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Kansas Can’t Afford To Keep Its Cut to the Top Income Tax Rate

Kansas voters overwhelmingly want their legislature to reverse the damaging tax cuts enacted five years ago at the behest of Governor Sam Brownback, but the governor and some of the state’s lawmakers are determined to keep a particularly costly provision — the state’s deep reduction in its top income tax rate.

Much of the sharp revenue loss from the tax cuts resulted from a steep cut in that rate, from 6.45 percent to 4.6 percent, so raising the state’s top rate is a key step back to fiscal sanity. But the governor and his remaining legislative allies so far refuse. Yesterday the governor indicated his support for a bill under consideration in the state Senate that would retain the 4.6 percent rate.

The bill would raise some revenue, in part by increasing rates on lower levels of income. Kansas currently has two income tax brackets: a 2.7 percent bracket for income under $30,000 (for married filers), and a 4.6 percent bracket for income over $30,000. The bill would tax all income at 4.6 percent.

That’s the wrong approach for multiple reasons, including:

  • Kansas can’t afford to keep the costly cut in the top income tax rate. The state faces a budget shortfall of about $900 million next year, not including hundreds of millions more that a recent state Supreme Court ruling deemed necessary to restore school funding. The Senate bill would raise only $295 million next year, even though it rolls back other aspects of Governor Brownback’s failed tax cut package — a costly and ineffective exemption for certain forms of business income and future additional income tax rate cuts. That’s nowhere close to enough. The bill’s proponents have said they might also raise tax rates on cigarettes and alcohol, but that would reportedly raise only about $85 million in additional funds.

    As such, the bill would leave the legislature with no choice but to sharply reduce funding for services in a state that already has endured years of cuts. Many of these services — a strong education system, roads and bridges, investments in children living in poverty, and health care, for example — contribute to economic growth and form a foundation for future prosperity. More cuts in these fundamentals would harm the state’s future, adding to the damage the tax cuts have already done.

  • The resulting tax system would be weak, adding to Kansas’ future difficulties. Single-rate income tax systems don’t grow as well with the economy as multi-rate systems that are based on a taxpayer’s ability to pay, especially during periods of high income inequality as we have today. When income is concentrated at the top of the income scale, but the wealthy pay the same low rate as everyone else, states struggle to provide adequate funding for schools and other investments that promote equal opportunity and a broadly shared prosperity. If Kansas accepted a single-rate system, it would set itself up for more problems in the future.

In February, a large majority of Kansas’ lawmakers passed a bill that got much closer to what their constituents are demanding — a repeal of the disastrous tax cuts and an end to the funding crisis for schools and other public priorities. The governor vetoed that bill. While Governor Brownback has agreed to roll back some pieces of his tax cut package, he’s still hoping to salvage his cut to the state’s top income tax rate.

Kansas cannot afford to keep that cut. Lawmakers would be wise to stand their ground against the governor’s inadequate new proposal, and insist on a plan that raises the revenue needed to get the state back on track, including by raising the state’s top income tax rate.