Wednesday, September 12, 2012

Advocacy group says new tax law will hurt families, children

By SCOTT ROTHSCHILD, The Lawrence Journal-World

One day after Gov. Sam Brownback sought to defend his tax cuts at the Lied Center, a child advocacy group released a report Tuesday stating that the tax cuts will be bad for children and families.

Kansas Action for Children stated the cuts will reduce revenues for necessary state services, increase taxes on the lowest-income Kansans, and incent businesses to reorganize to avoid paying state income taxes.

"Ultimately, the package of tax changes enacted by lawmakers will negatively impact Kansas children and families in a number of ways," the group said in its report.

Earlier this year, Brownback signed into law sweeping tax cuts that will reduce state individual income tax rates and exempt the owners of nearly 200,000 partnerships, sole proprietorships and other businesses from income taxes.

He said the tax cuts will produce 23,000 new jobs, give Kansans $2 billion more in disposable income and add 35,000 in population.

"We are trying to create a pro-growth environment," he told approximately 1,200 people on Monday during the Anderson Chandler lecture series presented by the Kansas University School of Business.

But Kansas Action for Children said there is no requirement that jobs be created under the tax exemption for businesses on "pass-through income."

The group notes that legislative staff have said the state budget will face a cumulative $2.5 billion shortfall of revenue, equal to 37.4 percent of the state general fund budget.

Brownback has said "core services" will be protected but Kansas Action for Children said "it is difficult to envision a scenario where core services are not negatively impacted."

And while tax rates are reduced for all income levels, there are parts of the new tax law that revoke provisions aimed at helping lower-income Kansans.

Those include the food sales tax rebate and the homestead property tax program for renters.

An analysis by the Washington, D.C.-based Institute on Taxation and Economic Public Policy shows that taxes as a percentage of income is reduced under the new law for all income levels except the lowest-income taxpayers.

The top one percent of Kansans, earning $400,000 or more per year, will see an average tax cut of $21,087, or 2 percent.

Meanwhile, the lowest 20 percent of Kansans, earning less than $20,000 per year, will see an increase in tax liability of $148, or 1.3 percent, the study said.

Kansas Action for Children makes three recommendations to mitigate the impact of the tax cuts. They are:

— Preserve the Earned Income Tax Credit;

— Restore the Child and Dependent Care Credit;

— Limit the pass-through business income tax exemption to the first $100,000 in non-wage income. This would provide the tax break for small businesses that the governor said he wanted, the group said.

"Ultimately, this will avoid or reduce the budget cuts necessary as a result of the 2012 Kansas tax changes," the group said.