Kansas is middle in the pack of the Tax Foundation’s recently released State Business Tax Climate Index rankings of all 50 states in the country. Based on measures such as corporate and individual income tax, sales tax, and property tax, Kansas ranked #26 for how well the state’s tax structure stands to promote long-term growth. Combined with a continuing malaise of job growth, Kansas should start thinking bigger about how to restructure its own tax climate to better promote economic growth.
Compared to the 2023 State Business Tax Climate Index, Kansas slipped down one spot from #25 to #26. Tax Foundation Senior Policy Analyst Katherine Loughead explained that this was a result of states shoring up their own policies rather than change in Kansas:
“For example, on the individual tax component, Kansas moved from 22nd to 27th due to the improvements in Iowa that brought them from 40th to 22nd, improvements in Oklahoma that brought them from 31st to 24th, improvements in West Virginia that brought them from 29th to 25th, improvements in Mississippi that brought them from 26th to 19th, and improvements in North Dakota that brought them from 25th to 21st. The reforms each of those states made are summarized starting on page 2 of the report itself.
On sales taxes, Kansas moved from 26th to 29th due to the sales tax rate reduction in South Dakota and in part due to reductions in Georgia’s gas tax between this year and last.
On the property tax component, Kansas’s ranking changed from 16th to 18th in part because Oklahoma improved from 30th to 15th with the repeal of its capital stock tax.”
The state that ranked highest overall in tax climate was Wyoming, largely due to being ranked #1 in corporate and individual income tax rate with a helpful #7 position in sales taxes.
The result of Kansas’s non-innovative tax structure is its mediocre economic results month after month from the Bureau of Labor Statistics. For instance, at surface-level, Kansas gained 4,000 private-sector jobs in September 2023. That sounds good!…until looking at the previous months and realizing that Kansas had floundered up and down. Meaning that another “good” month in September only brought job numbers back to where they were in February of this year.
Kansas’s private-sector job growth of 0.3% was met or exceeded by 17 other states across the county. That included Nevada, New Hampshire, South Dakota, Texas, and Tennessee – five of the nine states that don’t have an income tax.
In September, the unemployment rate ticked up to 2.8% due to another 536 new Kansas being unemployed but only 329 newly employed Kansans. The labor force participation rate remains at 66.7%. Again, these numbers aren’t catastrophic but certainly nothing to write home about either: at 2.8% unemployment may even seem like a “pretty good” number at first. However, low unemployment rates could also be indicative of an unhealthy economy. One interpretation is that by this point, enough people may have given up looking for a job, which means that they still don’t have a job enough to be counted, but don’t count as unemployed. In the literal sense, a low unemployment rate could indicate a growing scarcity of capable workers, which makes it harder for businesses to fill their positions.
It’s easy to look at job numbers or unemployment rates to forget the meaning behind them. Every open position is an opportunity for anyone – be it a recent college graduate or someone who dropped out of school and is looking for a new path – to find security and pay. Job numbers are a reflection of how small and big businesses alike are choosing to hire in a state. In areas with high unemployment, new jobs resulted in an increase in earnings per capita that was double what it was in areas with low unemployment. Jobs themselves help educate and provide skills to workers who will then go on to be entrepreneurs, scientists, and just everyday helpful citizens who make America run.
What the Tax Foundation Index comes down to is a state’s willingness to pursue significant reform; what would move Kansas up the list easily is some sort of 2024 initiative like a return of the flat tax.