Gov. Sam Brownback signed historic tax reform legislation last May that would reduce state income taxes by about $800 million in its first full year. As the Legislature returns Wednesday, the debate is about how much of last year’s tax reform will be wiped out.
Instead of reducing the cost of government to implement tax reform this year, Brownback and the Senate want to make the 6.3 percent statewide sales tax permanent and eliminate the income tax deduction for home mortgage interest. They also propose 0.5 percent reduction in the income tax on the first $15,000 of taxable income in 2014 and a reduction in all marginal rates beginning in 2017 (after a billion dollar increase in sales taxes).
The House plan isn’t perfect, but it’s much better. It allows the sales tax rate to drop 5.7 percent as promised, proportionally reduces income tax deductions, has some spending reductions and a formula that gradually eliminates the income tax altogether.
The goal of tax reform is to reduce the overall tax burden, not shift it. Consumption taxes are better than income taxes, but taxes will still be too high (and economic growth impaired) until we deal with the real problem of excess spending. But even some self-identified fiscal conservatives don’t want to reduce spending.
Part of their resistance is that many people equate spending less with service cuts, but that doesn’t have to be the case. Per-resident spending varies greatly across all 50 states. Yet every state has schools, highways, social programs, etc. Some simply do so more efficiently. States with an income tax spend 44 percent more per resident than those without an income tax. States that spend less, tax less (and grow more). Done well, states can spend less and actually deliver the same or better services.