When Kansas grants tax incentives to businesses across the state, the goal is to create jobs and stimulate growth to make up that lost tax revenue elsewhere, but legislators said Friday they don’t have a good method to measure those incentives’ effectiveness.
“We just need better accountability,” said Wichita Democratic Rep. Tom Sawyer. “I guess for years, we’ve just assumed they work. That’s an assumption we can’t really afford to make.”
They’re looking to state auditors to make recommendations about reviewing tax incentives after the Pew Charitable Trusts deemed Kansas “trailing” in its ability to evaluate the economic impacts of its programs. Other states, Pew reports, perform regular reviews and require legislators to consider the economic impact of incentive policies.
When Kansas grants a business an incentive to relocate or expand in the state, pay above-average wages or build a new development, it doesn’t know whether that will pay off.
“Basically, that’s the problem,” Sawyer said. “We don’t have an evaluation process, so that’s what we need so we can find out if they’re working. And if they’re not working, we need to change them.”
Kansas grants tax incentives through a number of programs. The Promoting Employment Across Kansas program, PEAK, encourages businesses to relocate or expand in Kansas. The High Performance Incentive Program pushes businesses to give above-average wages, and STAR bonds spur new developments by using sales taxes to pay off bonds that fund project construction.
“If we’re going to forego tax dollars, we’ve got to know we’re getting benefit, we’re getting jobs and we’re actually making money in the long run — that the jobs they’re creating are actually creating more taxes than the tax incentives are costing,” Sawyer said. “Now, if they’re not, we need to get rid of those incentives or change them.”
Rep. Steven Johnson, an Assaria Republican, chairs the House taxation committee and an interim committee on taxation meeting his fall. He said the committee decided to follow auditors’ recommendations on new evaluation tools. That study will be released next week.
“I think a number of folks are looking for how do we have appropriate accountability for each of those credits and exemptions,” Johnson said.
He said it was important to make sure the state was “adequately and fairly” distributing tax burden across the taxpayer base.
Kansas also faces a tight budget outlook. The state is projected to have budget shortfalls by 2020 and has to respond to a Kansas Supreme Court ruling that it’s not spending enough on schools. Officials are also working to build a new prison in Lansing and renovate state psychiatric hospitals.