As Kansas budget worsens, the state keeps giving away taxes to corporations through the PEAK program

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Kansas keeps acting like a problem gambler: It knows that the balance in the bank account is dwindling, but it still wants a seat at the poker table.

Tax revenues in Kansas are coming up $61 million short of already-modest projections through the first quarter of the current fiscal year. Yet the state keeps giving away potential tax revenues to dozens of companies on its side of the Kansas-Missouri state line through its Promoting Employment Across Kansas program. 

PEAK allows its corporate recipients to keep 95 percent of employee withholding taxes for a prescribed number of years. On its face, it seems like a promising way of attracting jobs to Kansas. Except PEAK is overwhelmingly used in Johnson and Wyandotte counties. That means the practical intent of PEAK is to lure Missouri-side jobs just over the state line or keep existing Kansas-side companies nearing the end of their lease from going to Missouri. 

According to a recent disclosure, PEAK has been used 30 times in 2015. Of those, 23 were to benefit companies in Wyandotte or Johnson County. 

If each recipient of PEAK stretches the benefit to its full advantage, it will represent $39,214,264 that won’t go to state coffers over the next several years. Instead, it will remain with the companies selected by the Kansas Commerce Department to receive PEAK benefits.

That’s just for the PEAK benefits that became effective in 2015. The program has been going on since 2010. More than 200 companies have been approved for PEAK since then.

PEAK is a howitzer in the economic-development Border War, meant to match or exceed a similar program in Missouri called Missouri Works. Both states leverage the program so they can say they attracted “new jobs.” When applied locally, the jobs usually aren’t new, but rather ones that hopscotched across the state line.

A more logical application of these programs would be to let companies keep withholding taxes for net new jobs that it creates. For example, if AMC moves 400 jobs across the state line, as it did in 2013 from Kansas City to Leawood, those existing 400 jobs shouldn’t be eligible for the PEAK benefit. But if employment grows to 440 jobs, it could keep withholding taxes for those 40 additional jobs.

Instead, Kansas corporations realize the full benefit of tax assistance while schools and welfare recipients receive close scrutiny from the administration and the Legislature.

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