PEAK subsidy costs Kansas $48.5 million annually

Dave TrabertTax & Spending

Many Democrats and Republicans in the Kansas Legislature are pushing for a very large personal income tax increase as the primary method of balancing the budget over the next two years, but they’ve shown little interest in stopping most of the special tax breaks they give to select businesses and government retirees.  The PEAK subsidy (Promoting Employment Across Kansas) is one of those preferential programs and it’s costing $48.5 million per year according to information from the Kansas Department of Commerce.

Under PEAK, qualifying employers are allowed to retain 95 percent of the Kansas withholding tax of PEAK-Eligible employees/jobs that are paid at or above the county median wage where the PEAK business facility is located. Depending on the number of PEAK jobs/employees to be hired over a five-year period and their wage levels, the Secretary can approve a PEAK benefit for up to 10 years.

Legislation has been introduced to the Senate Assessment and Taxation Committee to restrict PEAK or to at least temporarily prevent more subsidies from being doled out but it’s unclear whether it will get out of committee. Resistance to halting or suspending the program is particularly odd, given that the PEAK subsidy has been found to be ineffective.  Nathan Jensen, then at Washington University, found that PEAK recipients were no more likely to add jobs than non-PEAK recipients.

Ironically, the only tax change the Legislators want to make would be to raise taxes on the small businesses actually driving job growth within Kansas.  The exemption on pass-through income for proprietors, partnerships, LLCs and sub-S corporations is at least partially responsible for 82 percent on new jobs created in 2013 and 2014.  Employment at those pass-through firms grew just 2.4 percent in the two years prior the exemption but jumped to 8.4 percent in its first two years.

The following document lists the 261 current PEAK subsidy recipients as well their estimated lifetime and annual tax benefit.

PEAK Agreements
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