There is a theory out there that some go-go states are better off solely because they have no income tax.
There is yet a different theory, which may be the most compelling. These states without income taxes usually flourish, because they have something special going for them that allows them to derive state income from other sources.
Florida is the largest tourist trap in the world and has warm weather for retirees.
Nevada has its Las Vegas gaming and also warm weather for retirees.
Texas has its oil and gas.
Alaska has so much oil, it sends checks to its residents on a regular basis.
Wyoming has its abundance of coal.
South Dakota has no cap on credit card rates, so Sioux Falls is a mecca for large financial companies.
Washington imposes a highly lucrative business and occupation tax that is the same as taxing gross income.
Tennessee and New Hampshire have no tax on payrolls, but they do tax income from stocks and bonds.
(Before we go on, please note that Florida and Nevada, formerly go-go states, have been among the worst hit in the recession, even with their no-income-tax policies.)
Remember all of that the next time you hear a radio commercial espousing that Kansas residents should dump their income tax altogether, brought to you by Kansans for No Income Tax, reportedly funded by a multimillionaire St. Louis gadfly.
This is not quite what Kansas Gov. Sam Brownback’s tax reform task force has in mind. Word is, they are looking to slash income taxes, though not abolish them completely, at least not quite yet.
The shift of the tax burden from income tax to other taxes would not be pretty. Today, the income tax represents 44 percent of the state’s revenue, or $2.7 billion.
Unless the state comes into a gigantic windfall of new revenue that drops out of the sky — much bigger than the $300 million surplus recently projected — there are only two places to make up for any sizable income tax reductions: sales or property taxes, and sales taxes seem like the way they are headed.
The governor likely will announce in his State of the State address on Jan. 11 that he would like to keep some or all of the “temporary” sales tax hike of 1 cent passed mostly by moderate Republicans and Democrats. But that will not be enough to cover the shortfall, if the governor announces — as expected — that he would like to reduce the state income tax substantially “to spur growth.”
Our state leaders want to believe the fairytale pawned off by economist Arthur Laffer (whom the task force has hired for $75,000), who is telling them with lower income taxes, Kansas will attract enough growth to offset much of the lost revenue.
Laffer may be the only renowned economist in America who believes this bunk. If we cut or abolish our income tax, Kansans will pay for it, one way or the other.