TOPEKA – If reducing income taxes in Kansas requires big cuts in state spending, it would kill more jobs than it would create, according to a report commissioned by the Kansas Economic Progress Council.
That’s because a lot of government spending initially stays in the state economy as salary to employees and spending on contracts with local vendors. But when people get to keep more of their money, they often quickly send it out of state by buying non-Kansas goods or avoiding taxes by buying online, the study says.
“There’s no question that cutting taxes increases economic activity,” said the report’s author, John Wong, a former Wichita State University professor who is now chair of Urban and Public Leadership at the University of North Texas at Dallas. “But by reducing the rate, you’re also reducing the money coming in. It’s just whether the additional economic activity is sufficient to overcome the loss in money from the rate.”
That’s unlikely, he said.
The analysis comes as a dozens of tax reduction plans circulate the Statehouse, including Gov. Sam Brownback’s heavily-criticized proposal to reduce individual income tax rates and eliminate several popular deductions and credits. Read More