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Tax plan: Who benefits, who pays?

  • The Wichita Eagle
  • Published Sunday, Jan. 22, 2012, at 7:29 a.m.
  • Updated Wednesday, July 10, 2013, at 9:44 a.m.

What the governor’s plan could mean for a …

Single parent

$18,000 income

One child

Taxes would increase because of the elimination of the earned income tax credit and food sales tax refund.

Kansas taxable income: $6,750

Current refund: $402

Proposed taxable income: $2,250

Proposed tax: $68

Net increase: $470

Married couple

$50,000 income

Filing jointly, one child

Taxes would decrease because of lower tax rates.

Kansas taxable income: $37,250

Current tax: $1,505

Proposed taxable income: $37,250

Proposed tax: $1,255

Net decrease: $250

Business owner

$50,000 wages income

$75,000 business income

Married, filing jointly, two children

Taxes would decrease because of the elimination of taxes on business income

Kansas taxable income: $83,257

Current tax: $4,425

Proposed taxable income: $29,701

Proposed tax: $891

Net decrease: $3,534

Business owner

$50,000 wages income

$250,000 business income

Married, filing jointly, two children

Taxes would decrease because of the elimination of taxes on business income

Kansas taxable income: $212,028

Current tax: $12,731

Proposed taxable income: $25,030

Proposed tax: $751

Net decrease: $11,980

More Tax Scenarios

Here are sample tax scenarios based on the Gov. Sam Brownback’s reform proposal. The scenarios were prepared by Shawn Sullivan, senior vice president in tax services for Allen Gibbs & Houlik of Wichita. The calculations are based on limited assumptions and not intended to address all possible tax situations.

SINGLE

$18,000 income

Two children

Tax liability increases because of the elimination of earned income credit and food sales tax refund.

Kansas taxable income: $4,500

Current tax refund: $869

Proposed taxable income: $0

Proposed tax/refund: $0

Net increase: $869

$50,000 income

No child, no deductions

Taxes decrease because of lower tax rate.

Kansas taxable income: $44,750

Current tax: $2,415

Proposed taxable income: $44,750

Proposed tax: $1,908

Net decrease: $507

$50,000 income

One child, no deductions

Taxes decrease because of lower tax rate.

Income: $50,000

Kansas taxable income: $38,750

Current tax: $2,028

Proposed taxable income: $34,250

Proposed tax: $1,393

Net decrease: $635

$50,000 income

One child, itemized deductions (medical, taxes, mortgage interest, charitable deductions)

Taxes increase because of lost deductions.

Income: $50,000

Kansas taxable income: $27,000

Current tax: $1,277

Proposed taxable income: $34,250

Proposed tax: $1,393

Net increase: $116

$50,000 business income (non-wage, from LLC, S corporation or sole proprietorship)

One child, itemized deductions

Taxes decrease, primarily because of elimination of taxes on business income.

Kansas taxable income: $23,202

Current tax: $1,039

Proposed taxable income: –$19,283

Proposed tax/refund: $0

Net decrease: $1,039

$64,000 business income

One child, itemized deductions

Taxes decrease, primarily because of elimination of taxes on business income.

Kansas taxable income: $37,189

Current tax: $1,925

Proposed taxable income: -$20,272

Proposed tax/refund: $0

Net decrease: $1,925

$75,000 income

No children, no deductions

Taxes decrease because of lower rate.

Kansas taxable income: $69,750

Current tax: $4,026

Proposed taxable income: $69,750

Proposed tax: $3,133

Net decrease: $893

$75,000 income

No children, itemized deductions

Taxes increase because of lost deductions

Income: $75,000

Kansas taxable income: $51,691

Current tax: $2,862

Proposed taxable income: $69,750

Proposed tax: $3,133

Net increase: $271

MARRIED

$18,000 income

Filing jointly, two children

Taxes increase because of the elimination of earned income credit and food sales tax refund.

Kansas taxable income: $3,000

Current tax refund: $980

Proposed taxable income: $3,000

Proposed tax: $90

Net increase: $1,070

$50,000 income

Filing jointly, no children, no deductions

Taxes decrease because of lower tax rate.

Kansas taxable income: $39,500

Current tax: $1,645

Proposed taxable income: $39,500

Proposed tax: $1,366

Net decrease: $279

$50,000 income

Filing jointly, one child, no deductions

Taxes decrease because of lower tax rate.

Income: $50,000

Kansas taxable income: $37,250

Current tax: $1,505

Proposed taxable income: $37,250

Proposed tax: $1,255

Net decrease: $250

$50,000 income

Filing jointly, one child, itemized deductions

Taxes increase because of lost deductions.

Kansas taxable income: $27,000

Current tax: $946

Proposed taxable income: $37,250

Proposed tax: $1,255

Net increase: $309

$50,000 business income

Married, filing jointly, one child, itemized deductions

Taxes decrease primarily because of elimination of taxes on business income.

Kansas taxable income: $23,202

Current tax: $813

Proposed taxable income: –$16,283

Proposed tax: $0

Net decrease: $813

$64,000 business income

Filing jointly, one child, itemized deductions

Taxes decrease primarily because of elimination of taxes on business income.

Kansas taxable income: $37,189

Tax: $1,498

Proposed taxable income: –$17,272

Proposed tax: $0

Net decrease: $1,498

$75,000 income

Filing jointly, no children, no itemized deductions

Taxes decrease because of lower rates.

Kansas taxable income: $64,500

Current tax: $3,215

Proposed taxable income: $64,500

Proposed tax: $2,591

Net decrease: $624

$75,000 income

Filing jointly, no children, itemized deductions

Taxes increase because of lost deductions.

Kansas taxable income: $49,223

Current tax: $2,252

Proposed taxable income: $64,500

Proposed tax: $2,591

Net increase: $339

$125,000 income

Filing jointly, two children, itemized deductions

Taxes increase because of lost deductions.

Kansas taxable income: $78,790

Current tax: $4,137

Proposed taxable income: $110,000

Proposed tax: $4,820

Net increase: $683

$300,000 income

Filing jointly, two children, itemized deductions

Taxes decrease because of lower rates.

Kansas taxable income: $222,746

Current tax: $13,422

Proposed taxable income: $285,000

Proposed tax: $13,395

Net decrease: $27

Source: Allen Gibbs & Houlik

What would Gov. Sam Brownback’s tax reform mean for you?

The plan — which is likely to change substantially, based on the reception from lawmakers — would lower tax rates overall.

It would eliminate the state income tax for most small businesses. But it would wipe out a number of deductions and credits, including the earned income tax credit and food sales tax refunds that low-income filers rely upon.

Low-income Kansans accustomed to getting tax refunds would have to write checks to the state instead. Business owners could expect to see their taxes drop, sometimes significantly.

Many Kansans could see their taxes decrease, although families that itemize deductions — from home mortgage interest to charitable contributions — could see their taxes rise.

The Eagle asked Shawn Sullivan, senior vice president in tax services for Allen Gibbs & Houlik of Wichita, to calculate personal income taxes under a variety of scenarios to show changes taxpayers might face under the governor’s plan. His calculations are based on limited assumptions and not intended to address all situations.

However, in general, he said, “In the lower brackets, when you’re talking about folks that qualify for the EIC, you really see substantial swings. From there up, it can be plus or minus, but it’s not a huge change. That’s highly impacted by whether someone is itemizing deductions.”

Because the rates would be lowered, “If an individual doesn’t take advantage of tax credits and doesn’t itemize deductions, they should see their taxes go down,” Sullivan said.

Business owners would see their state taxes go down, Sullivan said, but they would pay more federal income tax because they would no longer itemize state taxes on their federal forms.

Calculations released last week by the state Department of Revenue estimate that overall, Kansans would see individual income taxes drop 12 percent. All groups of taxpayers, except those with adjusted gross incomes of $25,000 of less, would pay less on average, the department says.

More than a half-million tax filers — earning less than $25,000 a year — would pay an average of $156 more in income taxes. About 21,000 taxpayers earning more than $250,000 a year would see an average cut of $5,200 a year. Taxpayers earning from $50,000 to $75,000 annually would pay $282.90 less on average.

Reach Fred Mann at fmann@wichitaeagle.com.

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