It’s time to start thinking about just what we’re going to do with the extra money we’ll have starting Jan. 1 with the enactment of the largest tax cut in Kansas history.
That multibillion dollar tax cut means, for those of you who make more than $30,000 a year, you’ll see the percentage of your income paid as state income taxes drop from as much as 6.45 percent to just 4.9 percent. If you are in the bottom income bracket, your tax rate will drop from 3.5 percent to 3 percent.
If you work for a paycheck, someone in the personnel office will do some computation and reduce the tax withholding in your paycheck, so it will seem as if you got a raise. A few more bucks in every paycheck, that’s a good deal, of course.
Now, the key for income tax payers is that they are going to have to spend that money—generating non-income tax revenue for the state.
That’s the whole idea of this tax cut bill. More money in your pocket and the presumption is that you’ll spend that money on something that the state collects taxes on.
Now, just straight, everyday spending is the key here. The state collects sales tax on virtually everything you buy, so the more you spend, the more the state takes in to provide money for public education, colleges, highways, safety, social programs and such.
Oh, and while you’re helping the state budget balances, you also can get a bunch of neat new stuff to play with.
On the business side, most small businesses will pay less in taxes, and the theory here is that those small businesses will invest in equipment and in new employees, and that companies from around the world will move into Kansas to take advantage of those lower business tax rates.
And, all of this potentially good stuff starts Jan. 1, which we Statehouse insiders call “Tax Year 2013.”
Oh, and those of you with credit card balances or a few more payments to make on that sofa or double-door refrigerator will have more money to pay off those debts, but you’re not helping the state economy much. That’s because there isn’t any tax on repayment of debt.
So, the best deal for the Kansas government is if you pay off that debt quickly and get back to buying stuff that sends taxes into the state treasury.
Unfortunately, the best things for the state treasury are the worse things for you.
Instead of buying, say, a new Kansas-made car, Kansas would be better off if you bought cigarettes—which carry the highest percentage tax of anything you can buy in the state. “Light up for the children?”—probably not a good public service announcement, we’re thinking…
No. 2 best purchase you can make for the state you love? Drinks, because, again, the state’s tax “take” on alcoholic beverages is bigger than, say, food for your kids. Again, probably not the best way to show your support for tax-fueled public services—education , public safety and the like—but it’s the “bottoms-up” option.
And this is the year, and maybe for a couple months into Tax Year 2013, that you can joke about the tax cuts.
Because if business and individual income tax receipts drop off as dramatically as predicted—the real “downsizing government” goal of the tax bill—look for budget cuts to start as early as next spring.
Hmmm…that would be about the time the weather is nice enough to take a beer out to the patio and light up…
Syndicated by Hawver News Company LLC of Topeka; Martin Hawver is publisher of Hawver’s Capitol Report—to learn more about this statewide political news service, visit the website at www.hawvernews.com.
Income tax cut relies on increased consumer spending