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Archive for Friday, March 23, 2012

Study says lower state income taxes will lead to higher property, sales taxes

March 23, 2012

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— As Gov. Sam Brownback prods fellow Republicans to cut the state income tax, a study released Thursday says reducing that levy will probably lead to higher property and sales taxes and undermine funding for schools, roads and public safety.

“If Kansas gets rid of the income tax, the state will likely find itself both raising other taxes on middle- and low-income families and making massive cuts to vital services that will badly damage the state’s economy,” said Erica Williams, policy analyst and co-author of the report done by the nonpartisan Center on Budget and Policy Priorities.

The center’s report, released a day after much of Brownback’s tax plan advanced to a House-Senate conference committee, showed that states without an income tax have either sales or property taxes or both that are higher than states that levy an income tax.

For example, Kansas ranks 20th highest in percent of personal income spent on property taxes, and 17th in sales tax, the study said. Additionally, Kansas’ sales tax ranking will fall lower if the rate is allowed to decrease next year, as current law states.

Texas, which doesn’t have an income tax, ranks 14th highest in property tax and 13th in sales tax, the study said. Wyoming, another state without income tax, ranks fourth highest in property tax and No. 1 in sales tax. And South Dakota, which doesn’t have a state income tax, ranks 32nd in property taxes, and seventh in sales taxes.

Brownback and other supporters of cutting the state income tax, however, have argued that the plan will increase jobs and lure more businesses to Kansas. They say that growth-oriented tax reform requires shifting taxes from income to consumption.

A key component of Brownback’s plan eliminates income tax on non-wage business income and could affect 191,000 filers. The Brownback administration has called this a “unique and highly targeted strategy to make Kansas an incubator for innovation and a national center for entrepreneurship.”

But the center says this proposal would provide a tax break on what is called “pass-through” profits, which would benefit many large corporations and wealthy owners of large investment funds that have no employees. These large corporations are organized as partnerships, Subchapter S corporations and limited liability companies, the center said.

IRS data show the profits from pass-through entities and sole proprietorships represent about 8 percent of the Kansas personal income tax base, or $266 million. A $266 million loss of tax revenue is greater than the combined state appropriations for Kansas University and the KU Medical Center.

Legislative Democratic leaders say the hit could even be greater because businesses will reclassify their income to avoid taxes.

On Thursday, the Democrats bemoaned the fact that the Senate on Wednesday approved a massive tax-cutting bill after first voting it down.

“This bill would send our state to hell in a hand basket,” said Senate Minority Leader Anthony Hensley, D-Topeka.

All eight Democrats and 12 of the Senate’s 32 Republicans initially defeated the bill on a 20-20 vote. But after Brownback’s office spoke with several Republicans, they moved to reconsider the vote and nine Republicans flipped to pass the bill.

The measure would reduce income tax rates, maintain numerous deductions and credits and keep in place the schedule decrease in the state sales tax from 6.3 cents per dollar to 5.7 cents per dollar next year. It would reduce tax revenue to the state by $3.7 billion over five years.

Such a tax cut would make it impossible to increase school funding, which has been cut over the past several years, Democrats said.

The House has passed a tax-cutting bill that contains some of the same provisions as the Senate bill. A House-Senate conference committee starts meeting Monday to work on differences between the proposals.

Comments

WilburNether 2 years, 8 months ago

CBPP is an ultra-liberal, special-interest group. Any idiot should know that. Scott Rothschild shows his usual liberal bias and dishonesty by not mentioning that.

And, of course, all the little piggies who feed on other people's money at the public trough squeal in delight at this typical liberal dishonesty.

Matthew Herbert 2 years, 8 months ago

Study shows conducting study with obvious outcome, still a waste of money

Ron Holzwarth 2 years, 8 months ago

The real question is: How much money did that study cost the taxpayers?

They left that part out for some reason. But, I suppose you could say it created jobs, and that's important.

Michael LoBurgio 2 years, 8 months ago

In other news...........

Liberal watchdog group dings local Reps for family interests

Rep. Lynn Jenkins, R-Ks.: "Rep. Jenkins’ sister is a registered lobbyist in Kansas, and lobbied state government while Rep. Jenkins was the state treasurer and a trustee of the Kansas Public Employees Retirement System.

"Natalie Haag (sister): Ms. Haag is a lobbyist in Kansas on behalf of the Security Benefit Corporation, an insurance and financial planning firm where she is a vice president and director of governmental affairs."

Rep. Kevin Yoder R-Ks.: "Rep. Yoder’s campaign committee, Yoder for Congress, reimbursed the congressman and his wife.

"Kevin Yoder (self): During the 2010 election cycle, Rep. Yoder’s campaign committee reimbursed Rep. Yoder $10,649 for meals, travel, office supplies, and other unspecified expenses.

"Brooke Yoder (wife): During the 2010 election cycle, Rep. Yoder’s campaign committee reimbursed Ms. Yoder $448 for hostess gifts and unspecified expenses."

Read more here: http://midwestdemocracy.com/articles/liberal-watchdog-group-dings-local-...

Michael LoBurgio 2 years, 8 months ago

A Kansas fairytale: Cut income taxes, without taking a hit

The shift of the tax burden from income tax to other taxes would not be pretty. Today, the income tax represents 44 percent of the state’s revenue, or $2.7 billion.

Unless the state comes into a gigantic windfall of new revenue that drops out of the sky — much bigger than the $300 million surplus recently projected — there are only two places to make up for any sizable income tax reductions: sales or property taxes, and sales taxes seem like the way they are headed.

Our state leaders want to believe the fairytale pawned off by economist Arthur Laffer (whom the task force has hired for $75,000), who is telling them with lower income taxes, Kansas will attract enough growth to offset much of the lost revenue.

Laffer may be the only renowned economist in America who believes this bunk. If we cut or abolish our income tax, Kansans will pay for it, one way or the other.

Read more here: http://joco913.com/news/a-kansas-fairytale-cut-income-taxes-without-taking-a-hit/#storylink=cpy

Ron Holzwarth 2 years, 8 months ago

The government can easily "cut income taxes, without taking a hit" by using a very simple technique called: "Magic!"

verity 2 years, 8 months ago

I believe in magic, just not this kind.

cummingshawk 2 years, 8 months ago

Voodoo economics works just fine for advisor's pocketbooks, not so well for the everyday tax-paying joe in real life.

question4u 2 years, 8 months ago

The writing is on the wall, and anyone who can't read it or refuses to do so will get exactly what they deserve: higher property and local sales taxes, deteriorating highways, reduced law enforcement, higher crime, declining education, fewer health inspectors, less competitive universities and an even bigger drain of young people who are interested in a better life than Kansas will be able to provide. (Maybe the latter isn't such a problem, because an increase in illegal immigrants could fill some of the gap left by expatriate Kansas youth, and seniors can always pay more in sales and property taxes to make up for the declining tax-paying population in rural areas, right?)

But hey, Flim-Flam Sam says that if middle and lower income Kansans shift their tax burden from income tax to property and sales taxes and just pay a bit more for a bit less then Kansas will become "an incubator for innovation and a national center for entrepreneurship” – just like Wyoming (but without the national parks and other attractions). Cut taxes on "pass-through" profits then stand back and watch Kansas grow! Of course those incubators for innovation and centers of entrepreneurship won't be paying taxes so long as they don't employ anyone, but Kansas can be proud that they're here – and that's definitely worth higher property taxes and schools and highways like those in Missouri.

If Kansans don't care about the future of Kansas, who will?

usnsnp 2 years, 8 months ago

Kansas will pay, but by the time the axe falls, those who created the problem will either have moved on to other jobs or retired on gold plated retirement plans. There is no consiquence to Governors or Legislators if their policies hurt the State or the people in the State.

Richard Heckler 2 years, 8 months ago

"As Gov. Sam Brownback prods fellow Republicans to cut the state income tax, a study released Thursday says reducing that levy will probably lead to higher property and sales taxes and undermine funding for schools, roads and public safety." (( Guess Sam Brownback is still trying to dupe taxpayers as he did while living in the beltway for so so many years.))

“If Kansas gets rid of the income tax, the state will likely find itself both raising other taxes on middle- and low-income families and making massive cuts to vital services that will badly damage the state’s economy,” said Erica Williams, policy analyst and co-author of the report done by the nonpartisan Center on Budget and Policy Priorities."

So the Kansas GOP does in fact like tax increases in spite of their rhetoric. Not the economic giants of our time? Or do they simply lie about it?

Dick Sengpiehl 2 years, 8 months ago

We all knew this would happen. if King Sam gets his way. Suggest everyone contact their representatives and senators and let them know your opinion. Also strongly suggest ALL representatives and senators who vote for Sam's bill be voted OUT of office next election!!! Let them know we're not ALL stupid.

Dave Trabert 2 years, 8 months ago

According to New York Times reporter Matt Bai, the Center for Budget and Policy Priorities (CBPP) is funded by the Democracy Alliance. According to Bai's account, representatives of CBPP attended a May 2006 meeting of the Democracy Alliance to "talk about the agendas they were busy crafting that would catapult Democratic politics into the economic future."

It's quite telling that media calls this organization 'non-partisan' but consistently labels free market- oriented organizations as 'conservative'.

Their study's conclusion is based on nothing more than an assumption: "the state will likely find itself both raising other taxes on middle- and low-income families and making massive cuts to vital services that will badly damage the state’s economy."

This is the classic 'either/or' ultimatum that governments typically give taxpayers...either pay higher taxes or surrender some service you want. In other words, give us what we want or pay the price. Instead, governments should examine every program for effectiveness and efficiency, always looking for ways to maintain essential services at the most cost-effective manner. States with lower tax burdens have far greater job growth and wage & salary disbursements; their private sector GDP dwarfs high burden states. They gain population from people choosing to move from other states while the high burden states (including Kansas) lose population from domestic migration.

The key to having a low tax burden is to control spending, and that's exactly what low burden states and those with no income tax do. According to the National Association of State Budget Officers, states with no income tax spent $2,444 per resident in 2010 while the rest of the country averaged $3,572 or 46% more. Kansas spent $3,216 per resident and would have saved $2.2 billion by spending at the rate of states with no income tax.

Tax reform is about job creation and economic growth. The CBPP 'study' is about justifying the continuation of policies that have largely contributed to sub-standard economic growth.

kochmoney 2 years, 8 months ago

This message was sponsored by the Koch Brothers funded "think" tank KPI and ALEC, people who would coincidentally be able to do even better Scrooge McDuck style money swimming when tax burdens are shifted from income to property and sales.

Dave knows all about groups that aren't really "non-partisan." After all, his two big affiliations - ALEC and Kansas Policy Institute - make that claim while providing some of the most biased framing out there.

KSWFB 2 years, 8 months ago

Yeah maaaaaaaaaaaaan! I'm just a shill for Koch and a Rush Limbaugh automaton. You nailed it. God forbid a liberal admit that someone can think for themselves.

Just because I posted for the first time today doesn't mean I'm Koch plant. Why don't you consider that today's article was the straw that broke my free-thinking back?

I guess when you posted for the first time in September criticizing Brownback, someone should have called you out as George Soros puppet, right?

You should welcome differing points of view. After all, that's (open-mindedness) the hallmark of liberal, right?

I challenge you to re-read the article and tell me it presents a balanced accounting of the tax debate--regardless of your position on the policy.

just_another_bozo_on_this_bus 2 years, 8 months ago

"States with lower tax burdens have far greater job growth and wage & salary disbursements; their private sector GDP dwarfs high burden states. "

You mean like in Texas where most jobs created were minimum wage, and/or government supported jobs, and required lots of federal monies to make the mumbo-jumbo you trumpet work? Where education systems are among the worst in the country, and the environment is viewed as nothing more than a sewer? Where 1 in 4 people have no health insurance?

Is this the race to the bottom you want Kansas to win?

Dave Trabert 2 years, 8 months ago

You apparently have been misled. Texas students actually outperform Kansas students. Here are the 2011 scores for 4th Grade Reading from The Nation's Report Card (scale is 0 to 500):

White students: Kansas 229, Texas 233 Hispanic: Kansas 209, Texas 210 African American: Kansas 204, Texas 210 Low Income: Kansas 186, Texas 188

Texas also leads overall on 8th grade Reading and 4th and 8th grade Math, doing better than Kansas on 8 measurements, tying on 2 and trailing slightly on 2.

The reason that some people believe that Texas has lower scores is that they are only looking at an overall average. But for the same reason that one cannot fairly compare Blue Valley (relatively wealthy, very little minority population) with say, Topeka or KCK, one cannot compare states with dissimilar demographics. (For the record, it's not that some kids can't learn; they absolutely can. Unfortunately, not all kids have equal access to an effective education).

Kansas is 69% White, 16% Hispanic and 8% African American. Texas is 33% White, 49% Hispanic and 14% African American. Kansas has 46% low income students, Texas has 51%.

You might also be surprised to learn that Texas workers really have higher average incomes than Kansas. According to the Bureau of Economic Analysis, 2010 average pay (wages and salaries) per private sector person employed (full time and part time) in Texas was $47,188 compared to $40,199.

Texas is by no means perfect but it and the other low-burden or no-income-tax states have much strong economic performance and their private sector workers have much better opportunity. Kansas can either become one of those states or continue to fall farther and farther behind.

just_another_bozo_on_this_bus 2 years, 8 months ago

You can cherry-pick whatever statistics you like (and there are plenty of statistics out there that don't portray Texas education outcomes as you'd have us believe they are,) but you still don't provide any proof that reducing taxes on the wealthy (by removing or greatly reducing income taxes) and shifting that tax burden onto lower income folks is going to provide any benefit to anyone but the wealthy folks who pay your salary.

BTW, the "job creation" that Rick Perry wanted to claim was all smoke and mirrors, and was completely dishonest about how they were dominated by minimum wage jobs. While the average wage in Texas may be higher than here in Kansas, the income disparity in Texas is way higher, and getting worse thanks to the policies you'd like to see imposed in Kansas.

http://texashousers.net/2008/08/28/new-census-study-documents-stunning-levels-of-inomce-inequality-in-texas/

kochmoney 2 years, 8 months ago

Why not pick 8th grade scores? Why not pick averages between reduced lunch eligible and not eligible?

FYI - they don't fit your narrative.

KS eligible: 256 non-eligible: 276 TX eligible: 253 non-eligible: 274

As for the "average" wage of Texas workers? Nice trick. Median or mean? Also according to the U.S. Bureau of Labor Statistics, in 2010, 550,000 Texans earned no more than the federal minimum wage of $7.25 per hour. According to the census data, the median per capita income in Texas is $24,870 compared to a US average of $27,334. They also had a higher percentage living below poverty - something you yourself pointed out yourself about their demographics.

Don't get me wrong. If you're in Houston or Dallas or Austin, there are some great growth opportunities, particularly for the well educated worker in technology who lands a great IT contract from the Kansas government (which count as private sector), but those high paying jobs skew the mean and obscure the fact that Texas policies have done very very badly for the rural Texan. Since Kansas is even more rural than Texas and growing more so, your cargo cult worship of their tax policy is even more misguided.

chootspa 2 years, 8 months ago

Bwah! Trabert now quotes Wikipedia. According to New York Times reporter Matt Bai, CBPP is funded by the Democracy Alliance. According to Bai's account, representatives of CBPP attended a May 2006 meeting of the Democracy Alliance to "talk about the agendas they were busy crafting that would catapult Democratic politics into the economic future."

What's even better, is that the source cited doesn't actually back up the claim on the funding source. Good job, smarty pants.

KSWFB 2 years, 8 months ago

Once again, Mr. Rothschild posts a balanced article that provides a counterpoint(s) to the Center on Budget and Policy Priorities and the Democrats.......

The Center on Budget and Policy Priorities may be technically "non partisan," but it is definitely a liberal advocate for income redistribution.

Putting that aside, this piece of "journalism" fails to provide any refutation to this Center's and the Democrats' assertions. No matter your political stripe, you should take this study and article with a grain of salt. No self-respecting intellectual could read this article and walk away feeling truly informed on the tax policy debate in Kansas.

Pay Heed All Who Read Rothschild. Beware of the Bias.

kochmoney 2 years, 8 months ago

Thank you, Brand New Poster Who Joined Today. So glad you could join us a mere twenty minutes after the paid Koch mouthpiece to play back up singer for his band.

KSWFB 2 years, 8 months ago

Yeah maaaaaaaaaaaaan! I'm just a shill for Koch and a Rush Limbaugh automaton. You nailed it. God forbid a liberal admit that someone can think for themselves.

Just because I posted for the first time today doesn't mean I'm Koch plant. Why don't you consider that today's article was the straw that broke my free-thinking back?

I guess when you posted for the first time in September criticizing Brownback, someone should have called you out as George Soros puppet, right?

You should welcome differing points of view. After all, that's (open-mindedness) the hallmark of liberal, right?

I challenge you to re-read the article and tell me it presents a balanced accounting of the tax debate--regardless of your position on the policy.

kochmoney 2 years, 8 months ago

Aw, someone is so hurt and bothered that he/she/it protesteth twice! I'm honored to be the recipient of your second AND third post along with your melty lookup of my posting history.

If George Soros had an obvious paid spokesperson who posted twenty minutes before I first did, someone should have called me out about it. As it happens, I've yet to hear Soros say anything about Brownback. Equivalency fail.

FWIW - I don't actually think you're a Trabert sock, but I wouldn't discount you as being part of his community organizing efforts.

booyalab 2 years, 8 months ago

Correlation is not causation...... she said, as if anyone cared.

booyalab 2 years, 8 months ago

I take that back. The "study" was probably a veiled threat.

Niemoller 2 years, 8 months ago

“They say that growth-oriented tax reform requires shifting taxes from income to consumption.” We go through this all the time. The premise behind this idea is to put more dollars in the pockets of the middle and lower income families and they will consume more, which will increase demand, and make a need for more stock people at wal-mart to fill the shelves. Vah- la, jobs created. Here is why it doesn’t work in this economy – we, the 99%, already have bills that need to be paid. When we get paid, if there is money left over from the basic needs of rent, water, gas, electricity and food, we need to go to the doctor – which we don’t do now because we don’t have insurance. Once that bill is paid, usually at least $70 to and infinite $ amount, if there is money left over, we need life insurance for ourselves and our children – which we don’t have because that was the first thing our jobs cut when the 2008 crash happened. If this is the idea, that doctors and insurance companies will create more jobs because the demand for their services increase because the 99% have more money to spend, then the Governor is spot on…however, when you pretend that people will consume more wal-mart goods because they have $10 more dollars in their pocket – you miss the reality that they aren’t able to fulfill the bills they have already committed to – we won’t consume more, because we are already over consuming. This will not create more jobs, it will make the rich richer.

impska 2 years, 8 months ago

I went to the website to actually read this study and it leaves much to be desired.

So the study concludes that five out of nine states with no income tax have a "higher than average" property taxes. Wow, a resounding majority...? So we're only one state's lowered property tax away from this study completely reversing its finding and concluding that no income tax equals lower property taxes! I heard that 5 out of 10 states also have higher than average property taxes, whether or not they have an income tax.

They didn't suppose that a percentile might be more convincing than an average? Really?

What else can we conclude from this study... Only two no-income tax states are in the top 10 property tax leviers. So 8 out of 10 of the top property taxes belong to states with an income tax. And only 3 out of 10 have sales tax that are in the top ten! So 7 out of 10 of the top tenners are income tax states!

So states with income tax are more likely than not to be the top leviers of taxes.

Come on. Isn't this study a classic example of manipulating stats to say what you want them to say?

They don't seem to have delved into the question of whether or not the nine states in questions actually have worse roads or public services. It concludes that states MAY need to cut funding to health care and schools without actually bothering to include data. What kind of study is this, anyway?

just_another_bozo_on_this_bus 2 years, 8 months ago

So, are you trying to tell us that there is some magic at work here when cutting income tax levels? If the state's coffers see less money because income tax is reduced, where will the money be made up if not from the two other primary sources, property and sales taxes?

This ain't rocket science, Sarah. It's basic arithmetic.

jafs 2 years, 8 months ago

Generally, I agree.

But there is a possibility of increased efficiency, isn't there?

Then we could maintain services, and spend less, both of which would be good things.

just_another_bozo_on_this_bus 2 years, 8 months ago

I just don't believe there are efficiencies out there to provide the magic necessary to make the math work.

That doesn't mean the efficiency and accountability shouldn't always be high priorities, but I think that hoping for efficiency to make up for cutting off funds to government and expecting it to do what needs to be done is any better than trying to design a perpetual motion machine. (Or maybe Sam believes he can feed thousands of people with a single loaf of bread and a bottle of non-alcoholic wine.)

kochmoney 2 years, 8 months ago

If you foist centralized services onto local communities, generally you'll get decreased efficiency of services. You lose the economics of scale. You'll also see more long term projects and maintenance be derailed for short term savings, which pushes up the cost of infrastructure repairs when they finally can no longer be postponed.

kochmoney 2 years, 8 months ago

Thank you. Excellent points. Texas has metro areas with lots of population growth, and that's where they also have income and job growth. Kansas has the reverse problem with negative population growth and lots of rural areas. Rather than building a cargo cult, we need to look at ways to best benefit our state. If you just play the game of lowest bidder for manufacturing jobs, those same companies will play other states against each other and move whenever they feel like it. Here today. Gone tomorrow. See Boeing.

We could do our best to attract retirees by lowering property and sales tax. We could make sure there were lots of trains and well maintained roads to ship goods from our central location. We could make sure we have good schools that educate skilled workers. We could provide incentives for local startups.

Or, you know, we could shoot ourselves in the foot to see if it makes our knees hurt less.

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