Another Wichita company that paid to persuade you to vote for higher taxes now seeks to avoid paying those taxes.
Next week the Wichita City Council will consider issuing industrial revenue bonds to benefit a local company. In Kansas, IRBs are not a loan of money from government. Instead, the bonds are a vehicle for conveying property tax abatements, and often sales tax exemptions. 1 The applicant company is Hijos, LLC/JR Custom Metal Products, Inc.
City documents give the value of abated taxes at $44,900 for the first year. Following years will probably be similar.
Besides property tax breaks, industrial revenue bonds can convey an exemption from paying sales taxes on purchases. City documents don’t state the amount of sales tax the company might avoid paying. But documents state the bonds will be used to fund capital equipment in the amount of $2,686,000. Sales tax on that is $201,450.
City documents also state this expansion will add 13 new jobs over the next five years at an average wage of $41,995.
Like several other companies that have received an exemption on paying sales tax on their purchases, 2 3 4 5 JR Custom Metals advocated for you to pay more sales tax. During the campaign for the one cent per dollar Wichita sales tax in 2014, this company contributed $1,000 to persuade voters to approve the tax.
But now it seeks to avoid paying all sales tax on these purchases. It has done this several times in the recent past.
The jobs are welcome. But this incident and many others like it reveal a capacity problem, which is this: We need to be creating nine jobs every day in order to make any significant progress in economic growth. 6 If it takes this much effort and the forgiveness of hundreds of thousands of dollars in taxes to create 13 jobs over five years, how much effort and subsidy will it take to create the many thousands of jobs we need to create every year?
- Weeks, Bob. Industrial revenue bonds in Kansas. Available at wichitaliberty.org/kansas-government/industrial-revenue-bonds-kansas/. ↩
- Weeks, Bob. Spirit Aerosystems tax relief. Available at wichitaliberty.org/wichita-government/spirit-aerosystems-tax-relief/. ↩
- Weeks, Bob. In Wichita, campaigning for a tax, then asking for exemption from paying. Available at wichitaliberty.org/wichita-government/campaigning-for-tax-then-asking-for-exemption-from-paying/. ↩
- Weeks, Bob. In Wichita, pro-sales tax campaign group uses sales tax-exempt building as headquarters. Available at wichitaliberty.org/wichita-government/wichita-pro-sales-tax-campaign-group-uses-sales-tax-exempt-building-headquarters/. ↩
- Weeks, Bob. Union Station TIF provides lessons for Wichita voters. Available at wichitaliberty.org/wichita-government/union-station-tif-provides-lessons-wichita-voters. ↩
- Weeks, Bob. Wichita economic development and capacity. Available at wichitaliberty.org/wichita-government/wichita-economic-development-capacity/. ↩