- Governor Laura Kelly recommended taxing Kansans for digital goods, such as popular streaming sites like Netflix, Hulu and Spotify
- Currently, 27 other states have some form of taxation on digital services
- A digital services tax would bring an additional $22 million for the state’s general fund
The Democrat’s second budget proposal since Governor Laura Kelly took office recommends taxing Kansans for digital goods, which would include streaming services such as Netflix, Hulu and Spotify. and other digital services to raise an additional $22 million for the state’s general fund. The money would go to highways and local governments.
Taxing Kansans for Digital Goods
Located on page 30 of the 364-page Governor’s Budget Report is a section titled “Digital Property & Subscription Services.” Kelly’s recommendation of streaming online services would begin on July 1, 2020. Digital property and services are defined as “digital audio-visual works, digital audio works, digital books, artwork, digital photographs and pictures, periodicals, newspapers, magazines, video, audio and other greeting cards, graphics, applications (desktop, mobile, web, and cloud-based), games (online, video, and electronic), digital codes, and streaming services.” The tax policy was recommended by the Governor’s Council on Tax Reform.
Kelly’s budget director, Larry Campbell, said these online services provide a digital form of content that is avoiding sales tax fees. Campbell believes by taxing these online digital services it will “level the playing field for our existing Kansas businesses.” It is not clear what Kansas businesses would be competing with or hurt by digital services such as Netflix, Hulu, and Spotify regardless of a sales tax on their services, nor is it clear how it benefits Kansas businesses.
The Digital Goods And Services Tax Fairness Act
Taxing digital services is not as uncommon as one may think. There are currently 27 states that tax digital products that include, Alabama, Arizona, Colorado, Connecticut, Hawaii, Idaho, Indiana, Iowa, Kentucky, Louisiana, Maine, Minnesota, Mississippi, Nebraska, New Jersey, New Mexico, North Carolina, Ohio, Pennsylvania, South Dakota, Tennessee, Texas, Utah, Vermont, Washington, Washington DC, Wisconsin and Wyoming.
There is no universal formula for how the state decides to implement taxes on digital services. The federal government along with individual state governments attempted to make the tax on digital services easier to understand with The Digital Goods and Services Tax Fairness Act. However, the law only provides a general framework for digital taxes and does not provide guidance or directions for individual states.
Kansas Is The Third Worst State To Retire
As of May of last year, Lola held the highest rural commercial property tax in the nation. In total, 65 Kansas counties continue to experience triple-digit property tax growth while their populations continue to shrink. Wichita is the 14th highest property tax for urban commercial property in the country. Kansas sits in the bottom half to bottom third of all 50 states in job, wages, migration, and overall economic performance growth.
According to Green Book, Kansas has the 3rd highest number of state and local government workers per capita. The presence of too many government jobs could play a factor in slowing private-sector job growth. Green Book states the Kansas government “may be inefficient, as there is one Kansas governmental unit for every 1,400 Kansans.” The slow growth of the private sector means local governments are not seeing a natural growth in tax revenues so they try to force that growth. With policymakers committed to large numbers of staff and agencies, property taxes typically rise.
A report last year from Kiplinger ranked Kansas as the third-worst state in the country to retire in due to high taxes. When it comes to the elderly, Kansas fully taxes private retirement plans (including IRAs and 401(k) plans), out-of-state public pensions, and Social Security benefits received by residents with a federal adjusted gross income of $75,000 or higher. The average sales tax in Kansas is 8.67%, the eighth highest in the country, and the state-wide average property tax bill is the 15th highest in the country. Taxing Kansans for digital goods would only add to growing tax fees that are already high than average.
Kelly recommended putting $54 million towards a program that has not been funded since 2003 that helps reduce local property taxes. However, Republican Representative Troy Waymaster beliefs that would make little to no difference. According to Waymaster, the discount for a $150,000 home would be about $25. Waymaster believes reducing vehicle taxes would have a bigger positive impact on Kansas residents.
In 2018, a study by United Van Lines ranked Kansas as fifth in the country for residents leaving for more progressive and financially stable states. According to their website, United Van Lines has “annually tracked migration patterns on a state-by-state basis” since 1977. Each state ranking is based on the inbound and outbound percentages of total moves by state. New Jersey has been the number one outbound state for the last ten consecutive years of the study.
Kansas Forced Into A Serious Debate Over Cannabis
For years, Kansas has chosen to completely ignore a simple solution to help with the state’s tax issues. Kansas is one of only 17 states still fighting against moving forward with cannabis on any level. However, that could soon change as Kansas lawmakers are expected to finally have a serious debate over medical cannabis. Kelly stated during her 2018 election campaign that she would allow medical cannabis. Brownback’s replacement, former Governor Jeff Colyer, a surgeon, opposed the idea, along with Kelly’s opponent Kris Kobach.
Kansas is being forced to reevaluate their reefer madness propaganda-fueled views towards cannabis since neighboring states Colorado, Missouri and Oklahoma have moved forward with medicinal and recreational cannabis. Last June it was reported that Colorado had generated over $1 billion total state revenue in the legal cannabis industry since legalizing cannabis. Since the birth of legalized medical cannabis, Colorado has generated over $6.5 billion from cannabis sales.
Colorado is not the only state that sees the financial benefit of cannabis. Since legalizing medical cannabis in October 2018, as of September of last year cannabis had brought in $27.3 million from the medical marijuana tax and another $46.5 million from the tax collected by dispensaries. Activists in Oklahoma have already filed a petition to legalize recreational cannabis. State Question 806 requires 178,000 signatures to move forward.
Missouri is currently preparing to launch its medical marijuana industry. Earlier this month the Missouri Department of Health and Senior Services began the process of awarding medical cannabis manufacturing licenses to 86 facilities to manufacture cannabis-infused concentrates, edibles and tinctures. In December DHSS issued 60 medical cannabis cultivation licenses along with 10 testing lab licenses. DHSS believes dispensaries will open in late spring or early summer.
Kansas would be wise to not move forward with its habitual tactic of over-regulating the industry. Following the first season of legally being able to grow hemp in Kansas, disappointed hemp farmers told KSHB there was no demand for the product. Farmer Dale Morgan said lawmakers need to loosen the current regulations that limit hemp farmers to only grow one type of hemp. Farmers have been forced to go to other states to sell their product. Bobby Gabriel said the first hemp season cost him $250,000 and blamed the oversaturation from states like Oregon and Colorado. Kansas lawmakers have held farmers back for years, and now they are forced to compete with hemp farmers with years of experience and buyers. Some hemp farmers have already decided they would not do hemp crops again next season due to the loss.