Kansas lawmakers will soon decide whether to give you a tax cut. Supporters say that would put money back in your pocket. Opponents say that could lead to budget problems as the state pays for a large school funding increase.
Nearly a year after the Legislature raised taxes and largely ended former Gov. Sam Brownback’s tax cut experiment, the state budget has stabilized. Revenue is up, and officials project a surplus of hundreds of millions next year.
Some lawmakers are pushing to raise the standard deduction for income taxpayers, which would exempt more of your earnings from taxes if you take the standard deduction. The Kansas Department of Revenue estimates that more than 1 million tax filers claimed the standard deduction in 2016, out of 1.5 million total.
Kansas would collect an estimated $141 million less than expected next year under that tax change and others that lawmakers are contemplating.
“Who’s not going to give people back more of their money in an election year? I think that would be a no-brainer,” said Rep. John Whitmer, R-Wichita.
Other lawmakers say they worry that cutting revenue just as Kansas appears to be turning a corner will lead the state into new budget problems. They also contend it will leave the Legislature unable to make good on the plan it passed in response to a state Supreme Court order to adequately fund schools.
The Legislature returns on Thursday, with just eight days to work before adjourning. Republican leaders have told lawmakers they could work through the weekend.
All eyes will turn to the House, which will decide whether to take action on HB 2228, which contains the tax cut. The Senate passed the legislation 24-16 after hours of debate earlier this month.
House Majority Leader Don Hineman, R-Dighton, confirmed Monday that he has committed to allow the House to have an open debate on tax policy. Whitmer told The Eagle earlier in the day that Hineman had made the assurance to him.
“I’m hoping we can hold to that commitment,” Hineman said, adding that late in the session it is difficult to fit everything in.
He said a final decision hasn’t been made on how to proceed specifically on HB 2228, however.
Rep. Kathy Wolfe Moore, D-Kansas City, predicted the bill won’t go anywhere in the House. “I think it would be rather foolish to do this at this time,” she said.
Wolfe Moore said Kansas will be recovering for several years from the Brownback tax cuts that were “absolutely disastrous” for the state. It’s too soon to look at a tax cut of that size when state services have been starved for funding, she said.
“Certainly, the upcoming elections in just a few months' time play into it, and I would say that’s the reason for (the bill),” she said. “But I think we have to go beyond what plays well in the election cycle and look more toward what’s good and sustainable for Kansas, and I think this magnitude of a tax cut is not sustainable right now.”
What the bill does
Under the bill, the Kansas standard deduction would increase for single filers to $3,750 from $3,000, for heads of household to $6,875 from $5,500 and for married taxpayers filing jointly to $9,375 from $7,500.
The bill also ends a restriction that prevents individual income taxpayers from itemizing deductions on their state taxes if they don't itemize on their federal taxes.
Lawmakers proposed the change after Congress raised the federal standard deduction as part of a tax overhaul passed in December. The federal change is likely to reduce the number of people who itemize their deductions instead of claiming the standard deduction.
The legislation would also accelerate the restoration of some tax deductions put back into law by the Legislature last year. Beginning in 2018, taxpayers could claim itemized deductions for medical expenses, mortgage interest and property taxes paid equivalent to 100 percent of the amount allowed on federal taxes.
The bill moves up the full restoration of those deductions by two years.
Hineman said there generally appears to be support among lawmakers for allowing people to itemize on their state taxes even if they don’t itemize on their federal taxes but that there is concern over raising the standard deduction.
The bill would reduce revenue by $141 million next year, by about $108 million the following year and by about $80 million each year after, according to estimates from the Kansas Department of Revenue.
That reduction would come as lawmakers have committed to increasing school funding over five years. By the fifth year, schools would receive $500 million more each year than they do currently.
The Kansas Supreme Court must sign off on the school funding plan. The justices will decide in the coming weeks whether the plan is enough to make funding for education adequate under the state constitution.
As part of their deliberations, the court will consider whether lawmakers can pay for the plan they’ve passed.
A revenue forecast from state officials and researchers released last week shows Kansas will have $570 million to $610 million left over next year, depending on what adjustments are made to the budget.
The figures take into account the school funding bill that lawmakers passed earlier this month. They do not include any possible tax cuts.
Without tax cuts, Kansas will have only about $35 million left over by year four of the school funding plan, according to unofficial projections from the Republican chairman of the House Tax Committee.
“It was still positive, but the trend was not good,” said Rep. Steven Johnson, R-Assaria.
Elections play a role
Election-year politics add fuel to the debate.
Every House seat is up for election this fall, but the Senate isn’t up for election for another two years. That’s giving senators more freedom to press representatives on the bill.
Senate President Susan Wagle, R-Wichita, and Senate Majority Leader Jim Denning, R-Overland Park, have both called on the Legislature to pass a tax bill. Failing to act would mean a “stealth tax increase” for Kansans, Denning said.
Kansas Secretary of State Kris Kobach, who is running in the Republican primary for governor, has made the bill central to his campaign in recent days. He has also used it to attack Gov. Jeff Colyer, who has not said whether he would sign the bill if it passed.
“The people of Kansas have had enough and deserve a tax cut” after the 2017 income tax increase, a 2015 sales tax increase and other increases in property taxes, Kobach said in a statement.
“It is time for the Republican Party to once again become the party of low taxes, less spending, and more efficient government,” he said.
Spokeswoman Kara Fullmer said Colyer "would be happy to consider any bill the Legislature sends him that reduces the tax burden on Kansans."
Normally, tax cuts are “electoral gold,” said Bob Beatty, a political scientist at Washburn University. But the Legislature raised the state sales tax rate in 2015 and so far hasn’t passed any kind of sales tax cut, he noted.
Previous attempts to lower the sales tax rate on groceries have failed, for example. Kansas has among the highest tax rates on food in the nation.
“It’s not necessarily a slam dunk, but a clever opponent — whether it’s on the Republican primary side or in the general on the Democratic side — can say, ‘Yeah, they rushed for a tax cut, but that didn’t help you this morning when you went to Best Buy or didn’t help you when you went and bought your groceries,' ” Beatty said.