P.O.

Box 11415 Shawnee Mission, KS 66207
March 6, 2013 Representative McPherson Kansas State Capitol 300 SW 10th Ave., Room 268W Topeka, Kansas 66612-1590 Dear Representative McPherson: We support HB2355, “The Kansas FairTax Act of 2013.” Kansas’ best days are ahead of us. We have much to be thankful for and see tremendous potential for the Legislature to yet accomplish many good things for the citizens of Kansas. The process now in full swing in the Legislature provides a wonderful opportunity to create innovative ways to steer Kansas toward economic freedom and greater prosperity. The budget is always a daunting challenge, especially in light of today’s economic uncertainty and unrelenting demands on the State government. The need for careful review and awareness of the State’s required expenditures is never-ending. That review is now in process, and we are hopefully confident that it will lead to further beneficial reductions in State expenses. We are fully aware that the major share of the State budget is dedicated to Education, Public Safety, and Government Operations, all of which are virtually off the table, leaving only about 29% available for discretionary spending. This is the present dilemma as we now see it: What additional cuts can be made with such a small fraction remaining? Economic growth is the solution. Governor Brownback’s Pro Growth policy statement of February 2011 identified that very thing as the best solution for Kansas when he clearly and openly declared that Kansas needs “… a more uniform business tax policy that treats all businesses equally rather than the current set of rules and laws that give great benefit to a few (through heavily bureaucratic programs) and zero benefit to many”. It makes perfect sense to continue with his original strongly-stated policy and wise vision, because it is still the one and only truly viable solution for Kansas. Kansas’ looming economic challenge is being addressed by several bills currently awaiting further action by the Legislature, and of particular importance are SB-78 and SB-79, commonly referred to in combination as “the Governor’s Tax Bill(s),” and HB-2355, “The Kansas FairTax Act of 2013”. These two alternatives take significantly different approaches to creating accelerated economic growth for our State. Both SB-78 and SB-79: a. Surprisingly reverse the positive direction taken last year to reduce the amount of money collected by Income Taxes, and instead actually increase revenues derived from Income Taxes. b. Remove a popular Income Tax deduction for home mortgage interest and property taxes. c. Stretch out the timing of stepwise rate reductions in the Individual Income Tax. d. Establish no specific end date for getting to zero for either the Individual or Corporate Income Tax. e. Enhance and expand the so-called “Jobs Incentive” programs of HPIP, PEAK, IMACT, etc. f. Complicate an already overly complex state tax system that requires the processing of millions of claims every year. g. Leave great uncertainty with outside investors, who currently view Kansas as a poor place to invest.

In contrast, HB-2355 the Kansas FairTax Act of 2013: a. Accelerates the removal of the State’s direct dependence on the Federal Income Tax system. b. Immediately and entirely repeals the Kansas Corporate Income Tax. c. Accomplishes the complete transition to zero state Individual Income Taxes in three years. d. Broadens the sales tax base to include the same “flat tax” rate on all personally-consumed new retail products and personal services. e. Removes the incentive for the State to try to create jobs with state subsidies. f. Provides a Consumption Tax “Prebate” that pays Consumption Tax up to the poverty level for all Kansas residents who are US Citizens. g. Pays the retailers and service providers for the administrative costs of collecting the Consumption Tax. h. Immediately stimulates the economy by giving wage earners more take home pay. i. Removes most of the existing tax credits, eliminating the need for millions of claims. j. Uses a greatly expanded Consumption Tax base (i.e. 100% of all purchasers of personal goods and services), thus maintaining a constant positive cash flow into the State General Fund. It is a universally accepted fact that tax policy has significant consequences. A Government Managed Income Tax System hampers economic growth because: • Income Taxes remove capital from the Private Sector where the jobs and growth are created. • Government subsidies via tax credits and exemptions encourage political favoritism wherein Government leaders can pick winners and (unfortunately) thousands of losers. • The government does not have the technology or the business skills to create private sector jobs. • The administrative costs inside the government and the cost of compliance outside the government become a burden so large that they substantially stifle economic growth. • Every year a barrage of lobbying efforts is launched by scores upon scores of lobbyists trying to gain special favors, distracting business owners forced to make businesses decisions based on tax policy rather than free market opportunities. • Private sector investors are provoked into seeking more favorable locations to invest their money. A Free Market Tax System is superior to centrally concentrated control by the state in every way because: • Every private sector business can make its own decisions about how, when and where to re-invest its capital…or distribute its earnings to the employees, or opt for owners’ distributions. • The private sector commands far superior up-to-date technology and has the necessary business skills to guarantee a satisfactory return on investment in almost every case. • When businesses are not forced to be uncompensated tax collectors, they grow the economy. • When the tax system is simple and uniformly applied, there are very few claims on the State Treasury. • Outside investors like to know that fundamental tax policy is not likely to change from year to year, thereby giving them confidence that they can understand the “rules” of the State’s economy. Our FairTax organization has always wanted to contribute to a foresighted “Pro-growth” economic vision for the future of Kansas citizens. We would be pleased to share our extensive research findings with the Legislature if hearings on HB2355 can be convened. Our economic expertise is derived from the most highly respected members of the scientific community of U.S. economists: Louis Woodhill, frequent writer for Forbes Online, and advisor to the Club for Growth – Houston, TX Dr. Arthur Hall, University of Kansas School of Business – Lawrence, KS Dr. David Tuerck, Beacon Hill Institute – Boston, MA Dr. Karen Walby, economic advisor to AFFT – Clearwater, FL Leo Linbeck, President of Americans For Fair Taxation (AFFT) – Houston, TX We will continue to promote the FairTax solution, because it is based on sound and proven economic principals. It is our wish to be allowed to help your tax policy team to make Kansas the number one economic growth state in the country. Sincerely yours,

Earl Long
Earl Long President FairTaxKC

Mark Saylor
Mark Saylor, M.D. FairTaxKC Director Kansas 2nd District