The Legislature passed Gov. Sam Brownback’s revamp of Kansas income taxes in 2012 that virtually eliminated income taxes for about 333,000 businesses. The tax savings realized by these businesses were supposed to provide the funds to create new jobs.
But the House Tax Committee recently was informed that data since the tax cuts do not support the intended outcomes and won’t help the Kansas economy to grow.
Information from the Kansas Department of Revenue, which gives the breakdown of the effect of the tax breaks, reveals a major reason the policy is failing: Only very successful business owners receive enough tax savings to create jobs.
The 2,274 businesses with incomes of more than $500,000 each save an average of $38,310 in state income taxes. None of the other benefiting businesses saves enough to create even one new job. For each of 176,920 businesses with incomes less than $25,000, the average savings is only $158.
The savings for all other business filers also fall far short of what it takes to create a new job. You can’t create a job for $158 a year.
With the total cost to the state this year at about $205 million, the savings per company simply do not provide enough money to support creating new jobs. About half of the businesses benefiting from the tax cut have incomes of $25,000 or less. On the other end of the spectrum, businesses with incomes of more than $500,000 represent only 0.68 percent of the businesses benefiting from the tax cut.
The lowest income group making up 53 percent of the total business filers cost the state a total of $28 million in lost revenue, while the top 0.68 percent cost the state a total of $87.1 million in lost revenue.
The KDOR figures support the conclusion that the governor’s tax policy is failing to produce the results expected – and counted upon. Major corrections are overdue.
Jim Lowther is a former Republican state representative from Emporia.