Archive for Sunday, February 3, 2013

Brownback proposal to eliminate tax breaks for homeowners facing opposition

February 3, 2013, 12:00 a.m. Updated February 3, 2013, 5:40 p.m.


— State tax deductions for mortgage interest and real estate taxes, worth hundreds of dollars a year to each eligible Kansas household, may be eliminated to help fill the budget hole created by gaps in the state income tax.

Officials of Gov. Sam Brownback’s administration argue that the deductions benefit the wealthy and will be less beneficial as the state reduces income taxes. But the Kansas Realtors Association says the mortgage interest deduction is a middle-class tax break, and eliminating it could cripple the housing market.

Approximately 345,000 Kansans, out of 1.4 million tax filers, claim the mortgage interest deduction each year. The average amount of tax relief per homeowner is $433, according to the Realtors Association. Mortgage debt of $100,000 at 5 percent interest will yield a $245 state income tax benefit, assuming the homeowner pays the highest income tax rate of 4.9 percent.

Approximately 383,000 Kansans deduct real estate taxes on their income taxes, receiving an average benefit of $136 per homeowner.

The Brownback administration says the deductions help more affluent people who itemize deductions on their taxes. But the Realtors Association, citing IRS figures, said nearly 93 percent of Kansans who claim the mortgage interest deduction earn less than $200,000 per year, and 65 percent earn less than $100,000 per year.

Luke Bell, a spokesman for the Realtors Association, said elimination of the deductions would increase the tax burden on homeowners and serve as a disincentive to prospective new homebuyers, which could send the housing market into a tailspin.

Brownback needs the revenue from eliminating the deductions to balance the budget and accomplish his goal of cutting the state’s lowest tax bracket to 1.9 percent from 3 percent and the upper bracket to 3.5 percent from 4.9 percent by 2017, and eventually getting rid of the income tax altogether.

Brownback also has proposed keeping a 0.6 cent per dollar state sales tax increase that was supposed to expire July 1. That would produce another $262 million, available for state spending or reducing income tax rates.

Kansas Department of Revenue Secretary Nick Jordan said reducing state income taxes is “your best economic growth strategy,” and he said governors in several other states, such as Louisiana, Oklahoma and Nebraska, are following Kansas’ lead.

For those who advocate for progressive tax structures, Brownback’s policies make things worse. Kansas takes a “much larger” share of taxes from middle- and low-income families than from wealthy families, according to a recent report by the Kansas Center for Economic Growth and the Institute on Taxation and Economic Policy.

“Many wealthy people who benefit from these tax breaks won’t put that money back into the economies of Kansas communities,” said Annie McKay, executive director of the Kansas Center for Economic Growth. “The resulting loss in revenues will make it impossible to maintain our education system, our roads and bridges or our quality of life — that hurts our chances to attract and grow businesses.”

Based on Brownback’s first round of tax cuts, annual state revenue in the next fiscal year, which starts July 1, will decrease by $700 million, to $5.5 billion from $6.2 billion.

The study said that for the poorest 20 percent of non-elderly Kansans, state and local taxes take up 10.3 percent of their income. For the wealthiest 1 percent, that figure is 3.9 percent. Only 13 states have a larger disparity in tax burden.

Last year, Brownback and conservative legislators collapsed the three-bracket system for individual state income taxes into two lower rates, exempted 191,000 business owners from income taxes, and increased the standard deduction for single heads of households to $9,000 from $4,500, while increasing the standard deduction for married taxpayers filing jointly to $9,000 from $6,000.

But the package also repealed many credits aimed at helping low-income Kansans, such as the food sales tax rebate, child and dependent care expenses, child day care expenses and disabled access expenditures. In addition, renters are no longer eligible to participate in the homestead property tax refund.

Revenue Secretary Jordan, however, emphasized that many homeowners will eventually see reductions in their overall state taxes through the lowering of income tax rates. At a recent meeting of the Senate Assessment and Taxation Committee, Jordan promised more data as the members started studying the governor’s plan.

Committee Chair Les Donovan, R-Wichita, said the committee will work on Brownback’s proposal, Senate Bill 7, this week. “There are a lot of moving numbers in this mix,” he said.


question4u 5 years, 4 months ago

"The Brownback administration says the deductions help more affluent people who itemize deductions on their taxes. But the Realtors Association, citing IRS figures, said nearly 93 percent of Kansans who claim the mortgage interest deduction earn less than 200,000 per year, and 65 percent earn less than $100,000 per year."

Facts or Brownback, facts or's so hard to decide which to believe.

Mike1949 5 years, 4 months ago

I can only figure that brownback has an old radio with half the tubes missing and I see brownback with little ear phones on writing down messages, that is how he comes up with these ideas that in reality are so far out of this world that I am not surprised that he isn't sitting around with aluminum foil wrapped around his head. (though he may anyway). What bothers me, there are people in the state house & senate that follow him blindly! That is really scary!

Trumbull 5 years, 4 months ago

These are the "loopholes" politicians want to eliminate and this is how they increase revenues without raising taxes.

texburgh 5 years, 4 months ago

Brownback created a massive revenue hole with last years tax bill. To fill that hole, he raises taxes on middle and low income Kansans via sales taxes and elimination of home mortgage interest and property tax deductions. Then he digs another revenue hole with another cut to income taxes - a hole he will have to fill after the next election.

All of this so that bosses don't pay income taxes but employees do. Physicians who are partners in their practice pay no income tax, their nurses do. Attorneys who are partners pay no income tax, their clerks do. The list goes on and on.

Welcome to the Koch/Brownback plutocracy.

Lynn Grant 5 years, 4 months ago

So you Taxed Enough Already people out there are you happy now? Sales tax increase, elimination of deductions? Not happy yet? Just wait until your property taxes go up.

Dave Trabert 5 years, 4 months ago

It's true that many people won't be hurt by losing their mortgage deduction, but it's also true that some will. Instead of forcing state agencies to operate efficiently, this tax plan hurts some people by taking away their mortgage and property tax reductions. And it hurts all Kansans by increasing their sales tax.

Reducing income tax rates is good for citizens and job creation but the way to do it is by making government more efficient and to stop giving away taxpayer money in the name of 'economic development.'

tomatogrower 5 years, 4 months ago

Ok, I'll bite. What agencies are not running efficiently?

Dave Trabert 5 years, 4 months ago

Odds are, none. There has been no top-to-bottom review conducted.

texburgh 5 years, 4 months ago

There we go. Dave Trabert's assumes there are none operating efficiently. he has no empirical evidence, just "odds are, none." So we make legislation by anecdote. Dave Trabert says "odds are, there is inefficiency" but Dave Trabert can't point to any evidence. He can't even give you a guess as to which agency might be inefficient. Just, well, probably maybe every one. That's rich. Of course at the same time Dave says no give-aways for economic development all while his handlers at Koch Industries and their "small business" pass-throughs just got the biggest handout in the name economic development we've ever seen - they no longer pay income tax. Every one of these tax cuts is a corporate handout in the name of economic development and Diamond Dave Trabert supports every one. Now, thanks to Dave and his Koch addict pals, the rest of us get a proposal for three tax increases - the sales tax, loss of our mortgage deduction, and loss of our property tax deduction (that's a property tax increase folks all thanks to the GOP, Brownback, and their owners at Koch and the Chamber. There's a special circle in hell reserved for the hypocrites, Dave. Enjoy it.

chootspa 5 years, 4 months ago

Good demonstration of the logical fallacy known as begging the question: "reducing income taxes is good for citizens and job creation."

Richard Heckler 5 years, 4 months ago

Job creation? After 33 years of supply side economics 20 some million Americans are out of full time jobs or work in general that this entire economy needs back into system.

This plan was on an ALEC table long before Brownback became governor..... Sam was just waiting to jump from nowhere and be part of the fiasco. Supply side economics and a flat tax has no foundation thus invalid. They are nothing but theories that pump more money to the 1%.

What about this nonsense?

"The income taxes deducted from your paychecks each month are going to a very worthy cause: your corporate boss.

Good Jobs First, a non-profit, non-partisan research center, has analyzed state programs meant to create jobs, but instead have created some $700 million a year in corporate welfare. This scam starts with the normal practice of corporations withholding from each employee's monthly check the state income taxes their workers owe.

But rather than remitting this money to pay for state services, these 16 states including Kansas simply allow the corporations to keep the tax payments for themselves! Adding to the funkiness of taxation-by-corporation, the bosses don't even have to tell workers that the company is siphoning off their state taxes for its own fun and profit.

These heists are rationalized in the name of "job creation," but that's a hoax, too. They're really just bribes the states pay to get corporations to move existing jobs from one state to another."

A bit like grand theft by way of insider trading.

Centerville 5 years, 4 months ago

I was so glad to see the $9,000 personal deduction, up from$4,500. Ironic that Kansas taxes are screening the new federal tax hikes, but thanks to the 2012 legislature.

James Nelson 5 years, 4 months ago

I have never met the man so why does Brownback hate me? He has decided that since I am not a rich man I am unworthy of his friendship and thinks I should subsidize the rich who are his friends. Something is terribly wrong with this picture. Why are there so many Kansans who are less well off than I, who are faring even worse than I under Brownback, so eager to get to the polls and vote for the man? Something is rattling the brains of so many voters, not allowing them to think straight.

Armstrong 5 years, 4 months ago

Don't worry kids in '14 when we gwet to really start paying for Osamacare this will be a drop in the bucket !

jafs 5 years, 4 months ago

That's for a family of 5, with 2 adults and 3 children. Works out to about $1500/month. And the plans will cover preexisting conditions with no up-charges, a bunch of preventive stuff, etc.

I'd be interested to know what analogous coverage through current insurance plans would cost, if it's available.

And, of course, there will be generous subsidies for people making up to 4x the poverty level.

deec 5 years, 4 months ago

If you want to read the proposed regulations yourself:

The example referenced is on page 70.

chootspa 5 years, 4 months ago

Isn't that saying the tax penalty is that much for not buying coverage, or am I reading that wrong?

jafs 5 years, 4 months ago

The penalty seems to be about 10% of the insurance costs in this example - about $2000/yr.

Part of the SC's decision seems to have been that those penalties must be rather limited, which kind of cuts into the whole point of them - a family making $120K/yr can simply pay about $150/month and avoid buying insurance if they like.

Also, there are myriad exemptions from the penalties in the ACA itself.

Basically, the penalties won't serve as much of a prod for folks to buy insurance if they really don't want to, and they won't provide much in revenue for the government.

jafs 5 years, 4 months ago

Is the coverage analogous?

I doubt it, since many insurance companies currently deny coverage for preexisting conditions, for one thing.

jafs 5 years, 4 months ago

We currently pay 14.5% of our gross income for coverage for 2 people, both adults. It's good coverage, and includes vision and dental. That's through an employer. And those rates are somewhat lower than others I've heard about.

$1500 for a family of five with a gross income of $120K is 15% - for that they get coverage for 3 kids in addition to themselves. And, the exchanges allow individuals to get "group" rates, essentially.

Sounds like a pretty good deal to me.

Standing_on_my_own_2_feet 5 years, 4 months ago

In the last year or two many, many homeowners have refinanced with INCREDIBLY low rates (me included). With those low rates we won't be paying enough interest on the loan to qualify for the mortgage deduction! No loss for me. I'd rather save 10's of thousands over the life of my mortgage instead of a few hundred bucks on my taxes each year.

Think about it.

JackMcKee 5 years, 4 months ago

They're going to get rid of these deductions to pay for the last tax cut, but don't worry you won't notice because they're going to cut more taxes. What?!?! Am I the only one that's completely baffled by this reasoning?

chootspa 5 years, 4 months ago

So now you're in favor of taxing pass-through income again?

chootspa 5 years, 4 months ago

Either the poster I replied to was disappeared or the system is glitchy.

Paul Wilson 5 years, 4 months ago

I say no deductions for anything. These simply create temptations for all to exploit. Costs will go up...but so will income. Our nation continues to strive for equality for all. How is our current tax code fair? It's not. It penalizes success. We need to get rid of all deductions and loopholes. Find a flat tax rate (%15) for income above $25K and 0% for below and add a flat national sales tax (3-4%) for goods. You buy a $200K car... you pay. The amount of national sales tax we pay is our choice based on our greed for 'stuff'.

Bob Forer 5 years, 4 months ago

You might be a far right wingnut when a bunch of real estate agents ppose your policies.

Larry Sturm 5 years, 4 months ago

Yes cut the taxes on the upper class and raise it on the middle class sounds like Kock brothers laws to me.

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