Thursday, January 24, 2013

Does the Governor of Kansas Really Want to Lower Taxes?

It appears that Republican leaders in the state of Kansas want to eliminate the income tax.

NYT reports:
President Obama stood on the steps of the Capitol in Washington on Monday afternoon and laid out an expansive liberal agenda for the nation. Inside the Kansas State Capitol here this week, Gov. Sam Brownback and Republican legislators have been drafting what could be a blueprint for the other side.

On Wednesday, lawmakers received a bill to inch the state closer to eliminating income taxes, a centerpiece of a broad legislative vision that many in the Republican Party here hope will serve as a model of conservative governance for other states, if not the nation, to follow.

While Republican principles of small government and low taxes have holds on large swaths of the country, Kansas provides perhaps the starkest view of the crimson ideology that could challenge Mr. Obama’s Inauguration Day rallying cry.

This month, the largest tax cut in Kansas history took effect[...]

The bill introduced this week would pare taxes further, with the goal of eventually eliminating the state’s individual income tax.

[...]for the first time in generations, the House, the Senate and the governor’s office in Kansas are controlled by conservative Republicans. In much of the rest of the country, the political equation is similar: The Republican Party now controls both legislative chambers and governorships in 24 states. Democrats have single-party control in 13.

But is this all smoke and mirrors that will be a dangerous model for other states to follow?

NYT continues with the bad news:
 But there is significant concern in Kansas over the cost of the tax cuts, which is expected to total nearly $850 million in the coming fiscal year. In the budget he presented last week, Mr. Brownback proposed to help cover the cost of those cuts by keeping in place a sales tax increase that was scheduled to expire this year and by eliminating the mortgage interest deduction.
It's hocus pocus, cut a tax here, increase a tax there. But the MSM will try and promote the angle that it is a tax cut, burying the increases in other areas. Indeed, the NYT headline for the story is: Kansas’ Governor and G.O.P. Seek to End Income Tax

4 comments:

  1. Eliminating the mortgage interest deduction actually is not a bad idea at all, it was one problem among many that caused the financial crisis. The deduction encourages leveraged homeownership over renting and saving, especially among those who should save more before venturing into homeownership and have no business taking out a mortgage on a property.

    The deduction also tends to inflate purchase prices on houses because the reduction in taxable income obviously translates to a larger share of disposable income that can be put toward monthly payments (and higher purchase prices benefits mortgage brokers and lenders greatly). It is essentially a subsidy to riskier borrowing, and inflated loan amounts.

    Deductions can be good (like charitable giving and sovereign debt instruments), but not when they encourage potentially risky behavior. For instance, I think its silly that businesses cannot deduct anything when they save and pay for capital improvements or facility renovations with equity...but if they borrow the money by leveraging themselves they can deduct the interest.

    Brownback should cut state government outlays to "offset" the concept of people keeping their income, not by raising the sales tax.

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  2. "Mr. Brownback proposed to help cover the cost of those cuts by keeping in place a sales tax increase that was scheduled to expire this year and by eliminating the mortgage interest deduction."

    Eliminating the mortgage interest deduction indicates that the income tax still exists. If there is no income tax then there are no deductions to eliminate. Who are they kidding?

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  3. "But there is significant concern in Kansas over the cost of the tax cuts, which is expected to total nearly $850 million in the coming fiscal year."

    Cost to WHOM, pray tell. Let's see, govt by, for, OF the people. So let the people KEEP their money = NO cost, eh? Oh, except for the parasites haha.

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  4. Even if changing from an income tax to a sales tax didn't result in a net lower tax, it would be an improvement if it meant the elimination of individuals' requirement to file state income taxes.

    1) Less invasion of privacy
    2) No income tax forms for the individual to file, which reduces time spent and stress
    3) Somewhat more voluntary, because one can choose to not pay taxes on at least the part of income that is not spent on taxable goods.
    4) Taxes consumption (spending) rather than production (earning income), which on the margin should tend to encourage the accumulation of savings compared to a tax on income and also be less of a disincentive towards earning more.

    Of course greatly lower overall taxes would be preferable, but switching from income to sales tax seems like a step in the right direction.

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