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Ax State Income Tax? Kansans Say That's A Serious Mistake

GRAPH: As West Virginia lawmakers consider major changes to the state's tax system, economists say the state should not do what Kansas did and attempt to eliminate the personal income tax. In West Virginia that tax makes up about 40% of the main budget. Graph by the WV Center on Budget and Policy based on state figures.
GRAPH: As West Virginia lawmakers consider major changes to the state's tax system, economists say the state should not do what Kansas did and attempt to eliminate the personal income tax. In West Virginia that tax makes up about 40% of the main budget. Graph by the WV Center on Budget and Policy based on state figures.
May 4, 2015

CHARLESTON, W. Va. - Some West Virginia legislators want to get rid of the state personal income tax. But in Kansas, where that's being tried, economists are calling it a disaster. Over the last two and a half years, Kansas lawmakers slashed that state's income tax, starting at the top.

They said the lost revenue would be replaced through rapid economic growth and rising sales tax receipts. But Kansas is now growing more slowly than all it's neighbors and Annie McKay, executive director with the Kansas Center for Economic Growth, says the two-year general revenue budget has a $1.4 billion dollar hole.

"We actually had to make mid-year budget cuts because we ran out of money in the month of February," says McKay. "We had a cash flow problem; we weren't going to be able to pay our bills. We have school districts petitioning the state for emergency funds so that they can make payroll in June."

In what he described as an unprecedented policy, the Kansas governor and his allies cut income taxes, starting with businesses and higher income households. The sales tax was raised and some tax credits and deductions for lower income families were eliminated.

Governor Sam Brownback said this would spark a boom in economic growth. But McKay says the changes instead produced the huge deficit, a fall in the state's credit rating and forced seventy percent of counties to raise property taxes.

"It was sold to the Kansas public as going to be an 'adrenalin shot to the heart of the Kansas economy,'" she says. "It's just simply not working as they said it would."

McKay says the tax cut policy has several more years to go before the income tax is gone, but already services like road repair, libraries, community corrections and local health departments are suffering. She says the public education system, which had been a source of pride, is also falling behind. And she says the economy actually shows signs of doing worse.

"We're still trailing the region with private job growth, we're still trailing the national average," she says. "In the first full year of the tax cuts we actually lost 4,200 Kansans. We didn't misplace them, they left the state."

A West Virginia legislative committee is considering changes to the state's tax code. The personal income tax here provides about 40 percent of the basic budget. In Kansas, that number had been about 50 percent, but is now down to 43 percent.

Dan Heyman, Public News Service - WV