JEAN HANNA Associated press
TOPEKA, Kan. (AP) “Kansas could phase out its corporate income tax in a move that would also broaden its incentives to attract new businesses, and the provision is problematic as lawmakers rush to help the state to attract an undisclosed multi-billion dollar project.
The head of the State House Commerce Committee on Thursday called the measure “unfortunate” and postponed a vote until Monday on a bill authorizing hundreds of millions of dollars in incentives for billion-dollar business projects. The Senate approved the measure with bipartisan support last week, and the GOP-controlled legislature still hopes to wrap up work on the bill next week.
Democratic Gov. Laura Kelly and the state Department of Commerce are pushing for a quick pass so the agency can offer an anonymous company $1 billion or more in incentives to make Kansas the home of what officials in the department say they are a $4 billion facility. Kelly’s office and the department were negotiating with lawmakers.
Republican senators added a corporate tax cut, arguing that other businesses, especially small ones, should also get a break if the state offers huge incentives to sole proprietorships. But the provision is written so that the state will continue to reduce the tax in future years, perhaps until it is eliminated.
Kelly, other Democrats and the Department of Commerce favor a modest reduction in the corporate tax rate. Even some Republicans in favor of a series of cuts acknowledge that the wording of the challenged provision is vague enough that the cuts could be more aggressive than intended.
The measure would give the Department of Commerce the power to reduce a company’s tax burden, cover part of its payroll, reimburse certain employee training costs and reduce its local property taxes. It could also offer breaks to up to five top vendors named by that company.
Some GOP conservatives have criticized the measure as crony capitalism that forces the state to inappropriately pick economic winners and losers.
Assistant Commerce Secretary Paul Hughes told the House committee this week that Kansas is pursuing “a huge, advanced manufacturing plant” that will employ 4,000 people earning an average of $50,000 a year. Officials and lawmakers who know more details say they were required to sign an agreement not to release the information publicly.
The bill would also reduce the state’s corporate income tax by half a percentage point once that corporation begins receiving the incentives, raising the top rate from 7% to 6.5%. . The bill says the tax will continue to drop by half a percentage point for each year “a qualified business or supplier receives benefits.”
Senate Commerce Committee Chair Renee Erickson, a Republican from Wichita, said the goal was to secure multiple corporate income tax cuts so Kansas would be more competitive with other states. . Texas has no corporate income tax; Oklahoma’s top tax rate fell to 4% this year, and the top rates in Arkansas, Colorado, Missouri and New Mexico are below 6%, according to the Tax Non-profit foundation.