Archive for Wednesday, April 5, 2017

Kansas governor now backs ‘flat’ income tax plan, including eliminating exemption he had championed

Kansas Governor Sam Brownback sits down with reporters for a year-end interview in his office on Wednesday, Dec. 14, 2016 at the Kansas Statehouse.

Kansas Governor Sam Brownback sits down with reporters for a year-end interview in his office on Wednesday, Dec. 14, 2016 at the Kansas Statehouse.

April 5, 2017, 12:23 p.m. Updated April 5, 2017, 3:43 p.m.

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— Gov. Sam Brownback said Wednesday that he would accept a flat-tax proposal pending in the Kansas Senate that also includes a repeal of one of his signature tax cuts from 2012, the complete exemption of taxes on certain kinds of nonwage income.

“The Senate’s flat tax legislation creates a single low tax rate for Kansans, solving today’s budget challenges without unnecessarily harming economic growth in Kansas,” Brownback said in a news release issued around 2:30 p.m. Wednesday. “If the legislature sends a bill to my desk similar in nature to (Senate Bill) 214, I will sign it.”

The Senate plans to debate the flat tax bill Thursday morning, but it remains uncertain whether supporters of the bill can muster the 21 votes needed to pass it.

That statement came during a day of fluid negotiations over tax policy and questions about whether lawmakers would even continue working through the week if no deal was reached.

It was also the first time Brownback has ever signaled that he would be willing to surrender the business tax exemption, which many call the “LLC loophole,” that has exempted more than 330,000 farmers and business owners from paying any state income tax on their business income.

Currently Kansas has two income brackets. Individuals pay 2.7 percent tax on the first $15,000 of income and 4.6 percent for all income above that. For couples filing jointly, the higher rate begins on income above $30,000 a year.

The flat-tax bill would tax all taxable income at the 4.6 percent rate, but it would also raise the standard deduction and several other kinds of deductions to match the federal income tax form. That means individuals earning less than $6,300 a year, or couples earning less than $12,500, would pay no state income taxes.

Kansas tax filers also could deduct 100 percent of the property taxes they pay instead of the 50 percent allowed now. They could also claim the same deduction for medical expenses allowed under current law, a deduction that Kansas lawmakers repealed for state income taxes in 2015.

It would also lower the state sales tax rate on food purchases by one percentage point, to 5.5 percent.

Sen. Caryn Tyson, R-Parker, who chairs the Senate tax committee, said passage of the bill would generate $295 million in additional revenue for the upcoming fiscal year that begins July 1 and $356 million in the following fiscal year.

That’s far less than the projected shortfall of nearly $800 million the state faces over the next two years, a shortfall that does not include any additional money the state may need for a new school finance formula.

Senate President Susan Wagle, R-Wichita, said lawmakers may also look at raising tobacco and alcohol taxes to generate additional money.

“I don’t think the Senate wants a retroactive income tax at this point in time, and we are short of money in 2018, so there is discussion about consumption taxes,” she told reporters after the caucus meeting.

While Senate Republicans were meeting in their caucus, a House committee working on a new school funding plan settled on a bill that would add $150 million in K-12 school funding for the upcoming school year.

Current discussions in the Senate have focused on raising cigarette taxes by $1 per pack and raising the “alcohol enforcement tax” — a kind of sales tax collected by restaurants, bars and liquor stores — to 10 percent instead of the current 8 percent.

Senate Majority Leader Jim Denning, R-Overland Park, said that would generate an estimated $85 million a year in additional revenue.

Earlier in the day, Senate GOP leaders startled the caucus by telling them that Brownback might issue his own tax proposal and that if he did, House and Senate leaders would immediately assign that bill to a conference committee. That sparked intense push-back from rank-and-file senators who said such a move would cut them out from having any input into the final bill.

Comments

Ken Lassman 4 months, 2 weeks ago

As citizens who have elected representatives to the legislature, we have effectively been excluded from participation in our government. This is exactly "Taxation Without Representation." The original Tea Partiers would be aghast, as should we.

This is fundamentally undemocratic and it is time to get rid of anyone who operates under this kind of process, our governor included.

Tony Peterson 4 months, 2 weeks ago

Sounds like plan is to throw something together and then expect both chambers to act on it immediately without any time to review what's actually in it. Smells pretty fishy to me.

Richard Heckler 4 months, 2 weeks ago

Is this legal? If so how did this happen?

Bill Turner 4 months, 2 weeks ago

I think all of our representatives, Republican and Democrat alike, should vote against this regardless of the contents of the measure. This is a matter of principle: the legislature makes the laws, the executive executes them. There is no place for these shenanigans in the statehouse where the executive is writing laws and asking for a rubber stamp. The answer should always be NO in that case. When my representative doesn't have a say, I don't have a say. That's not how a constitutional republic should function.

Richard Heckler 4 months, 2 weeks ago

Chances are Gov Brownback is not writing this legislation. It is being directed though the back door of the American Legislation Exchange Council.

Bruce Bertsch 4 months, 2 weeks ago

A Flat Tax? C;mon...that only benefits the wealthy. That is why Sam likes it. The legislature had it right the first time. Go back and override his veto. Let him go off to Italy and ruin ag for the UN.

Richard Heckler 4 months, 2 weeks ago

The Flat Tax is more supply side economics which has been rejected for years. A former presidential candidate named Forbes was pushing the Flat Tax scam many years ago.

Are Kansas republicans so dumb as to continue pushing fuzzy math economic scams on the taxpayers?

Gov Brownback represents WRECKANOMICS?

If Gov Brownback were still married would his wife allow this type of nonsense in the household? Probably not however narrow minded conservatives don't mind hitting on taxpayers daily.

Richard Heckler 4 months, 2 weeks ago

One of the people I blame for the failure to override the veto is Sen Susan Wagle. She sat there during the campaigns and said that she will see to it that the taxes are rolled back, because that is what Kansans want.

However, when it came time to vote for the bill, she voted no. Then, when the veto came about, she voted against the override.

So in other words, she lied to the public, and to her voters about all of this!

Deja Vu

Steve Jacob 4 months, 2 weeks ago

I do agree. I know "they" say it hurts the poor, but the "rich" will pay more in taxes then the did before.

Cille King 4 months, 2 weeks ago

Currently, the lowest 20% income earners pay about 11.3% of their income in taxes (includes all taxes), while the highest 1% of earners pay only 3.6% of their income in taxes. For decades, 95% of all new profit has gone to the highest earners. A graduated income tax helps to even the field. A flat income tax adds to the income disparity.

RJ Johnson 4 months, 2 weeks ago

So what your saying is those who go out and make a life for themselves, go to college, work two or three jobs should be penalized vs those that do just enough to get by?

Chris Bohling 4 months, 2 weeks ago

No, Cille's saying that the effective tax rate on the lowest earners is actually much higher than the effective tax rate on the highest earners. If income tax was set at a flat rate without making any changes to the current deductions and credits etc. then the gap would grow even more pronounced.

That begs the question, if you are proposing a flat tax rate, what kind of changes are you willing to make to the rest of the tax code in order to make sure that flat tax is actually fair?

Cille King 4 months, 2 weeks ago

There are many people who work 2 jobs, are paid low wages with no benefits, barely get by. "Top wage earners last year made 5.05 times what their lowest-income counterparts took home, the widest gap in data going back to 1979, according to the Labor Department." You can read the whole article for more detail: http://www.denverpost.com/2017/01/26/american-wage-disparity-turned-for-the-worse-2016/

Corey Williams 4 months, 1 week ago

RJ, have you ever been to western Kansas at all? there is absolutely nothing there in the way of jobs.

John Brazelton 4 months, 2 weeks ago

A flat tax of 10% and a fair tax (sales tax) would make sure that all citizens paid taxes. At the national level about 40% pay no income tax at all. Sixty percent of taxes are paid by a very small group of citizens. Tax lawyers, accountants and CPAs would lose a lot of income if this legislation passes, but most citizens would benefit.

Cille King 4 months, 2 weeks ago

"People under 21 years of age made up over a quarter of the U.S. population (27.1%), and people age 65 and over made up one-seventh (14.5%)." So, under 21 and over 65 years of age makes up 41.6% of the population. When you add in those who are unable to work, are you surprised that 40% pay no taxes?

Most citizens would NOT benefit from a flat tax of 10%, as it only adds to the income disparity. Demography of the United States - Wikipedia https://en.wikipedia.org/wiki/Demography_of_the_United_States

Jonathan Becker 4 months, 2 weeks ago

Everyone is missing the point of this con job. Ask this question: A flat tax of 4.6% on what? Federal taxable wages? Federal adjusted gross income? Federal adjusted gross income plus or minus other credit/deductions added in or disallowed? Do you want to pay 4.6% of $100 or 4.6% of $100, adjusted by all of the governator's allowances that are only available for his rich coupon-clipping supporters?

As Bismarck said, "Never watch the making of law or sausage."

Carol Bowen 4 months, 2 weeks ago

Can a couple with an annual income of $12,501 afford to pay taxes?

Brock Masters 4 months, 2 weeks ago

How does a couple only make 12,500 a year?

Brock Masters 4 months, 2 weeks ago

Took it to mean both working but you're right. Even then how does one only make 12,500 a year assuming they are not disabled?

Chris Bohling 4 months, 2 weeks ago

Well, minimum wage at full time would be about $14.5K, and since so many min wage jobs are capped at ~30 hours for Obamacare reasons I can see how many people would end up under the cap.

Brock Masters 4 months, 2 weeks ago

Part of the problem with many of our society is the notion you should only have to work one job to make a living. Work 2 and you double your income.

Chris Bohling 4 months, 2 weeks ago

Eh, that's kinda beside the point I'm trying to make. I'm not really intending to argue about what people "should" do or attempting to cast moral judgments on anyone or the system TBH. Just stating reasons why somebody could make less than the listed amount. Maybe they are students. Maybe they only worked part of the year because they're Mormons and they were on their mission. Maybe they're subsistence farmers.

Carol Bowen 4 months, 1 week ago

Larry Sturm summed it up nicely: "A flat tax is unfair to the lower income, a person making 20k pays a bigger part of his living expenses than a person making 500k so what is fair about a flat tax." My interpretation of the $12,500 tax level is an assumption that anything more than $12,500 is discretionary funds. Even $20,000 is barely survival income. The flat tax is a hardship at lower income levels.

Tracy Rogers 4 months, 2 weeks ago

All I can say is that if the governor is in favor of a flat tax and is willing to let the exemptions go, then it must be a huge benefit for the highest income earners. He is not interested in what's best for the average Kansan, only those who keep him in office.

Larry Sturm 4 months, 2 weeks ago

A flat tax is unfair to the lower income, a person making 20k pays a bigger part of his living expenses than a person making 500k so what is fair about a flat tax.

Richard Heckler 4 months, 1 week ago

A flat tax may not be as fair as one would think. A gradual tax system does allow for things like wealth redistribution, which many have argued is a major benefit to society. And a flat tax could also give middle class families an extra burden. If someone making one million per year has to pay 18% of his income in taxes, he still has netted $820,000 for the year, a figure which still has great purchasing power.

But a person making $50,000 per year is left with $41,000 per year; that difference can influence fiscal decisions, like purchasing a new car versus a used car, whether to place a down payment on a house or affording either a state school or private college, extremely tough for people who make closer to the national median income level.

Read more: Should The U.S. Switch To A Flat Tax? http://www.investopedia.com/articles/tax/09/flat-taxes.asp#ixzz4dYxOiSFu

Unfortunately, it’s far from perfect and in any real-world incarnation would be a lot worse than the current code on at least two key dimensions: fairness and fiscal. It’s a highly regressive tax that would mean the loss of gobs of revenue.

Moreover, its simplicity is a ruse. The thing that complicates the tax code is not the number of rates.

It’s the myriad ways in which we define different types of income. It’s all the preferences, deductions and credits.

https://www.washingtonpost.com/posteverything/wp/2015/05/26/the-flat-tax-falls-flat-for-good-reasons/?utm_term=.ba8f0705a56e

http://www.dailykos.com/story/2013/5/14/1209013/-Why-a-Flat-Rate-Tax-is-Unfair-A-Quick-Overview-of-America-s-Wealth-Inequality-and-Tax-Structure

http://www.cnbc.com/2015/11/11/gop-simple-flat-tax-proposals-simply-do-not-add-up.html

https://www.usnews.com/debate-club/is-a-flat-tax-a-good-idea/flat-tax-would-introduce-new-problems

A pure flat tax might erase all deductions across the board. Now who wants a flat tax?

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