A Kansas business lobbying organization and a conservative Washington, D.C., think tank on Tuesday presented a 150-page report outlining income, property and sales tax reform options with potential to help the state's economy gain traction.
The Kansas Chamber partnered with the Tax Foundation on a road map for modernizing the income tax system for benefit of large and small companies while making adjustments to broaden the sales tax and adding transparency to property tax decisions.
"For the last half century, we've grown slowly," said Alan Cobb, president and CEO of the Kansas Chamber. "We continue to lag behind as a state competing in a global market for jobs and talent. The Kansas tax code needs significant changes to help improve the business climate and grow the state's economy."
In 2019, Gov. Laura Kelly vetoed two bills endorsed by the Kansas Chamber that would have implemented major recommendations offered by the Tax Foundation. The Democratic governor formed a bipartisan council that last week proposed modest change in tax law unlikely to have dramatic influence on state revenue.
The Tax Foundation recommended the state exempt foreign income from state income tax. It is an issue that surfaced nationally with the 2017 signing by President Donald Trump of a bill lowering federal income tax on U.S. multinational profits held overseas. Many states passed legislation to exclude repatriated income, but Kansas hasn't relieved these corporations of in-state liability.
In addition, the foundation's advisers proposed Kansas grant individuals the right to itemize deductions on state income taxes and claim the inflated standard deduction on federal taxes. Existing Kansas law requires people to choose standard deductions or itemize deductions on both forms.
The foundation urged Kansas to limit sales tax collections by out-of-state marketers to companies with a robust presence in the state rather than requiring all remote sellers to collect sales tax for Kansas. For example, Kansas could apply collection requirements to nonresident businesses doing a minimum of $100,000 annually in internet sales so mom-and-pop businesses weren't burdened.
Foundation analysts suggested Kansas extend the sales tax to include services as well as goods. Another goal would be restructuring of a state-mandated property tax lid on local units of government to make the process more transparent to the public, the report said.
Michael Lucci, Tax Foundation's vice president, said Kansas lawmakers in 2020 and beyond had an opportunity to make the state known for something other than a wrecked tax experiment. It was a reference to action in 2012 and 2013 by Republican Gov. Sam Brownback eliminating the income tax for 330,000 business owners and cutting income tax rates for individuals.
Much of Brownback's tax program was repealed in 2017 after years of revenue shortfalls, spending rollbacks, heavy borrowing, sales tax increases and other maneuvering to keep one step ahead of the budget crisis.
"It's time to turn the page on the debates of the past decade and chart a new course. One that makes Kansas a different kind of watchword," Lucci said.