The governor of Kansas is proposing to eliminate the state’s income tax. Let me give you a quick lesson on revenue sources.
Progressive revenue sources are those that require wealthy people to pay a greater percentage of their income than poor people. A graduated income tax is an example--people with low incomes pay a lower percentage of their income, while wealthy people pay a greater percentage.
A flat tax is a tax that takes the same percentage bite no matter what one’s income. There are very few flat revenue sources, but you can see how it would work in theory. The sales tax is sometimes thought to be a flat tax, but it really isn’t.
Here’s why. Let’s say you take in $10 million annually. You are not going to spend all that money on items that are subject to the sales tax. You will invest much of it, perhaps bank it in the Cayman Islands. On the other hand, let’s say your income is $50,000 a year. You will spend most of that money on items that are taxed. Therefore, you are actually paying a greater percentage of your income on the sales tax than the rich guy. The sales tax is a regressive tax, taking more from low income people than the rich.
An analysis of the Kansas governor’s proposal shows that the poorest 20% of Kansas residents will spend an additional $148 per year on taxes. The top 1% will see their income spent on taxes drop by 2%, or $21,087 per year.
The governor of Kansas and the majority of both houses of the Kansas legislature are Republicans. I really didn’t need to say that, did I?
(The Kansas figures are taken from today’s New York Times article entitled “Kansas’ Governor and G.O.P. Seek to Eliminate Income Tax.”)
I read an article about a year ago written about how the richest 1% spend their money. I remember reading that the richest 1% spend approximately $350,000 on their lifestyles and invest the rest. The only way I would be okay with a sales tax if there was a tax on investments.
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