As lawmakers in Washington continue to debate changes to the federal tax system, governors and legislators in some state capitals are starting to take matters into their own hands, and Kansas is leading the way.
A bill introduced this week could bring the state, which cut its income tax significantly last year, even closer to eliminating income taxes. It is part of a broad initiative that many in the Republican Party there hope will serve as a blueprint for other conservative states.
Kansas Gov. Sam Brownback has already cut the state’s welfare roll and consolidated government agencies, and he is pushing to keep in place a sales tax increase that was scheduled to expire this year.
“I think it is the leading edge of the conservative economic and political movement,” State Representative Tom Sloan, a Republican representing the area around Lawrence, told The New York Times
. “As such, it is the example that other state leaders will look to determine whether the political philosophy can mesh with the expectations of the public.”
Kansas is one of 24 states where Republicans control both the governorship and legislatures and therefore have the ability to test far-reaching and controversial tax reform.
Brownback and his supporters say the steps are necessary to reverse years of high unemployment and tight revenue. According to the Kansas Policy Institute, private sector jobs in the state have grown 1.6 percent over the past 14 years, compared to 12.2 percent in the 10 states with the lowest tax burdens.
The state estimates that the tax cuts will generate nearly 23,000 jobs by 2020 and $2 billion of income for the state.
“I think the unique thing is that we’re applying the principles on how you get your cost down and still provide a high-quality product,” Brownback said in an interview with the Times. “That’s been in the private sector, but it hasn’t been in the public sector for 50 years.”
Critics, though, argue that his approach will shift the burden to the state’s middle class and poor residents and leave many without basic services.
“It kind of eliminates a large group of Kansans out of that pursuit of happiness,” said Senator Oleth Faust-Goudeau, a Democrat from Wichita. “They will still struggle. They’ll pay the highest taxes. They are already working jobs with no benefits or very little benefits.”
Still, Brownback’s ideas are already being touted in other conservative states. “We have no choice but to make change,” said Bob Rucho, a state senator in solidly Republican North Carolina.
Rucho and other lawmakers want to eliminate all state individual and corporate income taxes and replace the revenue with a new business license fee and a higher sales tax on goods and services.
Rucho acknowledged that the poor could be harder hit by higher sales taxes, but said new sales taxes on services would also hit higher-income taxpayers. He contended that low-income people got more government assistance that could help offset higher taxes.
Republican Louisiana Gov. Bobby Jindal has also called for ending that state’s income and corporate taxes and shifting the burden to sales taxes.
Gov. Dave Heineman of Nebraska, a Republican, has introduced a bill to eliminate a variety of taxes, including ones on individual income and small businesses.
Republican Gov. Mary Fallin of Oklahoma plans to call for modest income tax cuts, and legislators in Missouri are discussing possible amendments to their tax code.
“When it comes to getting pro-growth tax reform done this year, the only real opportunities are at the state level,” Patrick Gleason, director of state affairs for Americans for Tax Reform, the Washington-based lobbying group headed by Grover Norquist, told Newsmax in an earlier interview.
But there is concern in Kansas over the cost of the tax cuts, which are expected to amount to nearly $850 in the coming fiscal year. Brownback has also proposed eliminating the mortgage interest deduction, but that is unpopular with both liberals and conservatives.
Other states without individual income tax, such as Texas and Florida, have other means of replacing the revenue; Texas has oil and Florida has tourism. Alaska, which has repealed its personal income tax, has supplemented the revenue with its huge state oil income.
And as he tries to reduce taxes, Brownback has not increased financing for education to the level that a state appellate court mandated this month, although the state is appealing that ruling. Opponents are also worried about deeper spending cuts.
Referring to the bill, Republican Representative Ray Merrick, who supports it, said “I think it’s going to be a hard sell.”
But many also see it an economic experiment whose political time has come.
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