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Archive for Sunday, November 18, 2007

Fairness of taxes under scrutiny

Studies show system hardest on Kansans with low incomes

November 18, 2007

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— For legislators who will face the voters next year, the new state revenue estimate is like manna from heaven.

When they return for the 2008 legislative session in January, lawmakers will have $160.5 million more than they thought they would for the current fiscal year.

That might allow lawmakers to invest in popular programs or cut taxes just before the campaign season cranks up.

But some say, instead of handing out treats, legislators should get to a more meaty subject: tax fairness.

'Fair and sustainable'

Studies show the Kansas tax system comes down hardest on low-income Kansans.

"The time has come for Kansas to take a serious look at the current tax structure and what needs to be done to make it reflect today's economy in a way that is fair and sustainable over time," said April Holman, director of Fiscal Focus for Kansas Action for Children.

The poorest Kansans pay a tax rate of one-third of their income while the wealthiest Kansans pay 7.7 percent of their income on taxes, according to a 2006 study by the Kansas Department of Revenue and the Kansas Public Finance Center of the Hugo Wall School of Urban and Public Affairs at Wichita State University.

Holman also said that the recently approved phasing out of the estate tax and franchise tax will add pressure on policymakers to increase state sales, property and income taxes in the event of an economic downturn.

And she said she is concerned that passage of tax credits, exemptions and diversions could create shortfalls in needed social services.

"However it is done, Kansas needs to begin a serious discussion about our tax structure," Holman said.

The idea has an ally in Gov. Kathleen Sebelius.

Asked about it, the governor said, "I am happy to have any group analyze the tax structure. Many elements are regressive, and there is no question that groups with powerful lobbies often are successful in avoiding taxes that average Kansas families pay."

The regressive nature of the state tax system stems from the fact that lower-income Kansans pay a larger share of their incomes toward taxes than higher-income Kansans.

For example, the tax study showed that low-income Kansans pay 23.6 percent of their income on property taxes, while high-income households spent an average of 0.6 percent of their income on property taxes. The same kind of disparity exists in the state sales tax.

Many states try to reduce the regressive nature of the sales tax by exempting necessary items such as food and clothing. Kansas continues to apply sales tax to those items.

State economy

While the state's tax policy may be out of sync with the notion of people paying according to their ability, the Kansas economy is doing well.

"Our receipts reflect a good economy," said Sebelius' budget director Duane Goossen. "There are a lot of good things happening: all-time high for job numbers, agricultural prices have been good, aviation is doing well in Wichita. It reflects a solid, growing economy."

In a recent talk, Lt. Gov. Mark Parkinson said Kansas' economy is in a historical era where the three main sectors - manufacturing, agriculture, and oil and gas - are growing rapidly. "When you look at our three core industries, we are doing great," he said.

But Goossen also holds up the "slow down" sign for the Legislature, warning that the state has made a number of funding commitments that already have soaked up much of the additional revenue.

"It's not like there is suddenly $160 million that has no purpose," he said.

In fact, even with the revised upward revenue estimate of $160.5 million, the state all-purpose tax fund for this fiscal year will probably end up with lower receipts than last year, according to the Kansas Legislative Research Department.

That is primarily because money has been transferred to pay for a school funding increase, provide funds for disaster relief, pay for various business tax cuts during the past couple of years, and finance some transfers of revenue to help the highway building plan, according to the research department.

And, Goossen noted, some storm clouds mar the bright economic outlook.

While state income taxes are up, sales tax revenue isn't. The state collected $1.766 billion in state sales tax in the last fiscal year, and the total is expected to drop slightly to $1.7 billion in this fiscal year.

That shows that people are not buying as much and no one is sure why, Goossen said, although economists have theorized that higher gasoline prices are curbing consumer spending.

Comments

none2 6 years, 5 months ago

Though, I don't agree with everything DotsLines says, I think there are some valid points.

1) Use Taxes should be more used than Income or Property Tax. Sales Tax is a use tax. Granted STAPLE foods should be exempt. Unfortunately, I think most people think anything you can put in your mouth shouldn't be taxed. That is just silly. It should just be staples such as milk, meat, fruit, vegetables, and other basic things to cook with. I'm surprised when I've been in a grocery store and seen people using their "Vision Card" for pop, candy, TV dinners, mac & cheese, potato chips, and other junk items. If people really believe those things shouldn't be taxed, then neither should sales taxes be paid by restaurants including fast food.

Use Tax is also good in that it taxes people who CONSUME as oppose to those who work and/or save. If consumption means more global warming, pollution, foreign goods, or any other such negative effect, then a sales tax makes a lot more sense.

2) As for taxing the wealthy, the thing that bothers me with that mindset, is WHAT constitutes wealthy? Is it a certain $$$ amount, or is it just someone who just makes a little more? Will that change from year to year by who is in charge with the State government. If we mean millionaires, they aren't that plentiful to pay all the government bills. As you keep dropping the $$$ amount that defines who is wealthy, you start affecting people who don't even honestly perceive themselves as wealthy. Keep in mind that the GOAL should be to get poorer people to where they can better themselves -- not to try to bring everybody else down to the poor people's hardships by taxing them to death.

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DotsLines 6 years, 5 months ago

Reality_Check (Anonymous) says:

Interesting, not surprising. Seems like higher income taxes on the wealthy is the only fair way to go:but only if it is used to counteract finally removing sales taxes from food.


And that would be fair how, again? If you look at the article, it doesn't say the poor pay an unfair amount of income tax, it's use taxes. Is there some reason why the rich should pay an equal percentage of the tax burden? They're certainly not using an equal percentage of state services. They're not getting food stamps, housing vouchers, not using public transportation or maybe even public schools. Their use of police departments, fire departments, roads, etc., isn't any more than any other group's. Somehow it's more "fair" to make those who consume the least pay the most?

I agree certain necessities and staples like milk should be exempt from taxation. I also agree certain things that are currently untaxed should be, like WilburM suggested. A "fair" tax burden should be more heavily weighted towards use taxes than income taxes.

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Centerville 6 years, 5 months ago

As Parkinson should know, the economy in Kansas is "doing great" because of tax cuts. We need to refund all of the $160,000,000 and let it make its viable way back into our ecomony. "Feed the Government First!!!" is not a smart place to start.

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Godot 6 years, 5 months ago

WilburM, I agree with your idea.

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WilburM 6 years, 5 months ago

Without a doubt the sales tax on food is a tremendous problem in getting to tax equity. But there may be a way to actually lower sales tax rates. Joan Finney may well have had it right fifteen years ago -- broaden the sales tax to include services, reduce the overall rate, and take it off non-restaurant food purchases. Why should we pay a tax on a $3 gallon of milk or a $2 loaf of bread, but not on a $30 haircut at a salon? Or a $50 massage? Or a $1000 lawyer's bill? If we taxed a broad range of transactions, we'd have lower rates and much more equity.

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Reality_Check 6 years, 5 months ago

Interesting, not surprising. Seems like higher income taxes on the wealthy is the only fair way to go...but only if it is used to counteract FINALLY removing sales taxes from food.

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