Kansas has a budget problem. It’s collecting less tax money than it planned. This spring, the state intended to take in $651 million from personal income tax, but only received $369 million. The decrease was due to a large and rather unusual income tax cut passed by lawmakers in 2012 according to The New York Times.
The measure was expected to reduce state tax revenue by more than 10 percent. Gov. Sam Brownback said it would create “tens of thousands of jobs.”
The tax cut did cut tax rates and increased the standard deduction, but it also eliminated tax on some kinds of income, including “small-business income.”
Creation of this preference has caused Kansas at least five problems:
- It’s sometimes possible to turn taxable salary income into untaxed “business” income.
- A lot of the beneficiaries of the tax break won’t be small businesses.
- It’s not clear that there’s anything special about small businesses for the purpose of job creation.
- Some of the revenue loss doesn’t even benefit taxpayers.
- The state budget is suffering.
The whole story, ‘Yes, if You Cut Taxes, You Get Less Tax Revenue,’ is available from The New York Times.