growth opportunities and emerging economies. This year’s changes to PEAK (Promoting Employment Across Kansas) enhance one of our newer economic development tools. Employers that create new jobs are authorized to keep a portion of employee withholding taxes for a period of time. This valuable incentive is not implemented until an actual new job is created.

Notes on the scorecards:
• Votes in bold indicate the legislator voted against the KEPC position.
• If a legislator passed on a vote, it counts as a vote contrary to the KEPC position.
• If a legislator was absent, the vote is not counted toward the total percentage of their score.

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