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Archive for Monday, September 4, 2006

Lawmakers to evaluate tax system

Study finds poor Kansans bear highest burden

September 4, 2006

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— They've cut taxes and raised taxes, waived taxes and shifted taxes.

Now legislators are getting ready to take a sweeping look at the state tax system itself, which a new report says falls heaviest on low-income Kansans.

"I want us to get to thinking about tax policy in this state from a more comprehensive level," said Rep. Kenny Wilk, R-Lansing, who is chair of a House-Senate committee studying tax issues in the run-up to the 2007 legislative session, which starts in January.

The committee will receive three tax studies and a report on local governmental debt at its next meeting Sept. 13.

One of the reports on who in Kansas has the largest tax burden already has been released.

The tax incidence study by John Wong, a professor at the Hugo Wall School of Urban and Public Affairs at Wichita State University, shows that low-income Kansans pay a higher percentage of their income for taxes than middle- and upper-income residents.

That means the tax system is regressive, especially the property tax, because "lower-income households tend to spend a higher proportion of income on housing than higher-income households," the study said.

The lowest income group in Kansas paid 23.6 percent of its income in property taxes, while the highest-income households paid 0.6 percent of their income in property taxes, the report said.

Kansas Action for Children issued a statement that said the regressive nature of the tax structure, coupled with numerous tax exemptions, has shifted much of the tax burden to Kansas families.

"The time has come to revisit and update the Kansas tax structure," the advocacy group said.

The group added that it would like to end enactments of special-interest tax exemptions and credits and instead widen the tax base.

"When more people pay a tax, the rate can be significantly lower," it said.

Wilk said he hoped the studies would provide the kind of information needed for lawmakers to make good choices on tax policy.

The proliferation of more than 75 sales tax exemptions "drives me insane," he said. And, he said, the state needs to do a better job of coordinating tax policy with local needs.

Bart Hildreth, director of the Kansas Public Finance Center at Wichita State, has been involved with numerous state tax and economic studies. He said the new studies should give lawmakers a road map.

"Our role is to put the information out and show a range of policy options that policymakers may want to consider," Hildreth said.

In addition to Wong's study on tax burden, the committee will consider one of his studies on the erosion of the sales tax base. Glenn Fisher, also a professor at Wichita State, will present a study on property tax issues, while Hildreth will provide an update on governmental debt.

Comments

ksknowall 7 years, 12 months ago

Heres an idea that is the obvious way to fix the overtaxed problem

MAKE ALL THE GOVERNMENT'S SMALLER!

Reduce local, county, state and federal government levels and taxes automatically will need to be less for all of us.

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wbob 7 years, 12 months ago

Don't renters pay property tax, if indirectly through almost everything they buy, and the property they rent?

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Jamesaust 7 years, 12 months ago

I would like to thank, first of all, the LJW and the authors of these various "studies" as well as the Legislature, for their commitment to 19th century journalism and public policy. Goodness knows, it may be the 21st century by now, but that doesn't mean that this information can simply be posted on the internet for all to see (and criticize). Ok, we'll just have to trust in the completeness and accuracy of the reporter (deep breath).

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Jamesaust 7 years, 12 months ago

Where to begin?

As this article comes up short of stating, there are three types of tax revenues (but more tax programs) available to the state: property, sales, and income.

The basic upshot of the article is that income tax is too low at the expense of property and that income tax is too low at the expense of sales. (No clear preference for property vis-a-vis sales.)

Above all is an unstated measuring stick of the percentage - and not the gross quantity of revenue produced - as the "fair" measure. Further, that population should be segmented by income (low, middle, high) not by property wealth or spending (again, low, middle, high).

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Jamesaust 7 years, 12 months ago

Its hardly a surprise that these "studies" arrive at their conclusions. They've been predetermined by their structure.

For example, "The tax incidence study ... shows that low-income Kansans pay a higher percentage of their income for taxes than middle- and upper-income residents."

Or rewritten more accurately, the study of combined, gross tax paid by Kansans receiving little cash or cash equivalents within a calendar year is a higher percentage than those with material cash or cash equivalents within a calendar year.

No doubt. But then that mixes apples with oranges (with apples = cash but oranges = wealth).

Since the study seems to aim at criticizing property taxes it would need to show that those with little property wealth pay a higher quantity (or percentage) of wealth as property tax than those with middle or high levels of property wealth. Of course, they do not, and stating so would then defeat the purpose of the study.

"The lowest income group in Kansas paid 23.6 percent of its income in property taxes, while the highest-income households paid 0.6 percent of their income in property taxes." Might this be because, despite the coming of the McMansion, that the connection between income and property is elastic? That increasing salaries and increasing home values do not increase in a 1:1 ratio? (Just how many bathrooms does a household of 3 people need regardless of how great their in flow of annual cash?)

Likewise, those will little income (from the German, to come in) of cash or cash equivalents pay little in income tax (percentage or gross) than those with middle or high levels of incoming cash.

(My guess is that the low-income group paid about 0.6% of their income in income taxes while the high -income group paid about 23.6% of their income as income taxes. Fair or unfair?)

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Jamesaust 7 years, 12 months ago

With regard to sales tax exemptions (how widely the tax is applied), I have little doubt that over time more and more items are exempted from it.

It does not follow, however, that sales tax exemption is itself problematic. The two criteria for exemption are: does the subject transaction lead to greater economic activity over time, and would the subject transaction not occur without the tax exemption?

If the activity is merely the sum of its parts then it should not be exempt. In short, is the item not taxed a productive asset or consumption? If it is a new "plastic press" for the plastics company then it is a productive asset; if it is a new Mercedes for the plant manager to drive to work in style then it is consumption.

Likewise, if it is a productive asset, would the activity occur regardless of the tax, or at materially lower levels? In other words, you tax transactions that MUST occur not those that might or might not occur (taxing the later increases the liklihood that they do not occur and so produce zero tax revenue - or secondary economic activity).

Finally, regarding the income component, beyond obvious things, I'll just note that any study relying upon "average" income is suspect, seeing that on the down side, income cannot be less than $0 but on the up side, the sky is the limit. It doesn't take more than a handful of one-time, sky-high incomes in a year to pull the "average" far above the "mean." Good tax policy is not based upon the odd, off-the-scale person (say a Kansas equivalent of Warren Buffett) but around the mass of tax payers.

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Charles L Bloss Jr 7 years, 12 months ago

The property tax has always been a regressive tax. Contrary to their studies, the middle class is being raped by the property tax. Every year, even if the mill levy stays where it was the year before, the valuation rises dramatically. In three years, a few years ago, our property tax rose $ 700. The biggest problem, besides rising valuations, are the school districts which are also raping us. After several tries, and each time paring their proposals down, USD # 343 got a bond issue passed to add on to the Perry-Lecompton High School among other things. The original high school building is metal, like a Morton building, though it is painted and looks nice. The addition, instead of matching the original building, is brick. Brick is one of the most expensive exteriors there is. These people spend our money with no regard as to where it came from, or how hard people had to work to make it. They drive a $ 100, 000 school bus to Topeka with just a few students on it, to play golf, or take them to the Vo-Tech school on the west side of Topeka. A van would do. Why should taxpayers have to pay for students to play golf anyway? Everyone, including the supreme court, is screaming for more money for education. Much of this money is wasted. All the studies they do, won't show the truth. There is rampant waste everywhere. The government at all levels, and especially school districts are like leeches, draining us of our hard earned money. It will not only continue, but it will keep getting worse as they scream that they still don't have enough money for education. Yet our students are not doing as well on tests as students from other, poorer, countries. Thank you, Lynn

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yourworstnightmare 7 years, 12 months ago

The property tax figures are skewed by the "McMansion", as JA puts it. One might look at it a different way and say that low income people have a chance for home ownership in Kansas and so pay a larger proportion of their income on property tax.

Having said that, the mostly GOP-led "war on income tax" in the last 25 years has resulted in greater reliance on the inherently regressive property and sales taxes.

A progressive income tax is the most fair and consistent tax and actually taxes something meaningful. Income should be taxed because it represents a level of benefit that an individual has gained from societal infrastructure. Why should sales be taxed? Why should property ownership be taxed?

Jesus would have favored a progressive income tax. Just read the bible and it is obvious ; )

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yourworstnightmare 7 years, 12 months ago

JA said: "I'll just note that any study relying upon "average" income is suspect, seeing that on the down side, income cannot be less than $0 but on the up side, the sky is the limit. It doesn't take more than a handful of one-time, sky-high incomes in a year to pull the "average" far above the "mean." "

JA, this is why the median is always much more illuminating than the mean in these situations. Means are intentionally used to skew results.

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true_patriot 7 years, 12 months ago

yourworstnightmare -

There is actually a stronger, more pragmatic reason why we have a progressive income tax (lately not progressive enough) that goes beyond questions of morals or ethics, and it is not very well understood and rarely well-explained:

We have a progressive income tax system because it is the only practical way to balance the regressive nature of all the rest of the taxes we pay, from property to sales to gasoline to sin taxes, etc. The "fairest" way to do taxes across the board would be a flat rate on ALL taxes (not just income tax), but clearly it would be ridiculous to have to calculate a percentage of our income (or more realistically our net worth) every time we transact any purchase, be it at a postage machine, a night-club, a convenience store, pay-at-pump, and so forth. So, since regressive taxation affects those at the bottom the most and those at the top the least, we have a progressive income tax to even it out, where it is not so impractical to take income and worth into account.

This is why whenever you hear politicians floating the "flat tax" proposal, warning bells should go off, because what they really intend is to remove the progressive nature of the income tax, which would tilt things even further than they already are in favor of those at the top. In other words, sure, it's a flat income tax, but since income tax is only one part of an overall regressive tax whole, making it flat rather than progressive produces an overall regressive tax picture.

Another common ploy is to argue for a "flat" income tax on the grounds that the current tax system is just "too complicated". While it is certainly true that the system is too complicated, what they conflate and most people fall for is that the complications arise from the complex set of loopholes and tax breaks that mostly benefit those at the top, and NOT from the progressive nature of the income tax. It literally only takes about 30 seconds to look up your income in a chart and find your allowance and where you sit in the tax bracket, but the rest of the hours-long headache comes not from the progressive nature of the chart but from filling out endless pages of expense categories and income sources and so forth. Progressity has absolutely nothing to do with complexity when it comes to income tax.

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