Kansas gives up hundreds of millions of dollars in revenue to a long list of tax credits each year.
But finding out which companies and individuals benefit from those tax credits, and how much of their tax bill is whittled away through these programs, is nearly impossible.
Kansas is a rare state that forbids disclosure of tax credit recipients, arguing that it’s confidential taxpayer information.
Greg Leroy, executive director of the corporate tax break watchdog Good Jobs First, said the lack of disclosure provides no way of analyzing whether corporate tax credits — often given for a promise of more jobs — actually work.
“When the state doesn’t disclose anything about outcomes of deals, actual jobs created, actual wages paid, you don’t have an honest cost-benefit debate,” Leroy said. “To us, that’s just irresponsible.”
Tax credits function like coupons to allow recipients to lower their tax liability as a reward for making certain investments or behavior, whether it’s scholarship programs, adoptions or paying employees above-average wages. Taken together, tax credits amount to a significant line item in the Kansas budget. In 2015, Kansas recorded $530 million in foregone revenue from tax credits, according to a Kansas Department of Revenue tax expenditure report.
That represents about one-twelfth of Kansas’ $6.1 billion general fund budget. Kansas does not spend as much on public safety — $398.7 million in general fund spending in 2017 — as it waived through tax credits.
Tax credit programs themselves are generally administrative functions. State agencies take applications from people or companies and approve the credits if they qualify. Tax credit advocates say the programs encourage good public policy behavior, like higher wages or business investment.
Personal tax credits account for a chunk of the $530 million. Corporate tax credits in 2015 amounted to more than $90 million alone.
The High Performance Incentive Program, which gives corporations a tax credit if they pay above-average wages, represented $64.6 million in foregone tax revenue. The program is sometimes bundled with other tax incentives when companies are lured to Kansas from other states, often from Missouri.
AMC Entertainment, for example, was eligible for those credits when it moved from downtown Kansas City to Leawood in 2013. The public only knows that because a company spokesperson acknowledged it at the time. But other companies receiving the credits are kept confidential.
Often when Kansas agencies forbid disclosure of state information to the public, they will let lawmakers review what ordinary Kansans can’t see. But with tax credits, even lawmakers are left in the dark.
“Because they’re getting government help, corporate welfare, whatever you want to call it … I think the public has a right to know who’s getting that help and whether they’re creating jobs or not,” said Rep. Tom Sawyer, a Wichita Democrat who is the ranking minority on the House Tax Committee.
Sawyer said the policy, which has persisted under both parties, hampers the Legislature’s ability to judge whether tax credits are working.
“When we’re hard-pressed for revenue, we need to make sure all of these things are working,” Sawyer said. “Because the ones that aren’t working, we need to get rid of.”
Kansas has suffered massive budget shortfalls in recent years, which has forced the state to delay transportation projects, reduce payments to doctors who work with Medicaid patients and repeatedly cut money for higher education.
Sawyer’s sentiment is shared by Kansas Republicans as well.
“I think we do a poor job of tracking our programs and would love to get better data,” said Rep. Steven Johnson, the Assaria Republican who chairs the tax committee.
Mark Desetti, the legislative director for the Kansas National Education Association, the state’s largest teacher union, called the lack of oversight frustrating because “we are giving up a lot of potential revenue for the state” without any analysis on whether individual tax credits are producing the desired job growth.
“If we don’t ever look, we’re just going on blind faith … no basis in reality. We ought to examine every tax credit,” he said.
He said that tax credits should come with “claw back” provisions that allow the state to recapture the lost revenue if the credits do not produce growth.
“Our position is that every time you give a tax credit there ought to be a strong rationale for it and an evaluation process. … Oftentimes there’s very little evidence that tax credits do create jobs,” he said.
It’s a different story in Missouri. With a few taps on a keyboard and clicks of a mouse, it’s easy to discover that the health care technology giant Cerner Corp. received $9 million from Missouri for a job training tax credit in 2017. One can also learn that Republican state Sen. Ryan Silvey’s Northland district, which is home to Cerner, received more in overall tax credits than any other district in the state.
Missouri publishes this data on a website it calls the Accountability Portal.
But Kansans have no way of knowing whether Cerner, which has offices in Wyandotte County, is benefiting from similar programs in their state.
Rachel Whitten, spokeswoman for Gov. Sam Brownback and the Kansas Department of Revenue, said in an email that Kansas law “will not allow us to divulge, or to make known in any way,” personal information from a taxpayer’s return.
“Because the tax credit schedule is part of the tax return, we are not able to disclose any individual information,” Whitten said.
Taxpayer information, such as how much a corporation pays in income taxes or an individual’s tax return, is generally held confidential.
For the record, Cerner confirmed it receives tax credits in Kansas, but it would not say how much.
Most states have not interpreted taxpayer confidentiality as a justification for keeping tax credit information secret.
Leroy, the Good Jobs First executive director, said Kansas is one of a few remaining states that continues to rely on the taxpayer confidentiality argument to keep tax credit recipients secret.
“I think it’s a hyperlegalistic reason,” he said.
He said the level of secrecy with tax credit programs doesn’t make sense when applied to other ways that state governments spend money.
“Would you hide a procurement contract and allow a contractor to build 50 miles of highway while getting paid for 100 miles?” Leroy asked.
The most information Kansans can obtain about tax credits is an annual report published by the Kansas Department of Revenue that lists the total amount of tax credits awarded in a given year.
Whitten said that Revenue Secretary Sam Williams is “open to working with legislators to change the law to make the tax credit data publicly available and increase transparency.”
Lawmakers from both parties have expressed interest in changing tax credit disclosure policies over the years, but the idea has not transformed into a priority when the Legislature convenes each year.