We retired Tax Justice Blog in April 2017. For new content on issues related to tax justice, go to www.justtaxesblog.org
Today, Governor Sam Brownback signed into law a radical tax bill that is projected to cost more than $2 billion over the next five years. It also means the poorest 20 percent of Kansas taxpayers will pay 1.3 percent more of their income in taxes each year, or an average increase of $148, while the wealthiest one percent of Kansans will see their state income taxes drop by about $21,087 on average. (See ITEP’s analysis of the Senate plan here for more figures.)
In terms of fairness, the legislation is tragic. Kansas is one of a few states that taxes food, but the Food Sales Tax Rebate (FSTR) has, until now, given targeted relief to taxpayers that are hit hardest by this regressive tax. By eliminating the FSTR, this new law makes it that much harder for low-income people to make ends meet.
The legislation also exempts from taxation all business income that companies “pass through” to owners – something that no other state that taxes business income does. It’s likely that tax avoidance will increase as a result of companies reorganizing their corporate structure to take advantage of this loophole, which was, of course, billed as a tax cut for small businesses. If lawmakers wanted to offer assistance to small business owners, there are more targeted ways to do just that, through credits or limiting exemptions.
Other provisions of the bill include reducing tax rates down to 3.0 and 4.9 percent; increasing the standard deduction for head of household filers and married couples; and eliminating the Homestead Property Tax Refund for renters.
Proponents of the bill and Governor Brownback himself have said that the tax cuts will pay for themselves because of increased economic activity, but these supply side arguments are groundless. As the Wichita Eagle opines, this “extreme makeover” of the state’s tax system is a “huge gamble,” and the odds are against Kansas recovering any time soon.
Photo of Governor Sam Brownback via King Content Creative Commons Attribution License 2.0