The past two weeks I have written about tax issues. I said in my column last week I would emphasize this week what I’m for, so here goes. In a policy statement on “The Brownback Pro-Growth Plan,” Gov. Brownback mentions five principles guiding his proposals:
(1) Taxes at the federal, state and local levels are a complicated hodge-podge of taxes, credits and special interests cobbled together through the years. He says we must streamline and modernize tax policy to fund core government functions, emphasizing business growth and encourages greater financial investment in Kansas. I totally agree.
(2) The Kansas tax code is complicated; it picks too many winners and losers; it attempts too much social engineering. The code should be fairer, flatter and simpler. It should broaden the base—more people pay the tax—so we can cut the tax rate as much as possible for the benefit of all Kansans. Again, I totally agree. No argument here.
(3) Small businesses and business start-ups are essential to the long-term health and growth of the Kansas economy. They are the engine of job creation and capital investment. Stuck record—I again agree.
We know that most jobs are small business jobs, and most new jobs are also through small businesses, and both the tax climate and the regulatory climate need to foster them, not make it harder to operate. Small businesses make jobs; if they succeed they create even more/better jobs.
4) Lower income tax rates allow Kansas families and businesses to keep more of their own hard-earned money. They know how to spend it more effectively than government does. I agree here, too, as far as it goes. I believe that tax rates of all kinds, or at least the big three—the three-legged stool—allow families and businesses to keep more of their dollars; then they can spend and use their dollars as they see fit.
I do object, however, to limiting this to income tax. I’d like to reduce the sales, income and property taxes. It might take a few years to accomplish, but that’s my goal. The end result might not be a huge reduction of any one tax, but cumulatively, the tax bite should be substantially less. It could clearly make a difference for all Kansans, not only those benefitted by a big income-tax reduction.
(5) Data show states with zero personal income tax significantly outperform states with the highest personal income tax rates (in terms of gross state product), they experience larger than average population growth and boost state tax revenues at a faster pace than high tax states.
Now, this is where I fall off the bus. Last week, I quoted a couple of sources that clearly tell us Kansas has been on the right path by pursuing a broad-based tax system, even if our taxes have been skewed to favor this or that, and spending is bloated.
We have fared better than most no-income-tax states during the recession. Even now, five of them have budget deficits ranging from 8 percent to 37 percent, including Texas. We also know Kansas compares favorably with the no-income tax states, beating two-thirds of them in gross domestic product.
Here are the numbers in regard to change in real per capita GDP from 1997 to 2009 (by percentage): Kansas 18.8, Alaska 5.4, Florida 13.5, Nevada 1.6, New Hampshire 20.5, South Dakota 47.6, Tennessee 5.1, Texas, 12.6, Washington 16.5 and Wyoming 52.2.
I believe we do need to help small businesses—main street, manufacturing and services. Talk to business people in your community and they’ll tell you they’re being killed by regulation and overall tax rates, particularly property tax.
Lowering taxes will help; perhaps the governor’s treatment of small-business income has merit. Until the committee hearings are held we cannot know their real impact.
My view: It’s not good business to eliminate the income tax. I see no evidence supporting its elimination, but working to lower and broaden all taxes has merit.
Art Hall, economist at the center for applied economics at KU, told us in 2010 that a state could follow the “fair tax” model—a super sales tax without an income tax—or the traditional “three-legged stool.” He said it didn’t really matter to him, because what mattered was government getting “out of the way of businesses so they can do what they do best, and that’s create jobs.”
While I have disagreed with his characterizations in other arenas, I sat up and took notice here. All the evidence I’ve seen since then about the three-legged stool compels me to advocate for that stool, and to work to lower all taxes incrementally.
You may e-mail me at: Brookens70@sbcglobal.net or write me at either 201 Meadow Lane, Marion, KS 66861 or Kansas State Capitol Building, 300 SW 10th, Topeka, KS 66612; or call me at 620-382-2133 or 785-296-7636.