The early focus during the 2012 Kansas legislative session has been on tax reform. Gov. Sam Brownback's administration promotes reducing income tax rates as a way to gain an advantage for Kansas, leading to an expanding economy and job growth.

The plan initially reduces income tax rates by eliminating many credits and deductions and by not reducing the sales tax rate, which is currently scheduled for July 1, 2013. In the future, whenever state receipts grow by more than 2 percent, the excess would be used to reduce tax rates even more, with the goal of eliminating Kansas income tax entirely.

Reducing Kansas income tax rates could definitely lead to economic growth. Kansans pay higher income tax rates than any of our neighbors except Nebraska. The first phase of the plan would make Kansas quite competitive in the region, making our rates lower than Oklahoma, Missouri and Nebraska -- and nearly the same as Colorado. That would be healthy for the Kansas economy.

But is there reason to continue pushing the rates ever lower, to reduce until the state income tax disappears entirely? Some say yes, and they point to Texas, where there is no state income tax, as one to emulate. But, last month, the unemployment rate in Kansas was 6.3 percent, and six of the nine states that have no state income tax had a higher unemployment rate. Texas was one of the six.

Kansas will have no state budget deficit during the next fiscal year, but five of the nine no-income-tax states face budget deficits up to 37 percent. Texas is one of the five.

For the period from 1997 to 2009, Kansas experienced greater growth in per capita GDP than six of the no-income-tax states, including Texas.

Obviously, total elimination of state income tax is no guarantee of economic prosperity.

What should overall tax policy look like? Most economists say that tax policy should be broad-based, stable and equitable. The governor's Equity Task Force in 1995 said "The state and local tax system should be balanced and diversified. A diversified tax system offers a blend of economic tradeoffs.  Because all revenue sources have their weaknesses, a balanced tax system will reduce the magnitude of problems caused by over reliance on a single tax source."

Alison Felix, economist at the Federal Reserve Bank in Kansas City recently stated "Kansas had the least volatile tax revenues in the Tenth District over the past 40 years.  The tax portfolio in Kansas is relatively diversified, putting almost equal weight on sales taxes and income taxes.  Just as diversification reduces risk in a financial portfolio, diversifying state tax structures is likely to reduce volatility."

Reducing Kansas income tax rates to gain competitive advantage must be achieved, and the first phase of Gov. Brownback's plan would do that.

But I see little evidence that total elimination of Kansas income tax would a positive step for our state. Instead, if we are truly concerned about those goals of stability and equity, maybe we should take a look at Kansas property tax. The Tax Foundation ranks Kansas citizen's property tax burden as excessive. Only nine states have greater property tax burden, and none of them are our neighbors. This is a very real problem for property owners, particularly in rural Kansas communities. Perhaps is it is time to consider tax reform in this arena as well.

My 2012 Issues Survey is now available. Call (785) 296-7636 for a copy or contact me at dhineman@st-tel.net for access to the online version.

Don Hineman represents the 118th House District.