Kansas tax act most regressive in nation / LJWorld.com —

Equally important, the act dramatically changes the Kansas tax system, shifting the income tax burden from the wealthy and prosperous to working people. The act provides that all income of business owners is tax-free (except in the unusual case where a regular corporation is used). Although the act was promoted as a boost to small business, there is no limit on the size of business that can be exempt from tax. Income of professionals — such as doctors, lawyers, architects, and accountants —practicing in partnerships will be tax-free. In a law firm, for example, the partners will pay no tax, while the clerical staff will continue on the tax rolls. Income received from partnerships and trusts will be tax-free. Wealthy Kansans who own real estate, stocks, bonds and other investments will simply transfer those assets to a partnership or trust, thereby freeing all their investment income from tax. All income of farmers will be exempt from tax. Who will still be paying Kansas income tax?Only three groups: 1) employees, 2) some retirees and 3) individuals whose investments are so modest that they cannot afford to create a trust or partnership to shelter their investment income.

This will be curious to watch. I think you’ll see a lot of paper flying, as a lot of firms “re-locate”, we’ll probably see a state GDP uptick on paper…and a massive drop off in tax revenue and quality of life for the other 90%. Other states will also lose revenue, as anything that can be funneled through Kansan shell companies will be. And lawsuits will rule the day as the real Kansan economy crumbles in under 5 years. Or maybe not…extreme test cases are always curious. It took nearly 7 years for the largest tax cuts in U.S. history (Bush 2001-3) to crush the economy and cause a debt “crisis” and downgrade. However, in that case you started with a fundamentally strong economy (U.S. economy circa 2000), not one already failing (Kansas 2012). — http://www2.ljworld.com/news/2012/may/27/kansas-tax-act-most-regressive-nation/