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1 Chris Atkins & Jonathan Williams, Corporate Tax Reform Will Enhance Kansas Competitiveness 1 (2007)

handle is hein.taxfoundation/ffhixz0001 and id is 1 raw text is: FOU AgN DAT IO0N
February 21, 2007
Corporate Tax Reform Will Enhance Kansas Competitiveness
by Chris Atkins and Jonathan Williams
Fiscal Fact No. 78
I. Introduction
Occasionally, politicians get the big questions right. In no place is that more evident in
2007 than in Kansas, where lawmakers are currently debating a package of corporate tax
reform plans.
The Kansas tax burden is ripe for reduction, as Kansas taxpayers face the 18th highest
burden of any state in the U.S., and the second highest looking just as Kansas' border
states. Reducing corporate tax rates, as Governor Sebelius and legislative leaders are
working to do, is also exactly the right way to reduce the burden, as Kansas' corporate
franchise and income tax rates are also higher than most other states.
As the old saying goes, however, the devil is in the details. While Kansas lawmakers are
correct to focus on corporate tax reform, several of the proposals on the table will not
achieve the goal of increasing the competitiveness of the Kansas tax system. How far do
lawmakers need to go in reducing corporate taxes to truly become competitive?
This study answers that question by presenting data on the Kansas tax burden, Kansas'
business tax structure, and examining the Kansas corporate franchise and income taxes in
detail. It concludes, based on the data, that Kansas needs to eliminate the franchise tax
and reduce the corporate tax rate to at least 6.25 percent. Stopping short of these goals
would not significantly enhance the competitiveness of the Kansas tax system and may,
in the case of a failure to eliminate the franchise tax, actually lead to a decrease in
competitiveness since Kansas' neighboring states are ripe to repeal or reduce franchise
taxes as well.
II. Kansas' Tax Burden
In both real and comparative terms, Kansas' state and local tax burden has increased since
1970. By burden we mean the fraction of state income taken by taxes of any kind.
Kansas' 2006 tax burden of 10.7 percent of income is average and ranks 18th highest
nationally. However, when compared regionally, taxpayers pay the second highest tax

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