As Democrats in eight blue states push unprecedented new wealth tax regimes, Republican leaders in the Sunflower State are laser-focused on delivering pro-growth income tax cuts and strengthening their state’s economy.
Both the House and Senate are considering bills that would lower and simplify income tax rates down to a single flat rate. With the support of Senate Chairman Ty Masterson and bill sponsor Sen. Caryn Tyson, SB 169 is moving full speed ahead toward a Senate floor vote this Thursday.
Thanks to their efforts and those of many other pro-taxpayer lawmakers, the Kansans are close to keeping more than their hard-earned dollars. And a flat tax would make it harder for future politicians to raise taxes, since every voter would know that a tax increase would impact them.
A tax reduction for each Kansan
Kansas currently uses a 3-bracket system for taxing personal income, with a top rate of 5.7% going as high as $30,000 for single filers. Earnings over $15,000 are taxed at a rate of 5.2%, with 3.1% tax on the remainder.
The Senate proposal would consolidate these bands into a single flat rate of 4.75% on earnings over $5,225. This threshold ensures that no Kansan would see a tax increase. In fact, the new lower rate would save them nearly $600 million a year. Thousands of small businesses, who file their taxes on the personal side of the code, would get relief.
In addition to allowing families, individuals and small businesses to keep more of their hard-earned cash, the tax-cut package spearheaded by Sen. Masterson would make Kansas an attractive destination for new residents and investment. Lowering income taxes is an effective way to stimulate population growth for years to come.
States are moving towards zero
Over the past decade, people and jobs have fled from high-tax states and into states that impose low and no income taxes. The flexibility of working remotely is amplifying this trend. To compete for that investment, a growing movement of states are working to reduce and phase out their income taxes.
Recent years have seen a record number of states move to simplify their income taxes to a flat rate and put them on the path to zero. In the 2021 and 2022 legislative sessions, five states — Idaho, Georgia, Mississippi, Arizona and Iowa — swapped their progressive income tax system for a single-rate tax. This brings the total number of states that have adopted a flat tax to 14.
Additionally, there are eight states — including neighboring Texas and South Dakota — that don’t impose individual income taxes of any kind.
That trend shows no signs of slowing in 2023. More than a dozen states, including North Carolina, Mississippi, Iowa, Louisiana, Oklahoma and Kentucky are cutting taxes and running to zero. Doing nothing would cause Kansas to fall behind.
Revenue triggers ensure responsible future rescue
Some states have implemented “revenue triggers” to further reduce income tax rates. This mechanism requires state revenues to grow by a certain amount above budgetary needs before tax rates are reduced.
Similarly, the House proposal for a flat tax, HB 2061, would channel excess revenues into a dedicated fund, reducing state income tax rates to zero.
However, some other proposals before the Senate threaten to undermine these tax cuts.
One such bill would end a three-year food sales tax phase-out that passed in 2022, reimposing the higher rate of 6.5% on foods that don’t qualify as “healthy,” based on a new definition imposed by the state.
Sound fiscal policy is about collecting the revenue needed to pay for key government functions, and doing so in a way that is least detrimental to economic growth and job creation. Kansas lawmakers would do well to avoid using the tax code to try to make people thinner. Aside from the political arguments against a payout designed to encourage weight loss, such a provision may cause future political headaches for those voting for it and distract from what is a general pro-growth overhaul of the tax code.
Kansas households, small businesses, and individuals continue to suffer from inflation, driven by out-of-control spending in Washington. Flat tax legislation to be passed in Topeka would provide much-needed relief to families across Kansas. With a full rainy day fund and $3 billion in excess tax revenue, 2023 presents a golden opportunity for lawmakers to enact tax reform that will make Kansas a more attractive place to live, work and invest.