It’s nice we can be of help.
In his testimony before a state committee on taxation, conservative economist Scott Drenkard said he uses Kansas as an example of what not to do.
In fact, Kansas is doing it ass-backwards.
A true conservative model is to have more people pay less in taxes, he said. So in 2012 when legislators exempted private businesses from paying taxes, that put a bigger tax burden on fewer people.
“I speak on tax issues in other states almost every week, and I often get questions along the lines of ‘What happened in Kansas?’ This is not good for state branding or economic development,” Drenkard said.
Drenkard represents the Tax Foundation, a conservative think tank that espouses low taxes, especially to the benefit of big business.
So you’d think they’d look favorably at our model.
But, as Drenkard explained to members of the House Committee on Taxation last Tuesday, it’s not sound policy to eliminate a critical source of income.
Several things led to our demise, Drenkard said.
First, we weren’t in a good enough financial standing to give businesses a tax break. In the first year alone, the exemption cut state revenue by $700 million.
Second, almost twice as many claimed the tax break as was expected. Suddenly, everyone became a “business” and could claim the exemption. Instead of the expected 191,000 claims, there are more than 330,000.
Even for those who believe lower taxes incentivize investing, as does Drenkard, this “experiment” is “incentivizing tax avoidance,” Drenkard said.
“If they passed a provision like this in Washington, D.C., where I live and work, I would go to my employer the next day and ask them to start paying me as an independent contractor,” Drenkard said. “I would still be doing the same job … I just wouldn’t be paying any income taxes.”
Drenkard also threw cold water on the idea of eliminating the personal income tax. If allowing businesses a free pass is sinking the state budget, why would we consider eliminating even more funding?
It’s just more of the same, only worse.
