Topeka Republican Gov. Sam Brownback’s administration released an internal report Wednesday showing that his latest income tax proposals would benefit Kansas’ poorest taxpayers more than its wealthiest ones, but the new analysis failed to quiet criticism from legislators who believe his policies are weighted toward top earners.
The Department of Revenue disclosed its figures ahead of a House Taxation Committee hearing Brownback’s proposals to further cut individual income tax rates after aggressive reductions last year.
The report did not consider a Brownback proposal to change the state’s sales tax law to raise additional revenues to bolster the budget while Kansas works to phase out individual income taxes. The department also excluded from its analysis tens of thousands of taxpayers — almost all of them with adjusted gross incomes of $25,000 or less — who don’t owe taxes under state law.
Revenue Secretary Nick Jordan told the House committee that lawmakers should note that poor families receive help from the state in buying food tax-free, and he said afterward that the department excluded non-paying income tax filers from its analysis because the governor is proposing no changes this year for them.
But House Minority Leader Paul Davis, a Lawrence Democrat, was skeptical of such arguments.
“I don’t think they’re cooking the books, but they’re definitely maneuvering the numbers to show the outcome they want to show,” Davis said.
Jordan shrugged off such criticism, saying of the governor’s opponents, “Everyone’s trying to find a crack in the wall.”
The House committee expects to wrap up hearings on Brownback’s proposals Thursday, and its Senate counterpart already has concluded testimony. But Republicans, who hold supermajorities in both chambers, have conceded that they’re also looking for alternatives to some of Brownback’s initiatives.
“We’re not going to be able to kick that bill out for a while,” said Senate Majority Leader Terry Bruce, a conservative Hutchinson Republican.
The governor’s goal is to eventually phase out personal income taxes, but he and lawmakers also must stabilize the budget over the next few years.
Brownback wants to keep the sales tax at its current 6.3 percent rate, rather than letting it drop to 5.7 percent in July. That decrease was scheduled in 2010, when the state boosted the tax to balance its budget under Brownback’s Democratic predecessor.
He’s also proposing to eliminate two popular income tax deductions for homeowners, for the interest on their mortgages and the property taxes on their houses.
The department’s figures showed that the income tax changes would reduce the collective income tax burden of tax filers with adjusted gross incomes of $25,000 or less by 41 percent for 2017. Other groups of taxpayers would see smaller overall reductions, with a collective cut of 39 percent for those earning more than $250,000.
The proposed income tax changes are weighted even more toward the poorest taxpayers before 2017, delaying their biggest benefits for the wealthiest taxpayers until that year, according to the department’s analysis. That’s in contrast to last year’s income tax cuts, which resulted in the top earners getting the largest percentage decrease in their collective tax burden.
The department released the report to the Kansas Legislature’s research staff and to key legislators, providing a copy to The Associated Press before formally making it public.
“It’s more balanced,” Jordan told the AP during an interview. “We’re trying to take a balanced approach. Obviously, we’re trying to go to zero for everyone and grow the economy through doing that.”
Under last year’s cuts — even according to Department of Revenue figures — taxpayers earning more than $250,000 saw a much larger percentage drop in their collective personal income tax burdens than those earning $25,000 or less. The state cut rates but also exempted the owners of 191,000 businesses from income taxes.
According to the latest analysis, when last year’s tax cuts are factored in, income tax filers earning more than $250,000 would still make out the best after five years, with a decrease in their collective burden of 60 percent phased in for 2017. However, the poorest taxpayers would see their burden drop 51 percent — and the gap between how they and the wealthiest taxpayers fare would narrow considerably from the changes made last year.
The least benefit overall after five years would go to taxpayers earning from $75,000 to $100,000. After five years, they’d be paying 49 percent less in income taxes.
However, they analysis covers fewer than 1.1 million of the state’s 1.4 million income tax filers, or almost 289,000 fewer than the number listed on similar reports last year. Reports last year listed about 564,000 filers earning $25,000 or less; the figure in the latest analysis is about 285,000, or 49 percent lower.
“There are fewer and fewer legislators who are putting a great deal of credence in the kind of numbers the Department of Revenue is producing,” Davis said.