It’s difficult to retire in Kansas. A new Kiplinger report ranks Kansas third from the bottom in how Kansas taxes retirees.
Why the low ranking?
Kansas fully taxes income from private retirement funds and out-of-state pensions. The state also taxes Social Security benefits for Kansans making more than $75,000 a year, has the eighth-highest local sales tax rate in the United States and higher-than average property taxes.
Overall, the Kiplinger report was fairly blistering but found some positive parts of the Kansas tax code. Military, federal government and in-state public pensions are exempt from state income taxes. Kansas also has no estate tax.
Although not included in the report, Kansas also has a fairly low overall cost of living. Our average cost of living is nearly 8.75 percent below the national average, the sixth lowest in America, according to data from the Kansas Department of Commerce. Owner-occupied homes in Kansas cost nearly 27 percent less than the national average. Those are marks in favor of the Sunflower State, but the overall ranking is a concern.
At a time when many Kansas communities are losing population, retaining retiring residents or even attracting them to settle in Kansas can be helpful. Retirees spend money on housing, food, entertainment and health care. They invest in local economies, stimulate local businesses and donate to charitable organizations.
So should Kansas implement a massive tax cut to attract new residents over 65? Not quite. Like retirees, our state has learned a lot from experience. Our 2010 tax cut experiment decimated our state budget and made it difficult to provide essential state services. Our state workforce, education system and vulnerable populations, like disabled and low-income Kansans, are still recovering as revenues return to sustainable levels.
There is a middle road that serves all Kansans. Legislators should continue to look carefully at sales tax levels, especially the food sales tax, given our fairly high local tax rate. However, people look at more than taxes when choosing where to retire. Investments in quality health care, public safety and cultural enrichment also attract retirees while increasing quality of life for all residents.
Some changes to the tax code may be wise, but the best way to serve retirees is to ensure a healthy state with robust state services.
A strong Kansas will attract and retain people of all ages.