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Will the Proposed Kansas Flat Tax Fall Flat?

Kansas Governor Sam Brownback is supporting a Senate bill that would impose a flat income tax rate of 4.6 percent on Kansans. The bill would also end the business tax exemption Brownback has long defended. If the tax is approved, it’s estimated to generate $652 million in revenue which would still not be enough to solve the state’s budget deficit according to reports from the Kansas City Star, Wichita Eagle and other media outlets.

It’s not the first time the flat tax has been discussed in Topeka. And it probably won’t be the last.

What is a flat tax?

Fairness remains one of the most referenced benefits of the flat tax because it imposes the same tax rate on all taxpayers. For example, with a 5 percent flat tax, a taxpayer earning $35,000 in income pays $1,750 in taxes while an individual earning $500,000 pays $25,000 in taxes.

Will the proposed tax fall flat in Kansas?

Critics of the Kansas plan cite the potential increased burden to taxpayers who can least afford a tax increase. Kansas currently taxes individuals who make less than $15,000 at a rate of 2.7 percent while those making more than $15,000 are taxed at 4.6 percent.
For people married filing jointly, those with combined incomes of less than $30,000 are taxed at the lower rate of 2.7 percent while couples with a combined income of more than $30,000 are taxed at 4.6 percent.

Joint married filers with a combined taxable income of $12,500 or less and individuals with taxable income of $5,000 or less are exempt from income taxes, according to the Kansas Department of Revenue.

The fallacies behind the flat tax

Flat taxes simplify the tax code. A major argument is that the flat tax would simplify our tax code. Given the propensity of lawmakers to add tax laws, a major simplification of the tax code likely wouldn’t happen anytime soon.

No need to have the IRS! Proponents of the federal flat tax say if we go to one tax rate, the IRS can shutter its doors (which won’t happen).

A flat tax won’t help alleviate the debt. Others explain that a flat tax would have a staggering effect on the amount of tax revenue collected. A 2011 study conducted by the Federal Congressional Budget Office found that the top 1 percent of American households paid 29 percent of their income in federal taxes while the lowest fifth of the tax paying households in America paid only 2 percent of their income in taxes.

We’ll see how the flat tax discussion progresses in the State of Kansas. As Kansas Senator Barbara Bollier commented about moderate Republican support for the proposed tax, “Could I laugh any harder?”

Stay tuned.