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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

denali 2 years ago

Obvious study is obvious.

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none2 2 years ago

Why are we comparing Texas to Kansas? Texas is the second largest state by area. (The old joke is that if you melted the ice in Alaska, Texas would be number one.) Kansas is number 14 in area.

By population, again Texas is number two (after California). Whereas Kansas is 33rd. By population centers, MSA's (Metropolitan Statistical areas), Texas has many: The DFW MSA is number 4 (after New York, LA, Chicago). Houston's MSA is number 6 (Philadelphia is less than DFW & more than Houston.) San Antonio is number 25. Austin is number 35. El Paso is number 66. Lubbock is number 162. Amarillo is number 185.

For Kansas, Wichita is 85. Kansas City is 29, but remember a good chunk of that is in Missouri. Topeka is 189.

Even if tomorrow the state of Kansas income taxes was zero, could someone please tell me which Texas companies would leave the cities of Texas for places like Wichita, Topeka, or the metro area on the Kansas side?

Now by tax burden, South Dakota has the lowest tax burden. Are there any companies rushing there to set up their headquarters? I remember years ago that "home grown" Gateway Computers decided to leave South Dakota (Sioux Falls) for heavily taxed California (San Diego). Kansas' tax burden is ranked 24th. So where are all those companies wanting to decrease their tax burden from those 26 other states that have higher burdens?

Taxes alone do not determine where a company settles, but over all quality of life and opportunities. It also helps to have an abundance of natural resources in your state, or pull such as tourism.

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impska 2 years 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?

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Niemoller 2 years 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.

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mikekt 2 years ago

This is all a rigged Sam Brownback shell game on the public.! This is an out of sight, out of mind way of drowning some part of Generalized Government in the bath tub in order to float somebody else's boat or of making citizens who have already payed (for services expected) once, to have to pay for them again, so it appears (slight of hand) that our State Government has lowered its' costs of operation. This is just another Grover Norquist / Sam Brownback phony solution. Now, I know that this sounds kind of unbelievable but you know, the next thing that Sam Brownback will probably be asking of the residents of Lawrence & Douglas County, will be to fund the rent payments of the local SRS Office, while Sam Brownback keeps the savings, which he hands out, as raises, to his loyal top (Publican) State SRS Officials! I know;..... that sounds like some paranoids' imaginings & the kind of things that "Cedar Crest Sam" would never do,............................but you just wait!.....You'll see! What is it Sam is so fond of saying? "LET US PREY.........Right Sam?!........But Not On The Public or its' trust!!!!!".

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booyalab 2 years ago

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

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KSWFB 2 years 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.

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Dave Trabert 2 years 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.

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Dick Sengpiehl 2 years 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.

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Richard Heckler 2 years 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?

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usnsnp 2 years 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.

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question4u 2 years 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?

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Michael LoBurgio 2 years 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

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Michael LoBurgio 2 years 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-...

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Matthew Herbert 2 years ago

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

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Paul R Getto 2 years ago

My thoughts exactly. Real rocket science there. Muscular Sam does know what he's doing. He can claim he lowered taxes, then hundreds of local units of government will either slash services or raise taxes. Sam can say, "I didn't do it." We are in this together collectively. The blue states support the red states nationally. In Kansas the areas with large population help support the rest of the state. Time to hit the reboot button, Mr. Governor.

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