Take
stock of what has happened to Kansas tax policy, and then ask the question,
“Who benefitted?” Here’s a hint: It wasn’t middle class or low income Kansans.
Big
changes in Kansas tax policy began in 2012 when Governor Brownback signed
sweeping tax cuts into law. Income tax
rates were lowered across the board and individuals who receive their income
through “business” sources were exempted entirely from paying state income
taxes.
Yes,
in that action, income tax rates went down for everyone, but at the same time,
lawmakers also raised the sales tax and took away credits that helped low
income Kansans. Even with the
offsetting sales tax increase, the income tax cuts proved so costly that they triggered
a severe budget crisis.
In
the first year, general fund revenue dropped $701 million, more than 11
percent, jerking the state budget badly out of balance. Lawmakers covered the ballooning gap between
expenses and rapidly falling income by using up all of the state’s financial
reserves.
With
the bank account emptied, lawmakers tried to close the gap by cutting programs,
including school funding. And they transferred
unimaginably large sums of money from the highway fund and from virtually every
other fund in the state treasury that had cash. Despite these irresponsible actions, they fell far short. At that point, even the most conservative lawmakers
decided to raise taxes.
Sales
tax rates rose again. Lawmakers hiked cigarette
taxes sharply, and eliminated most income tax deductions. Property taxes continued to go up, largely
because school districts tried to survive reductions in state aid.
What’s
the net result of all those tax changes? For the 20 percent of Kansans who earn the least, below $23,000 a year, average
taxes actually went up by $197 a year. For the next 20 percent, net taxes also jumped
higher. Middle income Kansans essentially
broke even. But the top 20 percent of Kansas
earners came out far ahead, and the top 1 percent, those who earn more than
$500,000 a year, picked up an average tax break of about $25,000. All these figures come from the Institute for
Taxation and Economic Policy, a group that has developed probably the best
model for measuring these types of changes in any state.
But
it doesn’t take a study to tell us what has happened. Any Kansan can see it. A sales tax hike takes a far bigger bite out
of a small income than a large one. Lower income Kansans spend a much higher proportion of their resources
on food and other items subject to sales tax than wealthy Kansans do.
Kansas
now has the second highest state sales tax rate on food in the nation. The shift to sales tax has contributed to
making our state’s tax system one of the ten most regressive. The poor pay a far higher percentage of their
income in taxes than the wealthy, not a statistic of which Kansans can be
proud.
Yet
even after shifting the burden of state taxes onto middle class and low income
Kansans, the budget is still not working. The tax breaks for the wealthiest of Kansans produced such a huge
revenue loss that the state budget remains in the red. Just this month, state officials announced
yet another downward revision of the future revenue forecast. So more “fixes” are ahead.
If
the real goal was to shift more resources to the wealthiest Kansans, this
policy has worked like gangbusters. But
if the goal was to adequately fund state programs with a fair taxation system,
it’s a wreck. The state budget is in
shambles. Unless we change course, the
lowest income Kansans and the Kansas middle class will bear even more of the
burden of fixing it.
— This column originally ran in a variety of Kansas newspapers over the weekend.
— This column originally ran in a variety of Kansas newspapers over the weekend.
