The American Prospect: What’s the Matter with KS, Tax Edition

January 25, 2012
By Abby Rapaport
What’s the Matter with Kansas, Tax Edition

The state aims to cut off deductions that benefit the middle class, all the while propping up big business.

While around the country, many Republican primary voters are up in arms that Mitt Romney only paid about 13 percent of his income in taxes last year, in Kansas, Governor Sam Brownback is pushing a proposal that would not only benefit wealthy Kansans but raise taxes on the state’s poorest residents. A new report released yesterday argues that the plan will benefit some large corporations but fail to create jobs.

The plan gets rid of a number of tax deductions—including those for home mortgages and charitable giving. It also takes away the earned-income tax credit and food-sales tax rebate. As the AP noted last week:

According to the Department of Revenue’s own figures, the only class of taxpayers that would see an increase in its aggregate income tax burden would be the one with people whose incomes are $25,000 or less, while the largest percentage cut would go to the group with incomes exceeding $250,000. As a group, the lowest-income taxpayers actually get a net payment from the state, so the tax change they face is calculated as an increase of more than 5,100 percent.

The new analysis left Brownback’s staffers doing spin control. Revenue Secretary Nick Jordan argued that included among the poorest taxpayers—41 percent of individual filers—are wealthy teens with after-school and weekend jobs. Shockingly, that particular line of defense doesn’t seem to have gained a whole lot of traction. Even an appearance from the father of Reaganite supply-side plans, Art Laffer, hasn’t been enough to quell concerns.

Meanwhile, proponents have clung to the aid it supposedly provides to small businesses and its ability to create jobs. But a new report from the Center for Budget and Policy Priorities argues that the plan will fail to create jobs while helping out large corporations. The report notes that the main businesses targeted for the big tax break, called “pass through” entities, include both large and small businesses. Furthermore, the pass-through businesses are not likely to be businesses that have many employees. “Many pass-throughs are used purely as investment vehicles, again, with no employees,” reads the report. “A study by the nonpartisan research staff of the U.S. Department of Treasury found 88 percent of the owners of pass-through entities and sole proprietorships own businesses that spend less than $10,000 on payroll or contract labor.” The state will lose more than $250 million in yearly tax revenue under the proposal.

Last year, in the midst of anti-tax Tea Party fervor, this kind of plan may well have garnered widespread praise. But now, even Newt Gingrich is laying into his opponent’s corporate ties and low taxes. A plan to raise taxes on the poor and eliminate taxes for the wealthy is going to be a tough sell in most parts of this country. Maybe even in Kansas.

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