By Associated Press - Tuesday, February 25, 2020

The Kansas City Star, Feb. 23

Is it fair that Kansans who work on the Missouri side of Kansas City pay a 1% earnings tax there - but it doesn’t work the other way around for Missourians who work on the Kansas side?

Probably not. But what if fixing that inequity would open the door to allowing all 105 counties in Kansas to levy a tax on income?

Be careful what you wish for - even when it’s fairness.

Identical bills currently before Kansas Senate and House tax committees - Senate Bill 400 and House Bill 2698 - would allow any county in the state to levy an earnings tax on its residents and others from out-of-county who work there.

It’s a well-meaning effort by state Sen. David Haley, a Democrat from Kansas City, to bring some equity to the bistate relationship. He says it’s only fair that Missourians working in Kansas City, Kansas, pay an earnings tax the same way his constituents who work on the Missouri side pay Kansas City’s.

He’s right in principle, of course. And even though the state’s cross-border workers get credit on their Kansas state income tax for the taxes they pay on the Missouri side, that means Kansas is helping subsidize taxes on the Missouri side of the border.

But the controlling law in this case may be the law of unintended consequences: Even Haley has to admit that the bill would open up the possibility of an earnings tax not just in border counties such as Wyandotte and Johnson, but in every other Kansas county as well.

A county earnings tax would require a public referendum to approve it, certainly. But still, most taxpayers would likely bemoan local units of government picking up the scent of yet another pathway to their pocketbooks.

Conscious of the fact that earnings taxes can apply to companies, the Kansas of Chamber of Commerce has been swift and sweeping in opposing county-level earnings taxes.

“This is another example of government entities in Kansas trying to increase the tax burden on working Kansans and small businesses,” chamber President and CEO Alan Cobb told The Star in a statement. “In today’s economy with so many employees and businesses working remotely, one shouldn’t be penalized because of where they work. Rather than increasing taxes, county governments should be looking for ways to reduce their costs.”

In addition, it’s not as if Kansans aren’t already paying enough in local property taxes, which have risen by more than $1 billion in the past decade, and now rank 18th-most-burdensome in the nation.

State Sen. Caryn Tyson, a Republican from Parker who chairs the Senate Assessment and Taxation Committee, notes that property taxes skyrocketed 164% from 1997 to 2018, and has sponsored a pair of bills that would increase public notice, public hearings and public votes on property tax increases. Gov. Laura Kelly, a Democrat, is also working on incremental property tax relief.

As for handing counties the power to impose earnings taxes? Tyson is more than skeptical, while diplomatic.

“This would be a major change for the state of Kansas,” she told The Star. “I don’t know if that’s the way we want to go with this state.” Income and property taxes are already onerous, she said. Adding another, local, earnings tax? “I just don’t think that’s a winning equation.”

It is said one of the most powerful things in the world is an idea whose time has come. This is not the idea or the time.

Sometimes the most powerful thing to do is nothing.


The Manhattan Mercury, Feb. 19

Gov. Laura Kelly wants to refinance KPERS, but we’re not so sure it’s a good idea.

KPERS is the Kansas Public Employees Retirement System. It’s the pension plan for 318,000 people employed by 1,500 governmental employers in the state. That includes all public school teachers.

What Gov. Kelly wants to do is reamortize KPERS so the state can defer about $963 million in payments over the next five years. That short-term savings would cost taxpayers $4.4 billion long term. The fund currently is worth about $21 billion.

The plan is like taking out a second mortgage on a house. And just like refinancing a personal loan over a longer period, this plan lowers the payments but dramatically increases the total cost of the loan. And in this case, refinancing puts the extra burden on future generations.

We understand the state is in a tough spot. That $963 million is too much to pay at one time. But a plan like this is the reason we’re in this situation now.

According to the Topeka Capital-Journal, lawmakers in 1993 installed a 40-year payment plan to pay off debt to KPERS. The legislature often skipped or delayed payments while struggling with budget issues under former Gov. Sam Brownback. That caused annual payments to increase.

The current annual payment of $702 million will escalate to $1.091 billion by 2033. Under Gov. Kelly’s plan, the annual payment would drop below $600 million next year.

Given the state’s payment history, we just don’t think this is a good idea.

And while KPERS is not at 100% funding, as everyone would probably like it to be, experts have said it’s on solid ground.

The KPERS State/School fund is at 66% and improving. Officials expect it to hit the 80% threshold that industry experts recommend by 2029. Full funding could happen as early as 2033. Refinancing would mean an additional seven years to hit the “good” mark and an additional 10 to hit 100%.


The Topeka Capital-Journal, Feb. 22

Small businesses in Kansas have a distinct competitive disadvantage, and the Legislature should act in this session to make Kansas tax policy consistent with other states.

Last year’s Wayfair decision from the U.S. Supreme Court said that states can mandate that businesses without a physical presence, like a storefront or warehouse, can collect sales taxes on transactions in the state.

The ruling was designed to get states to be able to collect taxes from major online retailers, like Wayfair and Amazon. The decision said only retailers with a “substantial nexus” presence in a state were subject to the ruling. The original law from South Dakota collected sales taxes only from retailers with more than 200 transactions in the state or more than $100,000 in sales, exempting small businesses from the need to collect out-of-state sales tax from purchasers and pay it to states.

In the months following the ruling, most states enacted similar laws, economic nexus thresholds, designed to exempt small businesses from taxes that would be burdensome to collect. For example, a small online seller making crafts and shipping them to buyers all over the country would not need to keep track of collecting and paying sales taxes in all 50 states.

Such an obligation would likely be more of an administrative burden than a financial one, since every state has various tax rates, blackout dates, exemptions and other standards to keep track of. At last count, 43 states have passed small business exceptions to remote seller sales taxes.

In Kansas, the Department of Revenue issued an opinion that they lacked the authority under the state constitution to create a small-seller exception, leaving the Legislature to enact one. To date, it has not.

The Kansas attorney general issued an opinion on the Kansas approach to the Wayfair ruling, noting that the policy that “requires all out-of-state retailers collect and remit is inconsistent with Wayfair, has not been lawfully adopted and is invalid.” Kansas is likely to face legal action if the Legislature does not carve out an exemption.

The one concession Kansas has made to small businesses is membership in a Streamlined Sales Tax organization that gives the state standard regulations with other states. This is a helpful step, but it is not enough.

Kansas businesses are taking the brunt of the decision, since they have to pay sales taxes on furniture, equipment and supplies they purchase from out of state, when competitors from other states do not. Those costs are inevitably passed on to Kansas consumers.

The actual taxes collected from these businesses are invariably small amounts, unlikely to make a big impact in the Kansas budget but likely to have an impact on the bottom line of small-scale retailers.

The Legislature should act to follow the lead of 43 other states and exempt small out-of-state sellers from sales taxes.

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