By Duane Goossen, Kansas Health Institute

 

A look at the Tax Freedom Day map  yields interesting information on how the Kansas tax burden compares to other states and should give policymakers something to think about in the final days of the 2013 legislative session as they work to set future tax policy.

Each year the Tax Foundation calculates the Tax Freedom Day for each state — the day when the state’s residents have earned enough money to pay all of the federal, state and local taxes that they owe that year.

Kansas reached its 2013 Tax Freedom Day on April 9, more than a month ago. Connecticut, the last state, arrived at that point just this week. Two Kansas neighbors — Missouri and Oklahoma — reached just days before Kansas, but Kansas was ahead of Nebraska and Colorado.

A more interesting comparison, though, shows the relationship of Kansas to the nine states that do not have a state income tax. Two-thirds of the no-income-tax states — Washington, Wyoming, New Hampshire, Florida, Nevada and Texas — came to their freedom day later than Kansas. Alaska, South Dakota and Tennessee were earlier.

This suggests that even though a state does not have an income tax, other taxes may take its place in the overall tax burden that residents bear.

State income tax receipts do not calculate into the revenue mix in these states, but a proportionally higher collection of other taxes does. Further, this illustrates that if some Americans make decisions about which state to live in based on tax burden, that decision is really much more complicated than only considering whether a state has an income tax or not.

Washington is a no-income-tax state, but this year Washingtonians reached their Tax Freedom Day 11 days later than Kansans. Which state is more attractive if the only criteria for the choice is the size of the tax burden?

Policymakers are seriously considering placing Kansas on a zero-income-tax path. The Senate-passed tax plan, for example, would put more income tax rate cuts into law. If rates are cut further, collections from some other tax must go up.

How would that work? What are those other sources? What do the zero-income-tax states use to bring money to their budgets? Or, if the income tax revenue is not replaced, what realistic spending cuts can lawmakers apply to balance the budget?