Kansas has a bit of problem with its tax code, or perhaps the issue at hand is not necessarily Kansas’ broken tax system but the suspicious absence of those all-important tax revenues. Seeking to fill a $416 million budget gap for the FY beginning July 1, it has begun looking at simplifying complicated exemptions but the change could hit already struggling non-profits in the state hard.
Lori McMillan, an associate professor of tax law at Washburn University, said the proposal to not grant exemptions to specifically named organizations but rather categories, such as nonprofit and charitable organizations, was a better policy for the state.
”Sometimes it seems that the criterion for an exemption is one’s ability to find a parking place and the committee room,” said Mark Desetti, a lobbyist for the Kansas National Education Association.
Emily Compton, president and CEO of Goodwill Industries of Kansas, said removing the exemption would increase her operating expenses by $40,000. She said the organization also must come up with $125,000 in unemployment tax contributions this spring and the combined increase in expenditures could result in fewer services and employees.
The change would mostly mean Goodwill sacrificing its sales tax exemption but that’s not all that’s on the chopping block.
John Scott, president of the Interfaith Housing Services Inc. which administers the program in Hutchinson, said the IDA program is budgeted to receive $500,000 worth of 50 percent tax credits each year. For example, if someone invests $100,000 in the program, they receive a $50,000 tax credit.
He said that if the program has to be changed, reducing the amount to $250,000 would be acceptable and still allow it to receive matching grants from other sources.
“We feel this is a win-win compromise. It helps you cut the budget without losing outside revenue, and it does not force us to close the program and possibly cause loss of jobs,” Scott said.
As is, the state exempts $4.2 billion in sales taxes and proposals currently under review by the House Taxation Committee could bring in an additional $196 million – still leaving a $220 million budget gap.
Is Kansas penalizing non-profits is the way to make up the gap? Goodwill Industries claims 83 cents of every dollar generated in its retail stores goes to serving its mission of providing work to individuals in need. Can the government of Kansas claim that level of efficiency when it comes to tax revenues?