When you add up all our taxes, new report finds Kansas has 5th highest tax rate in the U.S.
photo by: Nick Krug
When it comes to rankings, KU basketball fans already may be a bit testy. (To review, March has brought the following: A No. 1 national ranking, NCAA heartbreak, and a large supply of giant No. 1 foam fingers that almost certainly are going to get misused.) Well, there is another ranking that applies to the entire state of Kansas, and it may not improve moods. The state recently was ranked as having the fifth-highest tax rates in the country.
Earlier this month, I shared results from a report that found Kansas had some of the highest property and vehicle taxes in the country. Now, I have results from a wider study that shows Kansas’ ranking is even worse when you throw sales and income taxes into the equation.
Each year, the financial website WalletHub conducts a fairly broad study to try to determine which states have the highest and lowest overall tax rates. States, as you’ve probably figured out, don’t all have the same types of taxes. Some don’t have any income taxes, others don’t have property taxes, and lots don’t charge sales taxes on groceries, while a few — like Kansas — do.
The WalletHub report uses a methodology that combines all the different types of state and local taxes in the state, makes some assumptions about spending averages based on Census data and then calculates an overall effective tax rate that households pay in each state. The process isn’t perfect — taxes vary a lot from county to county, for instance — but the method provides a reasonable look at an overall tax environment for a state.
So, let’s take a look at Kansas’ tax environment compared to some of the other states in our region. WalletHub found Kansas had an effective tax rate of 13.4%, meaning that the average household pays 13.4% of its income in taxes to state and local governments. That ranked Kansas No. 47 out of the 50 states and the District of Columbia. Only Pennsylvania, New York, Connecticut and Illinois were higher. Illinois topped the charts at 14.96%. Here’s a look at states in our region.
• No. 9 Colorado: 8.58%
• No. 28 Missouri: 11.18%
• No. 30 Arkansas: 11.28%
• No. 31 Oklahoma: 11.4%
• No. 43: Iowa: 13.08%
• No. 46: Nebraska: 13.32 %
• No. 47: Kansas: 13.40%
WalletHub found the national average for state and local tax rates was 10.78%, meaning Kansas was not quite three percentage points higher than the national average.
It is important to remember, though, that averages can be deceiving in these types of matters. Cost-of-living varies greatly from state to state. Home prices are much different on the coasts, for example, and there are many states that have greater average income, as well. WalletHub’s report has a separate category that adjusts the tax rankings based on the state’s cost-of-living index. Kansas ranked No. 36 in that category, so still below average, but not as far below as the overall ranking suggests. Here’s a look at other states in the region:
• No. 13 Colorado
• No. 15 Arkansas
• No. 18 Missouri
• No. 23 Oklahoma
• No. 33 Iowa
• No. 36 Kansas
• No. 37 Nebraska
Perhaps some of you don’t care about percentages and rankings. You just care about dollars. The report does calculate how much the average household — it owns the average home and makes the average income in that state — pays in local and state taxes. Here’s how that shakes out for states in the region:
• Arkansas: $5,045
• Oklahoma: $5,489
• Missouri: $5,791
• Colorado: $6,289
• Iowa: $6,816
• Nebraska: $6,983
• Kansas: $7,056
Taxes, of course, have been in the news quite a bit over the last few years. During former Gov. Sam Brownback’s administration, people across the country were paying attention to our “tax experiment,” which involved a goal by Brownback to march our income tax rate down to zero. As you know, Brownback ended up marching out of office a little early, and, ultimately, both Republican and Democratic lawmakers decided they needed to repeal some Brownback tax cuts to better fund the government.
Given all that, I thought it would be interesting to see how much Kansas’ tax rankings have changed since the Brownback days. I did find this same tax ranking report that WalletHub produced in early 2018, which means it would be measuring taxes under the Brownback system. It does show we have become a higher tax state. Others would argue that we’ve become a better-funded state as well. I’ll let those two groups argue among themselves, but in the spirt of adding fuel to a fire, I’ll provide some numbers.
In 2018, Kansas had the 12th highest tax rate compared to the 5th highest today. The effective tax rate was 12.42% then compared to 13.4% now. When adjusted for cost-of-living, Kansas ranked No. 28 then compared to No. 36 now. Back then, we ranked ahead of Iowa and Nebraska in that category, while now we rank ahead of only Nebraska.
So, feel free to argue whether Kansas is better off now or then. You’ll need something to pass the time without basketball, and maybe you can even incorporate the foam fingers into the argument.