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Archive for Saturday, February 20, 2010

Regressive tax

Despite the need to look at all options to raise tax revenue, state legislators should avoid new taxes that fall heaviest on the state’s low-income residents.

February 20, 2010

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When state or local officials suggest an increase in the sales tax rate, there almost always is discussion about the fact that Kansas collects sales tax on food. Taxing the food people purchase at the grocery store is a “regressive” tax because it falls disproportionately on low-income people who spend a higher percentage of their money on necessities like food and shelter.

Why, then, would Kansas legislators propose adding a sales tax to another of life’s basic necessities: utility bills?

The answer, of course, is that state lawmakers are looking at all kinds of unpalatable ways to address the state’s budget deficit. It’s good that they are looking at eliminating some costly sales tax exemptions, but eliminating the exemption on residential water, electric and natural gas bills should be low on the list.

Raising taxes on optional purchases, like cigarettes or alcohol, makes some sense. Starting to collect sales tax on other optional purchases, like Girl Scout cookies, could be a valid strategy. A recent story in the Journal-World also pointed out inconsistencies in non-profit agencies having to pay sales tax because legislators have approved so many individual agency requests for exemptions. Those inconsistencies should be remedied.

Low-income Kansans are eligible to receive sales tax refunds if they file the proper forms, but many states simply choose not to collect sales tax on food because buying food is a necessity, not a choice. In more prosperous times, Kansas might consider doing the same. That won’t happen this year, but the state should at least avoid adding another regressive tax to the heating and electric bills many low-income Kansans already are having trouble paying.

Comments

Brent Garner 4 years, 10 months ago

First, why can't the state live within the revenues they already collect? If my income gets reduced that is the only option I have available. Do I like it? No! But, a responsible person deals with it by either finding another way to increase his/her income or by reducing his/her expenses. Since government can only take instead of generate income, they should learn to live within their means instead of constantly reaching into my pocket and your pocket whenever they want to fund something. Its not their money!

kansasmutt 4 years, 10 months ago

With the leaders in Kansas at this time , I can see us going from recession to depression in the fast lane. They have absolutely no clue as to what it is like out and about in our towns and in our personal everyday struggle to keep afloat.

Richard Heckler 4 years, 10 months ago

It's the Free Lunch that needs to hit the road: http://www.democracynow.org/2008/1/18/free_lunch_how_the_wealthiest_americans

The city of Lawrence increases user fees without batting an eye on who is impacted. Water,trash,sewer and city services across the board

Each time new housing projects are approved that increases taxes on all of us including the low income. Why? Residential housing does not pay for itself. Taxpayers subsidize the building industry by way of increased taxes or user fees.

USD 497 just increased taxes on all of us with the new sports facilities project.

Sprawling development increases taxes on low income people.

Inflated real estate values cost low income people plenty of dough as these inflate property taxes.

Builders/property managers who do not pay personal property taxes on vacant property is a questionable exemption = tax increase to all others.

Tax abatements increase taxes on all of us no matter our income level. How? Because someone else is not paying their fair share.

All of the above are just a few tax increases taxpayers do not get to approve. These are the type of taxes that NICKLE DIME taxpayers into oblivion which translate into lots and lots of dollars.

In this day of "boomtown" economic thinking and over saturating housing,retail and light industrial markets = unfriendly to business puts sales taxes as the least unfriendly to the majority of taxpayers. Why? Because too many privileged types find ways to avoid paying many of the above taxes which is a tax increase tax to all other taxpayers.

Sales tax is the one tax everybody pays.

Sales tax output on the other hand can be somewhat controlled by fiscally responsible buying habits..... buy only what you need.

commuter 4 years, 10 months ago

Merrill since you have all of the answers when are you running for city council, county commissioner, governor, Congress, President, and DICTATOR???????????

scott3460 4 years, 10 months ago

Commuter:

Merrill's comments are the most relevant and insightful so far. Why attempt to slam him for offering intelligent comments?

anon1958 4 years, 10 months ago

Holy crap, an editorial from the JW about politics I agree with. Just got off the phone with my close personal friend Satan and it is indeed snowing in hell.

texburgh 4 years, 10 months ago

The editorial is right on about regressive taxes. So here are some ideas; let's see if the LJW would support them:

Expand the sales tax to services while exempting medical services. Why not pay sales tax on attorney fees and dog grooming? If the state charged the sales tax on services then they could easily continue the exemption on utilities and maybe even exempt groceries or lower the overall rate. But of course many of these services are utilized by wealthier individuals and corporations - the Republican base. Bring back the estate tax. It falls only on the wealthiest individuals. Of course they are the Republican base. Redo the income tax brackets in particular by adding an additional bracket at the highest income level. The income tax is the best non-regressive tax unless you have never adjusted the brackets. This would keep the burden off the working poor but, again, it would be bad for the Republican base. As long as we live in a state dominated by Republicans and legislated by wealthy Republicans, we will have a regressive tax structure and the working poor will continue to pay more than their fair share in taxes.

George Lippencott 4 years, 10 months ago

For the 37th time, how about a few more higher brackets for our income taxes. Should not the wealthy pay their fair share, particulaly those doing well in this environmnet while the majority is not?? Ending our prograssive increase at 60K per year is a legacy of a time long ago when people made less and money was worth more.

usesomesense 4 years, 10 months ago

The problem of tax revenues can ONLY be solved by producing goods and services that are worth money.
People have jobs to do that.
Increasing and creating new taxes only produces higher unemployment and perpetuates the problem. Increasing taxes now is like a tiny bandaid and a squirt of bactine on someone who just had there legs cut off and has septicemia.

Mixolydian 4 years, 10 months ago

It wasn't the republicans in the legislature who proposed the 1 cent sales tax increase, it was the democrat governor. The republicans opposed the idea and it didn't get anywhere, at least so far.

The "wealthy" do pay their fair share and then some. Those at the lower economic end typically don't pay income tax and even get money back (earned income tax credit) Call it a regressive tax, but a sales tax is one way for everyone, even the ones at the lower economic end, to pay their fair share for all the services the government provides.

texburgh 4 years, 10 months ago

Mixolydian - I suggest you get a basic primer on taxes and study up.

Your first paragraph is correct. The governor proposed sales tax because that is usually the only tax Republican legislators approve precisely BECAUSE it is regressive and their wealthy base will pay a lot less sales tax as a percentage of income than the working poor. The reason the Kansas Republicans did not approve it is twofold: 1) a poke in the eye to the governor and 2) the current crisis feeds their long-term goal of starving government to death. With no money for state services, we can begin the privatization of prisons, highways, schools, etc.

A regressive tax is one that costs the poor more as a percentage of income than the rich. The sales tax - especially one that includes food and excludes services - is about as regressive as a tax comes. If you are living paycheck to paycheck, the sales tax on your groceries is a far greater burden than it is on a wealthy individual. An income tax is bracketed so that the more money one makes, the greater their share of taxes. You're right, the poorest of the poor don't pay it - that's exactly what it is designed to do! As you can afford more, you pay more. And the benefit you get is that fewer people are in poverty. Believe it or not, that is quite a benefit to the wealthy. Kansas tries to offset this a little with a sales tax refund program for groceries but it doesn't offset the problem entirely. The best sales tax solution is to broaden the base - tax services - and either lower the overall rate or exempt food.

Of course, as Mr. Lippencott rightly points out, the Kansas income tax top bracket is $60K. That makes our system far less "progressive" than it could and should be.

George Lippencott 4 years, 10 months ago

merrill (anonymous) says... It's the Free Lunch that needs to hit the road: http://www.democracynow.org/2008/1/18...

The city of Lawrence increases user fees without batting an eye on who is impacted. Water,trash,sewer and city services across the board

Each time new housing projects are approved that increases taxes on all of us including the low income. Why? Residential housing does not pay for itself. Taxpayers subsidize the building industry by way of increased taxes or user fees.

Baloney! Flawed studies by lefties in Lawrence and elsewhere show that. The assumptions drive the outcome. The fact is that low socio-economic individuals benefit most from taxes while property taxes hit hardest on the middle class homeowners. Property taxes do not hit those receiving subsidies and most renters at best pay about 30% of what a homeowner pays for a similar property.

notajayhawk 4 years, 10 months ago

All you folks are missing the obvious answer - we need nationalized homeowners' insurance.

The government will collect the premiums for said insurance through taxes, whether you own a home or not. And we will expand what we use that insurance for, no longer limiting it to unexpected major expenses, but now covering all the day-to-day expenses involved in daily living, including utilities, lawn care, semi-regular maintenance such as painting and furnace/water heater replacements, etc.

Wouldn't that just be swell?

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