Dorothy may have to flee Kansas after retirement, as the state is the third worst for tax-friendliness for retirees, says The Kiplinger Report in its annual review of state tax burdens. Only Illinois and New Jersey outrank The Sunflower State in income, sales, and property tax assessment for 2021. Last year, Kansas was the fourth worst.
Kansas begins levying taxes at $2,501 in taxable income for single filers and $5,001 for those filing jointly. The rate is 3.1% up to $15,000 for individuals and $30,000 for couples, increasing to 5.7% for incomes above $30,000 and $60,000 respectively. Distributions from private retirement plans, such as IRAs and 401(ks) and out-of-state pensions are fully taxed, but state and local government retirees are not taxed on their pensions. Kansas also taxes Social Security benefits of residents with a federal Adjusted Gross Income above $75,000.
The combined state and local sales tax rate of 8.7% in Kansas is the 9th-highest in the nation. Purchases of groceries and clothing are also assessed at that rate
Property taxes are an annual grievance of state residents, and for good cause; Kansas’ is the 15th-highest in the country. A hypothetical retired couple living in a $250,000 home pays around $3,423 annually. A $350,000 home for the same couple comes with a December tax bill of nearly $4,800.
Last year, Kiplinger ranked Kansas the fifth-worst state for middle-income families.
Kansas is massively over-governed
The reason that Kansas has some of the highest tax burdens in the nation is simple – the state is massively over-governed.
Every state provides the same basket of services (education, social services, etc.) but some states spend a lot more per resident doing so, and that forces taxes higher. In 2019, Kansas spent 42% more per resident than the states without an income tax, according to Kansas Policy Institute’s Green Book. KPI owns Then Sentinel.
Excessive government employees are the main reason that property taxes are so high. Kansas is the third-worst state for state and local government employees per capita, and the second-worst for local government employees.
KPI estimates that property taxes would be 37% less if cities, counties, schools, and other local entities were staffed at the national average of local government employees per resident.