Topeka ? 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.