Taxing our patience
At least one good thing has come out of COVID-19. Thursday won’t be the normal oh-be-joyful deadline for last-minute income tax filers.
A month-long, pandemic-proffered procrastination period for filers has given us ample time to poke around and find out how much various taxes cost us. The results may be surprising.
Take a typical Marion County family — average age, average number of household members, average household income, average value of home.
Check a bunch of official tax estimation services, do the math, and it comes out that a typical Marion County family is likely to have at least 22.9% of its income taken away in taxes —more if you include motor fuel and other excise taxes.
A similar family with twice the income, living in a house worth twice as much, pays 26.6%. A family with half the average income, owning a house half the average value, pays 17.9%.
That seems fair. The more affluent family pays more; the less affluent pays less — although, in both cases, only slightly so.
Where inequities lie are with taxes imposed mainly by local governments.
While the average family pays 2.5% of its income in sales tax, the twice-as-affluent family pays only 1.7% while the half-as-affluent family pays a whopping 3.7%.
Sales taxes may be popular because we don’t see their overall impact, but they clearly are regressive, imposing a greater burden on people less able to pay.
Property tax, which most of us hate because we typically pay it in big chunks, is actually a flat tax. The average family, the more-affluent family, and the less-affluent family all pay the same percentage of income — 4.4% — because the value of their homes increases or decreases in proportion to their income.
The biggest inequity involves pseudo-taxes, liking marking up the cost of electricity re-sold by municipal governments.
It’s an open secret that nearly all municipalities participating in Kansas Power Pool make money off the deal. That’s why the largely unregulated electric rates in these communities tend to be higher than regulated rates in communities where residents directly connect to private utilities.
We hope Marion made the right choice when it handed its administrative staff essentially a blank check for setting rate surcharges in response to February’s excessively expensive cold snap.
We aren’t sure how administrators can accomplish what they promised and keep the surcharge below the one cent per kilowatt-hour that Kansas Power Pool wanted. Despite what was said in city meetings, city staffers aren’t the ones charged with negotiating deals with power providers. We wonder whether the blank check will be used to hide other expenses, like costs of repairing Marion’s decrepit power grid, and will continue long after the two-year sunset the power pool wanted for its surcharge.
Still, it’s important that someone, somewhere tries to do something to mitigate the one-cent surcharge the power pool wants.
Less-efficient homes of less-affluent residents probably use more electricity than more-efficient homes of average and twice-as-affluent families. But even if we assume all homes use the same amount of electricity, the impact of a markup in electric rates is significant.
Adding just one cent to the markup per kilowatt-hour takes an additional 1.4% of the average family’s income while taking just 0.6% of the income of the twice-as-affluent family and a whopping 3.6% of the income of the half-as-affluent family.
For the less-affluent family, a seemingly modest one-penny markup would cost almost as much as the family pays for all property taxes combined.
As certain as death and taxes are, it’s clear that municipalities relying on sales taxes and profiting from re-sale of utilities balance their budgets on the backs of the poor. As unpopular as income and property taxes are, they’re much fairer alternatives.
Those who willingly transfer tax burdens from income and property taxes to sales tax and utility markups are either affluent people wanting to stick it to the poor or victims of a misdirection act in which we confuse how bills are delivered with the ultimate impact of those bills.
— ERIC MEYER