Syndicated to Kansas newspapers June 19, 2017.
It’s done. The income tax rates have been raised. We’re waiting to see just how Kansans who watched the scraps between Republicans and Democrats, the House and the Senate, and the Legislature and the governor will assess the result at the upcoming 2018 elections.
Did all that talk about putting those LLCs and other small businesses back in the routine of paying Kansas income tax yield supporters for those lawmakers who voted for the issue, some whenever they got a chance, some just once to override a gubernatorial veto?
Will that key issue in 2016 elections turn out to be just history for the upcoming election? Or, will Kansas income taxpayers who wanted that 330,000 or-so of their neighbors to start paying taxes again object, saying that while they wanted that LLC “non-wage income” taxed, they didn’t want to see their own taxes boosted.
We’ll get an indication soon, when the Kansas Department of Revenue issues new rates for withholding from most Kansans’ paychecks to make sure they will have most of their income tax paid without the annual April scrambling to come up with a few bucks, or a few hundred bucks, to settle their tax bills.
That tax bill, remember, instituted those new higher rates on wage-earners and, well, just taxes on those who are now exempt, going back to Jan. 1 of this year, so we’re halfway into the new tax year before there’s a chance to adjust withholding for next April’s Tax Day. And the LLCs, well, they’re going to have to start doubling up because they paid no withholding for the first six months of this year.
Might not be a big deal. Low-income wage earners will see another buck or two deducted from their take-home pay, middle-income folks a little more, and those making more than $60,000 as a married couple filing jointly a little bit more.
But there’s likely to be another response. Some taxpayers may say that as long as legislators were tinkering with the bracket system, why keep $60,000 income folks in the same bracket as higher-dollar income folks? That your neighbor who shops for Buicks is going to pay the same rate of taxes that the Honda buyer pays? Once you’re over that $60,000 income line, the fact that the rate is the same is likely to be the head-scratcher for folks who can now divert their interest from the LLCs to income tax equity in general.
Any good reason that those $60,000 earners should pay the same percentage of their wages as those who bank $100,000, or $250,000 or more?
This three-bracket system—two brackets more than flat-taxer Gov. Sam Brownback sought, didn’t get, and blocked until the Legislature overrode his veto of a three-bracket system—probably is the best deal that the high-income Kansans could have hoped for, while remembering to wail about taxes in general.
But, the tax increases are now law, and it’s going to be a little interesting to see whether the tax increases actually produce the $591 million in the state fiscal year that starts July 1 and the $633 million for the following year.
If the increases produce that amount of revenue, we’ll see whether lawmakers want to tinker with the rate structure, so the folks who make that $60,000 to wind up in the highest bracket are comfortable paying the same percentage of their income in taxes as those making $100,000 or more pay.
And…if the tax increases don’t yield the amount of state revenue to balance budgets in the next few years—and the state has a new governor as Brownback’s final term expires—it’ll be worth watching to see whether that three-bracket system gets stretched to more brackets.
Just like most of state government, it isn’t over even when it’s over…