About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline

LOG IN
LOG IN


1 Scott Drenkard & Joseph Henchman, Reexamining Kansas' Pass-through Carve-out 1 (2017)

handle is hein.taxfoundation/rexksptco0001 and id is 1 raw text is: Reexamining Kansas' Pass-through Carve-out Scott Drenkard Economist & Director of State Projects, Tax Foundation Joseph Henchman Vice President of Legal & State Projects, Tax Foundation Kansas House Committee on Taxation January 19,2017 Chairman Johnson, Vice Chairman Phillips, Ranking Member Sawyer, Members of the Committee, Thank you for the opportunity to speak with you today. My name is Scott Drenkard, and I'm an economist and the director of state projects at the Tax Foundation. I am joined by my colleague Joe Henchman, Vice President of Legal & State Projects at the Tax Foundation. For those unfamiliar with our group, we are a non-partisan, non-profit organization that has monitored fiscal policy at all levels of government since 1937. We have produced the Facts & Figures handbook since 1941, we calculate Tax Freedom Day each year, and have a wealth of data, rankings, and other information at our website, www.TaxFoundation.org. While we take no position on legislation, we hope to offer our insights and provide a national perspective on tax issues. Kansas' pass-through exemption is costly and has forced other tax increases In 2012, Kansas enacted a tax cut package that reduced income tax rates while completely eliminating income tax on pass-through entities like LLCs, S corps, partnerships, farms, and sole proprietorships. At the time, we warned that the pass-through exemption did not have good economic justification and would encourage economically inefficient, though tax-reducing restructuring activity. We also warned that the tax reductions, while producing positive economic benefits, would cost revenue and ultimately need to be paid for either by cutting spending or increasing taxes elsewhere. In 2013, revenue dropped by $700 million ($300 million more than predicted). Spending that year was only cut $150 million. These numbers are quite large for a $6 billion general revenue fund. The state delayed a planned cut to the sales tax, weakened the generosity of itemized deductions, and drew down reserves to make ends meet. FY 2015 had a significant cash deficit, masked by draining the rainy day fund and beginning