15 February 2019 | Tax and Budget

How Kansas can fix its upside-down tax code

Emily Fetsch
April 15, 2019

Americans are rightfully concerned that corporations and the wealthy do not pay their fair share in taxes. More than 80 percent of Americans say they are bothered by the feeling that some corporations and wealthy people don’t pay what they should.[1] The low tax responsibilities of corporations and the wealthy should be even more concerning for Kansans. Right now, our state’s economic policies favor the rich at the expense of the rest of us.

Kansans lived through five years of budget cuts during Gov. Brownback’s tax experiment to provide tax loopholes for the wealthiest Kansans. To correct this, lawmakers rejected the failed ideology. However, Kansas leaders still have work to do to fix its upside-down tax code by strengthening and reinstating tax credits for low-income Kansans as they work to support themselves and their families, while ensuring the tax code is as fair as possible.   

The lowest-income Kansans pay 4 percent more of their family income in taxes (11.4 percent) than the top 1 percent of Kansas earners (7.4 percent).[2] As a result, too much wealth is in too few hands, creating ever-growing barriers to opportunity for Kansas families. The barriers are particularly pronounced for Kansas’s communities of color because of how our history of race-based policies worsen today’s unfair tax policies. For example, due to historical barriers such as redlining, families of color are less likely to have accumulated wealth through assets like home ownership.[3]

It’s time to use our tax dollars to support those who need it most, not to line the pockets of the richest few.  To begin creating balance in our upside-down tax code, state leaders can start by strengthening tax credits for low-income Kansans and making the wealthy pay their fair share.

See more here: https://public.tableau.com/views/ITEPPersonalTaxes/Dashboard1

Strengthen tax credits

Policymakers can help low- and middle- income Kansans through tax credits. During Gov. Sam Brownback’s tax “experiment,” tax credits were reduced and/or eliminated.

  • In 2013, Kansas eliminated the Homestead Property Tax credit for renters.
  • In 2013, the food sales tax credit was made nonrefundable. Nonrefundable credits do little for low-income earners, who often earn so little that they do not pay enough in taxes to benefit from the credit.
  • In 2015, Kansas eliminated its child and dependent care credit, making child care less affordable for working families. While it has been reinstated, it could be increased to substantially help more working Kansas families. Kansas could also add a child tax credit on the state tax return, to provide more tax assistance to families with children.   

To improve the lives of working Kansans, policymakers can reinstate these credits, restore refundability of the food credit, and ensure they are targeting the Kansans who would benefit the most.

Rebalance the tax code

Kansas can begin to address inequity and barriers to opportunity for lower-income families in our state by balancing the tax code. Currently, the Kansas individual income tax rate structure has a resident making a million dollars a year paying the same tax rate as a Kansan making $30,000 a year (5.7 percent). This could be changed to tax high-earners at a higher rate. In addition, implementing taxes on wealth would take us in the right direction. The additional revenue would allow us to pay for services that help every Kansan thrive, like health care, child care, and paid family leave. Taxes on wealth, such as a tax on second homes, a luxury tax (charging a high sales tax for items such as fine jewelry, luxury cars, and high-priced boats), or an estate tax, are commonsense solutions.

Our current tax code didn’t happen by chance. Policies, like the current tax rates and corporate tax incentives, were intentionally created to benefit the wealthy and corporations at the expense of working Kansans. The tax inequity created by these policies is a barrier to success for Kansas families. Luckily, there are effective ways address this inequity, including implementing and strengthening tax credits for Kansans with lower incomes and ensuring the tax code is fair.

[1] Pew Research Center. “Growing Partisan Divide Over Fairness of the Nation’s Tax System.” April 4, 2019. https://www.people-press.org/2019/04/04/growing-partisan-divide-over-fairness-of-the-nations-tax-system/

[2] Institute on Taxation and Economic Policy. Kansas: Who Pays? 6th Edition. October 17, 2018. https://itep.org/whopays/kansas/

[3] Leachman, Michael, Michael Mitchell, Nicholas Johnson, and Erica Williams. “Advancing Racial Equity with State Tax Policy.” Center on Budget and Policy Priorities. November 15, 2018. https://www.cbpp.org/research/state-budget-and-tax/advancing-racial-equity-with-state-tax-policy

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