Expected Results and Next Steps
- By eliminating credits and deductions and lowering income tax rates for all state tax filers, Kansas’ top individual income tax rate will become the second lowest in the region (only slightly higher than Colorado), and the state will take its first step toward a fairer and flatter tax code.
Top Rate Today Change with Brownback Plan
Colorado... 4.63 Colorado..... 4.63
Oklahoma. 5.25 Kansas......... 4.9
Missouri.......... 6 Oklahoma... 5.25
Kansas..... 6.45 Missouri............ 6
Nebraska... 6.84 Nebraska.... 6.84
Iowa........... 8.98 Iowa............. 8.98
- Lowering the state income tax rate will give Kansas families and taxpayers an immediate raise in their paychecks as they decrease their state income tax withholding and keep more of the money they earn as they earn it. This directly relates to the Governor’s Road Map goal of increasing personal disposable income.
- Thanks to the innovative approach of eliminating individual state income tax on non-wage business income (e.g., from LLCs and S-corps), approximately 191,000 Kansas tax filers will have the opportunity to invest more in the growth of their small businesses. This is a unique and highly targeted strategy to make Kansas an incubator for innovation and a national center for entrepreneurship.
- As revenues grow more than 2 percent per fiscal year, future excess revenues will be applied to reductions in individual and corporate income tax rates in the subsequent tax years.
- The median Kansas tax return uses the standard deduction, has income of $65,430, and is filed married jointly with one child. This family will see a state income tax reduction of $425.43 per year.
- A single parent filing as head of household will see his or her standard deduction double from $4,500 to $9,000.
- A small business owner with an LLC, S-corp or sole proprietorship filing on the K-40 individual income tax form will not pay state income taxes on income from lines 12, 17 and 18 of the federal 1040 form.
- This reform is designed to be close to revenue neutral and fully fund the Governor’s proposed FY13 budget and the statutorily required 7.5 percent ending balance.
The ultimate goal is to unleash the Kansas economy by making state tax policy more competitive nationally and globally. This will increase net personal income and private sector employment while reducing unemployment and the number of children living in poverty.