Why this approach?

From 2004 through 2010, there was net outmigration of 15,683 tax filers from Kansas with 17,640 dependents and a total adjusted gross income of $1.09 billion.

The top six states people moved to from Kansas were either regional competitors with lower income tax rates (Missouri, Oklahoma and Colorado) or states with no income tax (Texas, Washington and Florida). Texas gained the most from Kansas outmigration with 6,395 tax filers along with 12,837 dependents and a total adjusted gross income of $305.4 million.

Data show that states with zero personal income tax significantly outperform states with the highest personal income tax rates (in terms of gross state product); experience larger than average population growth; and boost state tax revenues at a faster pace than high tax states.

Why is there an emphasis on small business in this plan?

The plan provides lower rates for all taxpayers while targeting small businesses for additional relief since those businesses are so vital to job creation in our state. Of the approximately 220,000 business filers in Kansas, about 191,000 file business income on the K-40 individual income tax form. Under a fairer, flatter and simpler plan, these taxpayers will not pay taxes on their business income reported on lines 12, 17 and 18 of the federal 1040 individual income tax return.

Why are small businesses so important?

Startups and small businesses are the main driver of the Kansas economy. A study by the Kauffman Foundation found, “Both on average and for all but seven years between 1977 and 2005, existing firms are net job destroyers, losing 1 million jobs net combined per year. By contrast, in their first year, new firms add an average of 3 million jobs.”

Why do you want to broaden the tax base?

Today, 25 percent of Kansas tax filers pay zero individual income tax. A broader tax base will be more fair and stable, even as everyone’s rates are lowered.  Further, as economist Dr. Arthur Laffer has said, “Economics is all about incentives … Don’t be surprised when government raises taxes on work, output, and employment and increases subsidies to non-work, leisure, and unemployment that the economy will produce less work, less output, and less employment and will produce more non-work, leisure, and unemployment. It’s the nature of people.”

Why move money into social service programs instead of leaving it as a tax credit or refund?

By moving money into social service programs, we are helping to ensure that the people who most need assistance will receive it. Welfare programs have more oversight and can target the neediest citizens (see Appendix B). For example, by moving money from an earned income tax credit that pays an average lump sum payment of $357 one time per year, we can expand social welfare programs that offer sustained aid throughout the year.

Why eliminate itemized deductions?

The tax system needs to be more fair and less complicated. By eliminating deductions at the state level (no impact on federal deductions), we accomplish both objectives while also lowering tax rates by 14 to 24 percent for everyone. Importantly, as individual income tax rates are reduced now and in the future, itemized deductions become less and less meaningful because the overall income tax burden is lower for everyone.