Taxes

Kansas Goes to Washington

JM Ashby
Written by JM Ashby

When former Kansas Governor Sam Brownback eliminated the state's income tax on owner-operated business (sole proprietorships and S corporations), the result of the policy was a wave of people, from bankers to farmers, declaring themselves businesses so they wouldn't have to pay any taxes.

Trump and the GOP's package of tax cuts for the rich doesn't entirely eliminate taxes on owner-operated business, but it does cut the tax rate by over 20 percent and some fear it will lead to a wave of people declaring themselves businesses.

The Tax Policy Center estimates the change could cost the federal government $650 billion in lost revenue over 10 years.

While Treasury Secretary Steve Mnuchin has promised to come up with rules to prevent this kind of tax avoidance, tax policy experts says it would be hard to stop. “You can always pay a high-priced accountant to find a way around it,” says Eric Zwick, a finance professor at the University of Chicago.

So here’s what you’d have to do: If you stop being an employee, and make your employer hire you as an independent contractor, the tax cut could save you thousands … and blow a hole in the federal budget, if enough people try it.

Hiring employees as independent contractors is already a very common practice especially in the technology industry where all of the money is made these days. Many if not most of the people who work for the likes of Microsoft, Apple, and Google are independent contractors.

I wouldn't even trust Steve Mnuchin to pour me a beer so I certainly wouldn't trust him to prevent millions of people from declaring themselves businesses to avoid taxes. This would have to be addressed by Congress in the law itself.

Ideally, we won't have to worry about this because the GOP will fail to pass their insane tax cuts for the rich in the first place.

  • Aynwrong

    Louisiana is also a good case study in conservative fiscal logic. The state was hawking state owned vehicles to try and pay the bills. None of this was known until after a D replaced Bobby Jindall and the new governor had to declare a state of emergency. Who knows how much longer this would have gone on had a D not been elected.

    • ninjaf

      I hope there is some in-depth analysis of this on CNN or something. FFS, we need to start learning from our mistakes.

      • Budgets are boring silly! CNN will cover this when bayous freeze over.

      • Aynwrong

        we conservatives need to start learning from our their mistakes.

        No snark intended. Just pointing out that anyone who could learn this probably has and that there are other people who either aren’t paying attention or just don’t care as long as it’s coming from an R.

        • ninjaf

          So very true. I was thinking of “we” as a nation. But you are right. Anyone who wants to learn this already has.

  • muselet

    When one’s only priority is cutting taxes for the wealthy, one tends to overlook or actively ignore trivia like lost revenues (or treat that as a positive outcome—SEE: Beast, starve the).

    The Rs make a big deal, rhetorically, about the states being the laboratories of democracy!, yet they never trouble themselves to review the results coming out of those laboratories. If they did, they would be using Kansas as a cautionary tale instead of a blueprint for the country.

    It’s stressful, waiting to see if the Rs’ internal divisions will torpedo their attempts at legislating.

    I wouldn’t even trust Steve Mnuchin to pour me a beer….

    I don’t know why that made me laugh so hard. (And I agree, he’s not trustworthy.)

    –alopecia

    • Badgerite

      Are any of them? Never have so many, lied so often, for so few. (see 1%)
      We will literally have the “best government money can buy.”
      Thanks SCOTUS.

    • JMAshby

      I was implying that he’s an out of touch, elitist toady that probably doesn’t even know how to properly pour a beer.

      I keep coming back to him saying only the little people in Kentucky care about the solar eclipse. Sophisticated New Yorkers like himself would never charge taxpayers $25,000 to fly to Fort Knox just to watch the sun with his haughty wife.

      • muselet

        Steve Mnuchin is all that, no doubt, and more besides.

        As for your original comment, I thought Mnuchin would figure out how to keep a significant parcentage of the beer as a Customer Service Fee, the way it works in the banking sector. I also thought he’d likely forget some piddling little detail like a glass, leaving it to someone else to deal with such minutiae.

        We make our own jokes sometimes.

        –alopecia

        • JMAshby

          Yes, he is a $10 dollar beer at a baseball park that only cost $0.50 to serve.