During the second week of the legislative session, life seemed dominated by the tax matters before us.
While Gov. Brownback, in his State of the State address, also spoke about his school-funding plan, state debt reduction, modifying KPERS (the Kansas Public Employees Retirement System), Medicaid and water rights, most of us spent our time making sense of the facts surrounding his tax plan. We?ll likely get more information on the other matters in time.
Conceptually, the governor advocates reducing income taxes, not reducing sales or property taxes, and he advocates permitting schools to substantially raise property taxes, district by district.
The devil, however, is always in the details. We now have more facts about the governor?s tax plan but it is still not complete. However, there is no shortage of newspaper articles analyzing the significance of all the known parts of the plan. You can read the analysis of others in the Jan. 18 edition of the Topeka Capital-Journal (available online) and other editions, and in the Wichita Eagle, including Sunday?s paper.
It is clear that under the governor?s plan, some will benefit more than others. On the one hand, Gov. Brownback spoke of doing away with credits and deductions so our tax code does not pick winners and losers; yet we owners of our own businesses (yes, that includes me) stand to dramatically gain advantage over ?mere? employees. I need your input on this: whether the cuts should benefit those who own businesses, or should benefit everyone, all in the same fashion.
We know small businesses count for most employment opportunities in Kansas. Should small-business owners get greater cuts and those with smaller incomes pay a greater proportion of income tax?
Knowing the business community?s real property-tax load, doing something is highly appropriate. Will skewing the income-tax code for the benefit of businesses?which may also include rental property holders?solve their problem?
Let me know your thoughts. I have not made up my mind on this as of this writing.
In 1995, the Governor?s Equity Tax Force in Kansas observed, ?The state and local tax system should be balanced and diversified. A diversified tax system offers a blend of economic tradeoffs. Because all revenue sources have their weaknesses, a balanced tax system will reduce the magnitude of problems caused by over reliance on a single tax source. It will also result in lower rates on each tax and reduce the pressure of competition from other states that have lower rates for a particular tax.?
Alison Felix, economist at the Federal Reserve Bank of Kansas City, recently stated: ?Kansas had the least volatile tax revenues in the Tenth District (including Missouri, Nebraska, Kansas, Oklahoma, Colorado, Wyoming and New Mexico) over the past 40 years. The tax portfolio in Kansas is relatively diversified, putting almost equal weight on sales taxes and income taxes. Just as diversification reduces risk in a financial portfolio, diversifying state tax structures is likely to reduce volatility.?
The same can be said of Texas, which is experiencing fiscal woes substantially greater than Kansas?.
Observations such as these cause me to hesitate to imbalance the three-legged stool by marching to zero on income taxes. I still agree we ought to reduce our tax load, and reducing income tax is fine with me. I just do not want to skew it toward anyone, unless there is a compelling case made.
In the meantime, the Senate?s special tax committee is exploring the entire tax code and is trying to develop a comprehensive plan for overhaul. The exploration is not yet complete.
The House Tax Committee has its own version emerging, which would still plan to march the income tax to zero, but will keep credits and deductions, or so it seems now. I know not how that would work out.
Want some fun? Get on your computer and go to: khi.org/fiscal-policy and play ?The Kansas Budget Puzzle.? Former 70th District Representative Duane Goossen now works for the Kansas Health Institute, and he introduces this game to us on their site. It?s a good learning tool. Enjoy!
NEXT WEEK: You will hear from me about what I do advocate in tax policy. You may e-mail me at: Brookens70@sbcglo?bal.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.