Business Culture: Business Climate and Economic Conditions

BISECTED BY A STATE LINE, THE KANSAS CITY REGION IS AN AMALGAM OF ECONOMIES THAT HAVE BOTH LOCAL AND STATE COMPONENTS. THAT CAN SEND SOME MIXED MESSAGES ABOUT THE OVERALL HEALTH OF THE REGIONAL ECONOMY.



The bad news—if you’re a bad news-first sort of person—is that Kansas slipped from No. 4 to No. 7 in the 10-state region that includes  Missouri and the bordering states, and from No. 23 a year ago to 28th this year in the overall nation. So says the Tax Foundation, which crunches a great many variables to produce its annual rankings of the states. 

The good news if you’re in the Kansas City area? Missouri jumped to No. 1 in the region, and 14th nationally, for the pro-business aggregation of taxes covering corporate and individual income, sales and property levies, and workers’ compensation taxes. Then again, with the way state legislative bodies, including the one in Kansas, have embraced higher taxes on multiple fronts, all Missouri had to do to ascend
the rankings, basically, was hold serve: On a national level, Iowa (ninth regionally, 40th nationally) matched the five-spot fall of Kansas,
while Arkansas (10th/45th) gave Illinois (eighth/36th) a run for its money with identical plunges of seven spots. So with 2020 upon us, here’s where things stand in the Kansas City region.

Sales taxes. Missouri has a statewide base sales tax of 4.225 percent; in Kansas, it is 6.5 percent. Because most every municipality (and school, sewer, water, fire or library district, etc.) has its own sales-tax levy, you can find thousands of permutations. Taken as a whole, the
city and state sales taxes average 8.13 percent in Missouri (14th-highest nationwide) and 8.67 percent in Kansas (8th-highest). Corporate income taxes. Missouri has a flat 6.5 percent levy on taxable income, lower than 29 other states. Rates in Kansas start at 4 percent, but for
those with income above $50,000, the rate will rise to 7 percent. That puts it in a tie for 20th-highest nationwide. In either case, it looks a lot rosier than California’s 8.84 percent levy, but not as inviting as the zero-tax rates on corporate income you’d find in Texas, Ohio, Nevada, South Dakota, Washington or Wyoming.

Individual income taxes. Kansas has  three brackets—3.10 percent, 5.25 percent, 5.7 percent, with the highest marginal rate applying to income above $30,000 for individuals, and $60,000 for married filing jointly. That gives it an average yield of 5.4 percent, according to the Tax Foundation. Missouri has been peeling back thin layers of taxation in recent years, reaching a 5.7 percent levy that is roughly comparable to Kansas’.

Property taxes. This is the area where residents can be thankful they don’t have “D.C.” as part of their geographic designation—the nation’s capital extracts, per capita, $3,535 from residents each year, highest in the nation. By comparison, Missouri was way down on the list, at $971 (good for 39th place); Kansas weighs in at No. 21, with $1,490 per capita in this category. Business taxes alone, however, don’t
tell the whole story, as health-policy gurus have often pointed out. The Show-Me State has the lowest cigarette tax in the nation, 17 cents a pack; compare that with the highest levy, $4.35 a pack, in New York. The 6-cent per gallonage tax on beer also was the nation’s lowest. Advocates for higher taxes to curb consumption say both of those factors contribute to social ills that impose hidden costs on business.
A statistic of some note to companies with large fleets of vehicles is the gasoline tax. There, Missouri’s 17.35-cent levy is second-lowest among states, while Kansas ranks No. 33 at 24.03 cents per gallon. 

If, after all that, you still believe that a business-climate ranking index is your thing, you can always turn to organizations that focus more on
business than policy, and understand it from that perspective. Take, for example, the Forbes annual index of Best States for Business, which
bases its ratings on a matrix of six business factors—business costs, labor supply, regulatory burden, economic climate, growth prospects and quality of life.

Some of those are more measurable than others, of course, and things can get fuzzy when trying to assess something like quality of life; one man’s quality might be another’s misery. Missouri and Kansas fare lukewarm in those ratings—Missouri rose four spots to No. 18 in 2018, and Kansas surged 11 spots to No. 28.