Tax cuts are front and center this Legislative session.
For Republican leadership, the only “fair” tax cut is a flat tax: An across-the-board 5.15 percent income tax rate.
Don’t let its simplicity fool you.
For their math to work, all things between taxpayers must be equal. We’re all bigwigs and a 5.15 percent tax rate will be a big savings.
We wish.
In truth, that 5.15 percent rate would be a boon for the wealthy and a bust for everyone else.
Kansas’ current tax rate is modestly structured so that households with incomes up to $30,000 pay a 3.1 percent rate; incomes up to $60,000 pay a 5.25 percent rate and all incomes higher are charged at a 5.7 percent rate.
It’s because the CEO of a company pays a higher tax rate than the factory worker that Kansas has kept on a sound financial footing.
It’s also more equitable.
Here’s why.
Other than income taxes, we all generally pay the same tax rate for other expenses such as property taxes on homes, rental property and automobiles as well as the sales and excise taxes charged for goods and services.
For example, for most low- and middle-income households the combination of income, sales, and property taxes affects their overall incomes by about 11 percent. Those hit hardest, in fact, are middle-class households, those earning between $49,900 and $85,300.
Anywhere beyond middle class, however, and the impact of taxes decreases significantly. Households earning $136,000 and above see less and less of their incomes affected by taxes. The top 1 percent, those who earn more than $655,700, see about 7 percent of their incomes devoted to total taxes.
This is why sales and property taxes — which are the same for everyone — are considered regressive. They take a bigger cut out of the paychecks of the low- and middle classes.
Instead of looking to cut income taxes, Kansas needs to see how it can make everyday living more affordable.
