Kansas finds cutting taxes is not as simple as it thought
J Thoendell stashed this in Misc
Kansas has a problem. In April and May, the state planned to collect $651 million from personal income tax. But instead, it received only $369 million.
In 2012, Kansas lawmakers passed a large and rather unusual income tax cut. It was expected to reduce state tax revenue by more than 10 percent, and Gov. Sam Brownback said it would create “tens of thousands of jobs.”
In part, the tax cut worked in the typical way, by cutting tax rates and increasing the standard deduction. But Kansas also eliminated tax on various kinds of income, including income described commonly — and sometimes misleadingly — as “small-business income.” Basically, if your income results in the generation of a Form 1099-MISC instead of a W-2, it’s probably not taxable anymore in Kansas.
Let’s say you own an L.L.C. in Kansas but live in Oklahoma. Mr. Dunning, the accountant in Wichita, described clients in this situation who have oil and gas interests along the state border. The tax change in Kansas relieves those business owners of their obligation to pay income tax to Kansas — but they also lose a credit on their Oklahoma tax returns for taxes paid to Kansas, so they just end up paying more to Oklahoma.