Kansas historic preservation tax credits should not be expanded

Testimony to be delivered to the Kansas House Taxation Committee.

The Kansas historic preservation tax credit system should not be expanded beyond its current limit.

We must recognize that a tax credit is an appropriation of Kansans’ money made through the tax system. If the legislature is not comfortable with writing a developer a check for over $1,000,000 — as in the case with one Wichita developer — it should not make a roundabout contribution through the tax system that has the same economic impact on the state’s finances.

While I would not recommend writing checks to developers, this practice would be more efficient than the current system of subsidy through the tax system. Last month the Legislative Division of Post Audit (audit 10PA03.1) found that the system is not efficient: “Our review showed that, on average, when Historic Preservation Credits were transferred to generate money for a project, they only generated 85 cents for the project for every dollar of potential tax revenue the State gave up.”

Furthermore, the Department of Revenue has not been tracking the tax credits accurately, significantly under-reporting the cost of the program to the legislature. The audit found that “Finding problems like these in a relatively small sample raises questions about the integrity of the Department’s tax credit information.”

The confusing nature of tax credits leads citizens to believe that they have no cost to the state. A leader of an economic development group in Wichita recently asked questions of me that lead me to conclude that he did not understand the economic effect of tax credits.

The program often ends up being welfare for the wealthy. In Wichita the tax credits have been used to renovate a building with condos selling for $300,000 to $950,000. A current case would have a developer in Wichita receive over $1,000,000 for rehabbing apartments that will rent for $1,000 to $2,000. Perhaps $3 million to $4 million will go to the developer of a hotel in downtown Wichita.

We should recognize that living or working in a historic building is a premium amenity that one chooses, just like one might choose granite countertops in their kitchen. We shouldn’t expect others to pay for these voluntary choices.

In Wichita, many of the projects where historic preservation tax credits are sought are already receiving other forms of subsidy, such as TIF financing and property tax abatements.

Some have said that the tax credits put people to work on projects. I would suggest that when Kansans keep their own money — instead of subsidizing wealthy developers — they spend or invest it in ways that they feel best advances their position in life. This too is economic activity that creates jobs.

I have more material about this issue at my website “Voice For Liberty in Wichita” at WichitaLiberty.org. Along the top, click on “Search” and search for historic tax credits for more information. Or, please contact me by email or telephone and I will send you articles.


4 thoughts on “Kansas historic preservation tax credits should not be expanded”

  1. The second sentence in paragraph 2 is the most succinct explanation of what these tax credits are. This leaves no question as to what these credits really are.
    Thank you.

  2. We would have enough money to cover the shortfall if all the Texicans and other out of state tag holders would register their cars, trucks and trailers when they establish residency here.

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