There has been ongoing discussion and evaluation of the small business tax policy, which will continue.
We all interact with small businesses on a day-to-day basis, and every national statistic shows these are key components to our communities and are also significant job creators.
These small businesses have had a difficult time finding capital to grow. Many are entrepreneurs wanting to grow their business in Kansas and don’t qualify for many of the incentives available to large corporations.
To assist them, Kansas has created one of the best small business environments in the country, lowering individual income tax rates by an average 30 percent for Kansas since 2013. Seventy-one percent of the tax savings went to families and individuals, with income taxes eliminated for more than 300,000 of Kansas’ lowest income families. Only 29 percent of the tax savings went to small businesses.
There has been ongoing discussion and evaluation of the small business tax policy, which will continue. The policy has allowed many businesses to grow, and 20,000 first-time small business filers have come to Kansas. These are people and businesses whose Social Security number, name or name of the company has not previously appeared on a Kansas tax return.
The vast majority of the businesses taking advantage of the exemption are truly small. Ninety-three percent have a net income of less than $75,000
They have brought more than $1 billion in new income to Kansas and $899 million in taxable income because small businesses, even with the exemption, pay taxes on wages, capital gains, and dividends and guaranteed payments.
We recognize that people are frustrated and concerned that, while state revenues have been growing annually since fiscal year 2014, collections have not been meeting estimates.
The administration shares that concern and has assembled an external review team of accountants and bankers who are studying the Consensus Estimating Process to see if we can develop a new more reliable and accurate estimating formula.
The group will present their recommendations to the governor’s office by late October. Budget officials and the governor’s office will then begin planning the budget and present a workable, structured plan to the Legislature in January. We look forward to working with the Legislature to address higher than anticipated government expenditures.
There are some who argue that the solution to our challenges is to eliminate the exemption for small business, or even eliminate all the income tax cuts since 2013.
We have said all along that the answer is not higher taxes.
We must continue to put the people of Kansas before the growth of government by managing expenditures and being fiscally responsible while meeting our state’s core needs.