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SPOTLIGHT
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Tax law changes coming

Published on -8/7/2012, 10:47 AM

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The Kansas Legislature recently passed HB 2117 and it was signed by Gov. Sam Brownback. This bill will significantly change the income tax computation for many Kansas taxpayers and will most likely have a dramatic effect on the state of Kansas budget.

In a nutshell, the new tax law goes into effect Jan. 1, and some of the major changes are:

* Lower tax rates will be 3.0 percent and 4.9 percent;

* Increased standard deduction for married filing joint and head of household will be $9,000 (no change for single taxpayers);

* Most credits and rebates will be repealed and not allowable: child day care credit, adoption expenses credit, food sales tax rebate and 13 additional credits are gone;

* A subtraction adjustment for any and all business income will be allowed, which means all net profits produced by any business, farm, building rental, farm rental, oil lease, oil royalty production, and any business income passed through a partnership, S-corporation, estate, trust or LLC will not be taxed on the Kansas return. All other income-wages, interest, retirement proceeds, capital gains for example, will be taxed. Also, any non-resident taxpayers will not pay Kansas income tax on business income generated in Kansas.

The intent of these changes is to stimulate business growth which will increase employment in Kansas.

Supposedly this will produce increased income tax collections on wages of these additional employees and increased sales tax collected as a result of the new business and employment activity.

What does this mean for our state budget and financing for our schools, libraries, long-term care facilities and other important entities? Who knows?

Only the most optimistic really believe this bill will stimulate enough business growth to offset the huge tax revenue reductions that will be forthcoming.

Especially when you consider that our sales tax rates and property tax rates still make Kansas unattractive versus many other states in the Midwest and the nation.

The more likely scenario is that we will have to increase our reliance on sales tax and property tax just to keep our state and local governments afloat.

I, for one, believe the governor and legislators that supported this bill have acted very recklessly and irresponsibly in implementing this "grand experiment."

It puts the tax burden directly on the back of the wage earner and retirees and lets the business owner and farmer -- myself included -- operate Kansas income tax free. Is this equitable? It will also allow out-of-state companies, such as oil exploration companies, to consume our resources and then take their profits back to their home state without paying any Kansas income tax. Does this make sense? I do not think so.

To express your opinion on this law, I urge you to contact your representative, senator and the governor. Your input is important and can make a difference.

In conclusion, I have been a registered Republican all my voting life, but I believe politics is a lot like driving. You need to stay between the ditches -- too far to the left and too far to the right and you are probably not doing what is in the best interest of the majority of the people. It is time for moderates of the Republican Party to act and vote today and in November to prevent the ultra-conservatives, led by Gov. Brownback, from completely decimating our state and local governments.

Don E. Tilton, CPA

Quinter

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