Tax brackets

Lawmakers looking for ways to raise state revenue might take a look at the Kansas income tax structure.

As budget discussions get more serious in the Kansas Legislature, at least a few legislative leaders are becoming more willing to look at some tax increases to help avoid more drastic cuts to education and other state services.

As they consider possible sources of additional state revenue, the state’s income tax deserves a look.

So far, most of the tax talk has been focused on the sales tax and targeted taxes. A higher overall sales tax rate has been suggested for a limited period along with eliminating some sales tax exemptions, including the one on utilities such as natural gas, water and electricity. Various proposals also are on the table to increase the tax on cigarettes and alcohol and perhaps even add a sugar-based tax on soft drinks.

Only around the edges have a few legislators floated the idea of adding a new income tax bracket for the state’s highest-income residents. The state’s current income tax brackets were set in 1992, with a tweak for single-filers in 1998. Is it time to take another look at the system?

Kansas currently has three income tax brackets. Married Kansans filing jointly pay a 3.5 percent tax on income up to $30,000 and 6.25 percent on income between $30,000 and $60,000. The tax rate on income above $60,000 increases only slightly to 6.45 percent. That rate applies to income over $60,000 whether it’s someone who earns $61,000 or $610,000 a year. These rates are collected on taxpayers’ adjusted gross income after various credits and deductions are taken out.

The people in the lower tax brackets shouldn’t be targeted for an increase, but what about those who earn well above $60,000? According to the Kansas Department of Revenue’s 2009 annual report, about 11 percent of Kansas taxpayers had adjusted incomes over $100,000 in 2007, and 1.7 percent were above $250,000.

Although the governor and some legislators have noted that a sales tax increase may be one of the easier budget-balancing measures to pass, it is a regressive tax that places a heavier burden on low-income Kansans. That is especially true because Kansas collects sales tax on food, a situation that would only be exacerbated by removing the exemption and starting to collect sales tax on other basic life needs like heat, lights and running water.

These taxes clearly weigh hardest on people who are least able to pay. On the other hand, adding a new income tax bracket with a higher rate for the state’s highest-income residents would shift some of that burden to people who already pay a higher portion of state taxes but arguably are most able to afford a tax increase. Where that line should be drawn isn’t obvious, but it’s worth taking a look.

Raising any tax is a difficult political issue, but Kansas lawmakers aren’t facing any easy choices this year. A change in the state income tax structure probably isn’t the whole answer, but it might be part of an acceptable budget package.