Under the Dome - May 7, 2012
The Income Tax: It’s a really big deal
We want you to understand the ramifications of the tax policy decisions being made this week in Topeka because the decisions will have long-lasting and possibly devastating effects on life in Kansas far into the future.
Governor Brownback spent the summer working with supply side economist Arthur Laffer to draft a tax plan for Kansas. The Governor’s decision was to eliminate the Kansas income tax. Such a plan dramatically reduces taxes on the wealthiest Kansans and corporations. The Governor puts his faith in the discredited notion of supply-side economics – that is, if one gives tax breaks to corporations and the wealthy, they will in turn invest in businesses and hire more people.
The problem with this is that most economists agree that it hasn’t worked in the past and it’s not going to work now. This is because lower taxes really just mean larger profits. Businesses hire when there is a demand for their product. Lower taxes on corporations and the wealthy don’t create demand.
For most Kansans, if the income tax is reduced or eliminated, overall taxes will go up.
Since one’s income tax is a deduction on the federal income tax, one’s federal income tax increases as the state income tax goes down or goes away.
Additionally, the maintenance of state services would result in large increases in sales and property taxes to make up for the reduction in the income tax. The state income tax currently accounts for nearly half of the state’s general fund budget. Whatever portion of it went away would result in either large cuts to services or large increases in other tax sources.
The Governor’s tax bill has been reworked a number of times during this legislative session and with each revision there has been a new analysis of the impact. Depending on who is doing the calculation, the impact has ranged from a budget deficit of over $900 million to a budget surplus of $138 million. But in each, one fact remains constant – revenue to the state dramatically declines over time.
Large deficits come quickly when the bill includes immediate slashes in the income tax rates and a schedule for further reductions leading to the complete elimination of the tax. More measured approaches such as that in the conference committee report being discussed this week see a gradual decline over time.
Built into the analysis are certain assumptions – the assumption that Medicare changes will reduce the state’s obligations, the assumption that jobs will be created, the assumption that corporations will be drawn to Kansas based on the tax policy. Those assumptions help build a case for the tax cut but the fact is that they are based on an economic strategy that has been discredited over time.
KNEA believes that the best way to attract businesses and jobs is to create a state that values and invests in its citizens. Good schools create a strong workforce and attract families. A social service safety net helps seniors and those with disabilities to live healthy productive lives and contribute to our communities. A solid infrastructure of safe roads and highways helps our businesses connect and move materials and products in and out of our state. Public safety, public recreational opportunities, public libraries and museums all enrich lives and make one want to live, work, and raise a family right here in Kansas.
A balanced tax system based on the three-legged stool of income, sales, and property taxes provides sufficient revenue to pay for all those services and still meets the test of equity in which no one individual or entity is taxed beyond the ability to pay.
Governor Brownback and many in the Kansas Legislature appear ready to abandon a system that has worked well for Kansas for many years. And while our system could be “tweaked” to bring it back into better balance, it is not in need of the kind of massive overhaul being proposed in Topeka today.
Look what the press has to say on this issue!
Kansas City Star; Steve Kraske: Kansas at pivotal moment
http://msg4svc.net/cgvld/472244/51/1775/1241/0/S/0/0/gefm.html
Hays Daily News; Burdett Loomis: Analysis, facts should trump ‘believing’
http://msg4svc.net/cgvld/472244/52/1775/1242/0/S/0/0/gefm.html
McPherson Sentinel; Legislature should use nonpartisan numbers, not gov’s
http://msg4svc.net/cgvld/472244/53/1775/1243/0/S/0/0/gefm.html
Lawrence Journal-World; Tax cut solution will have lasting effect in Kansas
http://msg4svc.net/cgvld/472244/54/1775/1244/0/S/0/0/gefm.html
Wichita Eagle; Still questions about tax-cut cost, benefits
http://msg4svc.net/cgvld/472244/55/1775/1245/0/S/0/0/gefm.html
Links for a better understanding of the issue
For an excellent summary of the conference committee report on taxes, we suggest you look at this one from the Kansas Economic Policy Council: http://msg4svc.net/cgvld/472244/56/1775/1246/0/S/0/0/gefm.html
For an independent analysis of the Governor’s plan, the House plan, and the Senate plan, we suggest you look at this one from the Institute for Taxation and Economic Policy: http://msg4svc.net/cgvld/472244/57/1775/1247/0/S/0/0/gefm.pdf
For an independent analysis of the job-creation effect of eliminating the income tax, we suggest you look at this one from the Center for Budget and Policy Priorities: http://msg4svc.net/cgvld/472244/58/1775/1248/0/S/0/0/gefm.html
For more on the impact on sales and property taxes when the income tax is eliminated, we suggest you look at this analysis from the Center for Budget and Policy Priorities: http://msg4svc.net/cgvld/472244/59/1775/1249/0/S/0/0/gefm.html
Would you like to let your voice be heard?
We know how much you care about the future of our schools and our communities. That future is being threatened right now in the legislature. If any of the tax bills slashing income taxes pass, the state will have severely limited revenue—that means less money for schools, roads, and social services. The legislative research department analysis shows a budget DEFICIT of as much as $712 million! Our legislators need to know that choice is not acceptable. We expect them to do better for our state—we demand that they do better!
We NEED contacts with legislators today and in the next few days. Who should make these contacts? You, your colleagues, your neighbors, your parents, your family . . . Everyone who has a vote and who cares about our future.
They need more than a canned message. Tell them what the funding losses have meant in your schools. Tell them what would be lost without adequate funding in the upcoming years. Be specific and be sincere to give your message power--tell them about 64 kindergarteners in two classes, about one counselor serving 700 students in three different schools, about students failing because after-school tutoring is no longer available. . . Speak from your experience and from your heart.
How to contact:
1. House emails are firstname.lastname@house.ks.gov; Senate emails are firstname.lastname@senate.ks.gov.
2. Go to http://msg4svc.net/cgvld/472244/51/1775/1250/0/S/0/0/gefm.htmlon the KNEA website to find a name and address.
3. Go to http://msg4svc.net/cgvld/472244/52/1775/1251/0/S/0/0/gefm.html(click on Find Your Legislator) to find a phone number.
Refer to recent Under the Dome messages for specifics, but make this YOUR personalized message.
Please don’t wait and don’t hesitate to get others involved. Our voice needs to be heard NOW.
Thank you for your voice!
