Would a Kansas income tax cut help more than a food sales tax one? Here's the case for yes
Kansas Gov. Laura Kelly rightfully wants to provide tax relief to Kansas families, but her approach is less beneficial to low- and middle-income families and it won’t help the state’s economic situation. She wants the Legislature to eliminate the food sales tax in 2023 instead of income tax relief, which she says is "irresponsible and reckless."
Her comment ignores basic economics, and she is also factually inaccurate in saying that income tax cuts “provide no relief for everyday Kansas.”
A flat income tax that exempts the lowest earners from paying income tax gives them more tax relief than eliminating the food sales tax.
A family of four with an adjusted gross income of $35,000 and taking the standard deduction would owe $558 in income tax, offset by an earned income tax credit of $734. If they didn’t have any other tax credits, they get a $176 refund because the earned income credit is refundable in Kansas. Eliminating income tax on the first $30,000 for married couples ($15,000 for single filers) increases their refund by $558. That is considerably more than the $208 they would save by not paying a 4% sales tax on $100 per week on groceries.
Even a single taxpayer with no children earning just $15,000 is better off with the flat tax plan than eliminating the food sales tax.
Taxpayers would also benefit from having a stronger economy.
In 2020, the states that tax income spent 52% more per resident than those without an income tax. Each state provides the same basket of services, but those that do so at lower costs can have lower taxes and superior economic performance.
For example, between 1998 and 2020, the states with no income tax increased private employment by 45%, compared to just 18% for the other states. They also gained population from domestic migration while the rest of the country lost on that basis. Kansas has been losing population from domestic for many years, and it caused a decline in total population in 2021.
Taxes aren’t the only reason people are leaving, but it’s a significant factor for retirees and there are better employment opportunities in low-tax states.
The primary reason for Brownback’s deficits was implementing a large tax cut and increasing spending by $278 million. That’s a fourth-grade math error that Gov. Brownback, Democrats and some Republicans chose to ignore. They wouldn’t reduce wasteful spending or propose a tax increase to balance the budget.
And at the same time that Kansas struggled, states like North Carolina, Tennessee and Indiana successfully cut taxes. Nine states already have a flat tax and five more — Iowa, Idaho, Arizona, Mississippi and Georgia — are in the implementation stage. Retirement income is now exempt in Iowa, and its flat tax rate will be just 3.9% when the plan is fully implemented in 2026. Iowa also provided corporate tax relief.
Kansas has staggering cast reserves, and missing this opportunity to lower taxes would be an insult to families already suffering from generational inflation. Kiplinger’s “Tax-Friendly States for Middle-Class Families” lists Kansas as the sixth-worst state, and its “Tax-Friendly States for Retirees” says Kansas is the third worst.
For legislators, it comes down to casting a vote based on politics or a vote based on creating opportunities for Kansas families.
Dave Trabert is CEO of Kansas Policy Institute, a nonprofit research and education organization that promotes economic and educational freedom aand protects constitutional rights.
This article originally appeared on Topeka Capital-Journal: Income tax cut would benefit Kansans more than food sales tax cut
