TOPEKA — Shifting money from the working poor to low- to middle-income homeowners may not be so much about conservative versus liberal philosophy as it is about socio-economic class.
During a wide-ranging debate about shifting Kansas’ tax code in favor of homeowners by trimming the value of the state’s earned income tax credit, Sen. Mitch Holmes, a conservative Republican who was part of last year’s power shift away from moderate Republicans, gave a heartfelt plea.
The shift in tax policy, approved on a 25-15 vote in the Senate on Tuesday, affects his family directly.
“I am the working poor,” he said. “And I know that there’s at least one other senator in here who is classified as the working poor.”
The bill would cut the value of the state earned income tax credit from 17 percent of the federal credit to 9 percent. It would shift the roughly $42 million saved by that change to the homestead property tax rebate claimed by homeowners who were born before 1957, are permanently disabled or have a dependent child. It increases the maximum income to qualify for that from $32,400 to $34,400.
It would boost the maximum rebate from $700 to $1,200.
Holmes, a computer programmer from St. John who says he favors property tax reduction, said he can’t find a job between legislative sessions, and he suggested legislative pay isn’t enough to raise five children.
“I literally maxed out my earned income credit the last three years,” he said. He said his wife has helped the family endure the April-to-January stretch when lawmakers aren’t paid.
In 2012, an individual filing alone had to earn less than $13,980 to qualify. A married couple with two children would have had to earn less than $47,162 to qualify.
Holmes said his family loses a little of its EITC credit about every two years when one of his kids turns 18.
“I hope and I pray that this summer I’ll have work,” he said. “I’m probably rare for someone who is living below the poverty level in that I have a house that’s paid for. It’s an old farm house. It’s not worth much. I don’t pay much in taxes on it.”
Holmes questioned whether he, or others like him, would make up for lost EITC money with increased property tax refunds – and he questioned how it hits the working poor who live in rentals and don’t qualify because lawmakers eliminated the renter’s portion when they cut income taxes last year.
“We’re taking from them, but we’re not giving anything back as an exchange,” he said.
Wichita Sen. Mike Petersen, also a consistently conservative Republican, departed from the Senate’s conservative core and voted against the bill.
“You’re taking away from one group of deserving people and giving it to others,” he said. “I have a lot of seniors in my district that could desperately use the property taxes. However, in the areas, particularly those hit by the tornado (last year in southeast Wichita), we have a lot of folks that are relying on this money – and some of them still are seniors that are trying to work. There’s no good direction to go in. Hopefully, we can find a better way.”
The Senate’s vote moves House Bill 2060 to the House.
Democrats and moderate Republicans opposed the bill.
But they supported property tax relief and attempted to change the bill by increasing the homestead rebate while not reducing the EITC, likely causing even more budget problems as the state looks to cut spending to accommodate income tax cuts signed into law last year and potential new income tax cuts being debated this year.
Senate Vice President Jeff King, R-Independence, helped get the bill through the Senate.
He said Kansas has one of the larger state EITC programs in the country. As of 2012, 25 states offered EITC money in addition to the federal credit. Kansas provides 18 percent of the federal credit, putting it ahead of at least 13 states, although nuances in state policies make it difficult to rank.
Cutting the credit from 17 percent of the federal credit to 9 percent would put Kansas closer to seven other states that offer 7 percent to 10 percent, according to data collected by the National Conference of State Legislatures.
King said that trimming Kansas’ EITC brings the maximum value of the combined federal and state EITC from about $7,500 to about $7,200.
By shifting the money, the state may be able to more than double its homestead property tax rebate for fixed-income seniors, people with disabilities and others.
“Property tax is far and away the most onerous tax on the working poor, on fixed-income seniors and the disabled,” he said.
Those with low incomes will have their property taxes paid entirely; others will get the majority of property taxes paid, he said.
“That’s helping a lot of poor Kansans,” King said.
Many working poor Kansans in rural areas own property and will benefit.
“To me that is the greatest tragedy of our high property taxes in Kansas, that often we tax fixed-income seniors out of a home they’ve had for generations,” he said. “With passage of 2060, that will virtually be eliminated in the state. I think that’s a great accomplishment.”
Gov. Sam Brownback proposed eliminating the EITC last year, but the idea proved politically unpopular because it was a major reason projections showed the tax-cutting plan would increase taxes for the state’s poorest.
Brownback said Tuesday he’d withhold judgment on the new bill until it reaches his desk. He didn’t propose changing the EITC in his newest tax-cutting plan.
“We thought it would make the debate more difficult,” he said. “So let’s stick with the sales tax, the deductions and just stick with that.”