Governor Brownback unveiled his highly anticipated and closely guarded proposal to the states tax system. His tax plan would eliminate taxes for businesses organized as sole proprietorships, limited liability corporations, and S corporations. Most small businesses, and some large ones, fall into those three tax categories. In addition the Governor proposes to reduce the state personal income tax 24% for the highest income tax payers and a $90 million increase in taxes to the lowest earning working families in the state.
The plan also proposes that the legislature break the promise of reducing the sales tax, and eliminating a host of deductions to taxable income and tax credits individual filers currently enjoy.
The deductions that you will no longer be able to take are:
• Mortgage Interest
• Charitable Contributions
• Real Estate Taxes
• State and Local Sales Taxes
• Learning Quest
• Long Term Care Insurance
Credits being eliminated are:
• Earned Income Tax Credit (EITC)
• Food Sales Rebate
• Child and Dependent Care
• Historic Preservation
• Community Service Contributions
• Adoption Credit
• Small Employee Health Benefit Plans
• Individual Development Accounts
• Disabled Access
• Child Day Care
The tax changes will hurt low and fixed income individuals the hardest and middle income families will be hit by the loss of the deductions for taxes, mortgage interest, child care, and charitable contributions.
The loss of the Earned Income Tax Credit is major blow to the lowest paid tax-paying families. This credit was introduced by President Regan and has been the single most effective program for reducing poverty and keeping people off of the welfare roll and into tax-paying citizens. It is in effect a $90 million tax increase on our poorest working tax-filers.
Income taxes accounts for almost one-half of our state revenue. Any major reform to our tax system that will have as much impact as what the Governor is suggesting needs to be taken with a great deal of caution. The potential for a sharp and dramatic increase in property and sales taxes is very real if the legislature and the Governor get this wrong.
Lowering local property taxes would be my first priority for tax reform during this legislative session. Middle class working families and Kansans who live on fixed incomes have watched their property taxes skyrocket 65 percent over the last decade, all while their incomes have remained stagnant or, in many cases, declined. These are the folks who are really hurting in this recession, and they will benefit much more from a property tax break than an income tax break.
As presented, Governor Brownback’s proposal to eliminate the state income tax appears to more of a tax shift than a tax reduction. In fact he has said it will be revenue neutral, meaning it will raise the same amount of tax revenue. That means the higher the income the less in taxes, and those in the middle and lower incomes will be paying more.
