January 22, 2012

Tax plan: Who benefits, who pays?

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

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.

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