American Oil and Gas Reporter - September 2018 - 127

ConventionCoverage: Kansas Independent Oil & Gas Association
that results in secure geologic storage,
he said.
There are hurdles, he allowed. The definitions of qualified EOR project and secure
geologic storage are vague, he indicated,
and extensive monitoring and recording
are required. IRS rules require a "mass
balance approach," he said, which requires
an operator to track the volumes of CO2
purchased, injected, and produced with the
oil and then reinjected. The operator also
must measure how much CO2 escapes and
monitor for potential loss of stored CO2.
There are business complexities as
well. "Can you imagine trying to get 30
ethanol plants capturing CO2, and someone
transporting it and selling it to 10 or so
Kansas operators?" he posed. "So there
are lots of complexities. However, the
prize is big enough that there are people
considering it."
Failed Kansas Tax Plan
Trabert, who authored What Was Really
the Matter with the Kansas Tax Plan,
listed three primary mistakes the Kansas
Policy Institute believed doomed the
Kansas tax cuts:
* Cutting taxes while increasing
spending;
* No plan to balance the budget; and
* Not having the right systems in
place.
Despite the popular narrative that
Kansas lawmakers were slashing spending,
Trabert noted that the state's budget rose

from $6.1 billion in fiscal 2012 to $7.0
billion in FY 2019. "Most years, Kansas
set spending records," he reflected. "The
year they approved the tax cuts in 2012,
lawmakers also approved a $400 million
spending increase."
And there never was a plan to balance
the budget. "That was painfully clear in
the interviews we did for our book," he
declared.
He showed research demonstrating
that states that taxed income spent 50
percent more per capita than states with
no income tax. Kansas came in at 36
percent more.
At the same time, Trabert revealed,
from 1998 to 2016, gross domestic product
grew 129 percent in states without income
taxes, compared with 100 percent for
states with income taxes. And employment
grew 40 percent in states without an income tax versus 21 percent for states
with one. The numbers for Kansas are
90 and 12 percent, respectively.
"So, all we had to do was go from
being morbidly inefficient to grossly inefficient to balance the budget," Trabert
asserted. "There were many opportunities
to do that."
He cited performance-based budgeting
and reliable revenue estimating as two of
the systems necessary for sound fiscal
policy.
But there also were economic factors
beyond lawmakers' control. One was the
precipitous drop in oil prices, which Tra-

Pausing after the KIOGA's keynote breakfast are, from left, KIOGA President Ed Cross,
KIOGA Chairman Ken White, keynote speaker Charlie Kirk, 2018 Convention Chairman
Will Darrah and 2019 Convention Chairman Mike Reilly. During his remarks, Kirk, who is
founder and president of Turning Point USA, said many student radicals on college campuses were changing their minds after ﬁnally being exposed to contrary points of view.

Many legislators who criticized Kansas'
tax exemption for limited liability companies nevertheless voted against repealing it to improve their chances of
raising the state's marginal income tax
rates, deduces Kansas Policy Institute's
David Trabert. Had lawmakers eliminated
that exemption in an election year, he
suggested, voters might have concluded
the state's budget problems were solved.

bert said resulted in severance tax collections plummeting about $200 million
over two years. That was compounded,
he said, by a concurrent drop in farm
commodity prices, which resulted in sales
tax revenues dropping in many parts of
the state, despite the legislature raising
the tax rate in 2015.
And then there was what Trabert called
a toxic political environment. Even though
the greatest revenue impact came from
lowering marginal rates, media and opposition focused on the exemption for
limited liability companies. But when a
bill to repeal that exemption failed by 19
votes in the Kansas House of Representatives in 2016, Trabert observed, 24
vocal critics of the exemption voted to
retain it.
The reason, he asserted, was that 2016
was an election year. "If that exemption
went away, some of you might have
thought the problem was solved and we
didn't need to get rid of conservatives,"
he rationalized. "If that had happened,
(Democrats and moderate Republicans)
wouldn't have had the opportunity to do
what they really wanted: raise marginal
income tax rates."
Trabert said state Senator Laura Kelly,
D-Topeka, even told the Topeka CapitalJournal that opponents of tax relief would
have lost their "leverage" if they had
eliminated the LLC exemption.
Trabert concluded by warning that
this year's $522 million increase in school
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American Oil and Gas Reporter - September 2018

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