What a difference a week can make in the life of a tax proposal! Last week the Kansas Legislature was just starting to examine the details of Governor Brownback’s tax reform “Pro-Growth Plan” that the governor touted during his State of the State address on January 11th. This past Friday the governor’s plan was on life support based on strong negative reaction, and the Kansas House Republican leadership team distanced itself from the plan by announced intentions to introduce their own tax reform initiative.
To recap, the governor’s plan lowered individual income tax rates by lowering the top tax rate down to 4.9 percent (versus 6.45 percent) on taxable income higher than $15,000 (single) / $30,000 (married), lowering the bottom rate to 3 percent (versus 3.5 percent) and eliminating the current top income bracket of $30,000 (single) / $60,000 (married). His plan also doubled the standard deduction for head of household filers and exempts all non-wage business income from being taxed. The plan paid for the reduction in personal income tax rates and small business income exemption by 1) eliminating all itemized deductions, 2) eliminating various income tax credits including the Earned Income Tax Credit, the Food Sales Tax Rebate, the Child and Dependent Care credit, and 3) making permanent the temporary .6 % sales tax increase passed by the 2010 Legislature.
The Institute of Taxation and Economic Policy, a non-partisan, non-profit think tank that analyzes state and federal tax policy, found that under the governor’s plan the top 20 percent of the state’s earners would see substantial tax cuts while the bottom 80 percent would see a tax hike. For example, those earning less than $20,000 in annual income would pay on average an additional $242 in taxes, while those earning between $20,000 and $35,000 in annual income would pay on average an additional $247 in taxes. Compare that to the earners bringing in $90,000 and above, who actually begin to see savings. The study further concluded that, for most middle and low-income Kansans, any benefit received from the lower income tax rates would be lost due to on elimination of income tax credits and itemized deductions as well as the higher sales tax rate.
As the Kansas economy slowly rights itself, Kansas families continue to struggle to pay their bills and put food on the table. When it comes to taxes, everyone needs to pay their fair share, especially wealthy corporations and the richest individuals. Governor Brownback’s tax plan does exactly the opposite, forcing middle-income and poor families to pay more while dramatically lowering taxes for the most wealthy. It’s time to pull the plug on this clunker of a tax plan and instead focus our attention on the real tax dilemma facing Kansas – burdensome property taxes.