As the result of federal tax policy, Kansas expects to lose $360 million in tax revenue over the next three years.
Richard Auxier at The Urban Institute and Tax Policy Center told The Center Square this is related to the Paycheck Protection Program (PPP) loans.
“In an attempt to help businesses, Congress said not only is PPP not income, but with the payroll it supports, it can still be a deduction,” Auxier said. “This is great for businesses as it lowers taxes, but costs [the state tax] revenue. That’s OK at the federal level because they can deficit finance; it’s tougher at the state level because of balanced budget requirements.”
Federal lawmakers intended for businesses not to pay any federal income taxes on these loans and not pay federal income taxes on expenses made by these loans, Michael Austin, director of the Sandlian Center for Entrepreneurial Government at Kansas Policy Institute, told The Center Square. Kansas tax law means Kansas businesses will automatically pay fewer federal and state taxes, he said.
“These loans are to keep these businesses afloat and encourage investment activity,” Austin said. “Kansas making these businesses pay higher taxes because they refuse to eliminate wasteful programs effectively kicks firms while they are down.”
This forecast is a sobering change from the last several years of Kansas’ greater-than-projected tax revenue as a result of tax reform in 2017. Tax collections have been better than projected for eight consecutive months.
State lawmakers will meet April 20 to discuss budget matters. Gov. Laura Kelly said she is hesitant to resort to any policy that would return Kansas to a state of chronic budget shortfalls.
This article was originally posted on Kansas taxpayers won’t pay income taxes on PPP loan dollars