from a portion of her newsletter Rep Ann Mah:Summary of the new TAX REFORM Law, HB2117Governor Brownback signed HB2117 into law today. It is the largest tax cut in Kansas’ history. These provisions will start with tax year 2013. This is the tax cut bill I wrote about that puts the state $360 million in the hole in 2014, $1.2 billion in the hole in 2015, and $2 billion in the hole in 2016. I know it sounds great to get tax cuts. Everyone wants to pay less in taxes. But this bill will put the state in a perpetual budget crisis. It pushes the cost of education and other services out to local property taxes, and jeopardizes our state infrastructure.
Here are some of the details:
• The state goes from three tax brackets (3.45%, 6.25%, and 6.45%) down to two brackets. Those making $30,000 or less will pay 3% and those making over $30,000 pay 4.9%.
• Non-wage business income is exempt from taxes. This is income made by owners of LLC’s, Subchapter-S Corporations, and sole proprietorships.
• Some tax credits and deductions would no longer be allowed, including: food sales tax rebate for low-income Kansans; adoption expenses; child and dependent care expenses; child day care expenses; disabled access expenditures; small employer health benefit plan contributions; temporary assistance to family contributors, the homestead property tax refund for renters, and the cost of long-term care insurance premiums, among others.
• The standard deduction for single head-of-household goes from $4500 to $9000; for married taxpayers it goes from $6000 to $9000.
• Taxes are raised on oil and gas manufacturers through a severance tax increase.
• Tax deductions that REMAIN in place are those for home mortgage interest, charitable deductions, angel investor contributions, and historic preservation.
• The one cent sales tax increase is reduced as planned on July 1, 2013.What is the goal?
• The Governor proposed income tax cuts to stimulate economic growth in the state. He acknowledged that most Kansans wanted a property tax cut, but he believes income tax cuts would bring new business to the state. He expects these cuts to bring as many as 23,000 new jobs to the state by 2020 and 35,000 people to move to the state. He said these cuts would help mostly small businesses.What does all this mean?
• Those making $30,000 or more a year pay the same tax rate, whether you make $30,000 or $30 million. That benefits the richest Kansans most.
• This is a shift in wealth from low-income and middle class Kansans to business owners and corporations. Those who work for wages will be left to pick up the tab for those who will be able to avoid taxes altogether. We don’t really know what the total loss of revenue will be from the elimination of business income taxes. More than just small businesses will benefit. Many large corporations are organized as S-corporations and LLCs. For example, the Koch brothers have over 20 LLCs in Kansas. Also, those of us who live on investments could organize ourselves as LLCs and avoid taxes as well.
• This change disconnects Kansas from the federal income tax structure. Where we now start with your federal income on the Kansas return, now you will have different deductions for federal and state taxes.The bottom line:As the state moves into a continual budget crisis mode, state spending on schools and other services will have to be cut. This will push property and sales taxes higher.
• Even if the Governor is right and these cuts do produce 23,000 jobs, it will not be enough. Our non-partisan legislative research department has said we would need about 500,000 jobs created to make up the lost revenue. That’s a lot of trickle down if you ask me.
• My skepticism grows as we cannot get the Department of Revenue to produce the financials for these tax cuts. For other tax bills we received an analysis of the impact of the cuts on low, middle, and upper income Kansans. So far they have refused to produce that analysis for HB 2117.I would be glad to try and answer any questions you have about HB 2117 if you want additional information.STAY IN TOUCH!I will continue to do newsletters throughout the summer. I will start knocking on doors soon and look forward to seeing you when I’m in your neighborhood. Regards,Ann MahState Representative – District 53