Wednesday, June 20, 2012

Winning the Border War - Kansas Ranks Among the Most Friendly States for Small Business

A study of more then 6,000 small businesses across the nation by found that Kansas ranks in the top 10 easiest states for starting a new small business and 11th overall for the friendliest states for small business.  The study also found women business owners were especially likely to find the state supportive or very supportive of small business.

The study took place over a two month period and did not take into account changes in small business rules that were part of recent pro-growth tax reforms signed into law by Governor Brownback.

According to the Star's Steve Rose:

The special tax exemptions for owners of small businesses [in the new reforms] will make the past border wars with Kansas City seem like a skirmish. Already, my accountant friends’ phones are ringing off the hooks with Missourians considering a move of their small businesses to Kansas.
Lawyers, accountants, doctors, architects — every owner or partner of a limited liability company, as well as every Subchapter S corporation and sole proprietorship — would be foolish not to consider moving to Kansas with the most recent giveaways.
Under the new law, any distribution of the profits to the owners (or partners of a corporation) would be exempt from state income taxes. That can mean thousands — even tens of thousands — of dollars in tax savings for each owner or partner, enough to lure many businesses across the state line.
Despite admissions the reforms will entice new businesses to Kansas, Rose and other critics still incorrectly claim the tax cuts will force draconian budget cuts.  After repeating this false assertion, he seems to debunk his own argument:
[I]t is a definite plus for Johnson County and for Kansas, because all of the taxes on the salaries of owners and employees of these relocated companies will go into the state’s coffers.
Rose also states the majority of new businesses attracted to Kansas will locate in Johnson County, a county he admits is responsible for paying one-third of the total tax revenues collected by the state.  Even though the states top tax payer rate will decline to 4.9 percent from 6.4, the hundreds, if not thousands of new tax payers will result in a dramatic increase in revenues.  It will also means Johnson County will be responsible for subsidizing an even greater portion of the states' budget.

Rose calls these tax reforms "regressive".  If by regressive he means Johnson County residence now have to shoulder more of the burden of supporting Kansas' other 104 counties, I agree.

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