United States: Top Republican legislators in Kansas have reopened their dispute with the Democratic governor over income tax cuts that have garnered bipartisan criticism for favoring the rich, with little prospect of a break in the standoff that stalled tax relief last year.
Republican Proposal Faces Hurdles in the House
The House was slated to vote Thursday on a Republican plan to reduce income, sales, and property taxes by $1.6 billion over three years. The Senate approved it 25-11 on Wednesday, but with four members absent, Republican backers appeared to be at least one vote shy of the two-thirds majority needed in the 40-member House to override Gov. Laura Kelly’s predicted veto.
Single Income Tax Rate
Beginning in 2025, top Republicans propose imposing a single personal income tax rate of 5.25%, replacing three rates that peak at 5.7%. Kelly strongly opposes the concept, and the state Department of Revenue’s predictions show that a single rate would result in the greatest savings in raw cash for persons earning more than $250,000 per year.
Fiscal Landscape and Public Sentiment
According to the conservative Tax Foundation, a debate over the single-rate or “flat” plan stalled a substantial tax cut in Kansas last year while a dozen other states lowered taxes. Kansas currently expects to have about $4.5 billion in surplus cash by the end of June, accounting for 17% of the state’s current $25 billion budget.
“We need to give the money back,” said state Sen. Mike Thompson, a conservative Kansas City-area Republican.
The Republican senators who wrote the plan included measures that would exempt the first $20,300 of a married couple’s income from state taxes — more if they had children — with the amounts increasing with inflation after 2025. Supporters pointed out that all income categories would enjoy reductions and that some low-income families would have their tax obligations eliminated.
Dueling Tax Plans
Republican leaders combined the income tax plans with Kelly’s proposal to repeal the state’s 2% sales tax on groceries beginning April 1, as well as proposals she supported to exclude all retiree Social Security income from taxation and to reduce homeowners’ property taxes.
“We gave her a lot of stuff in this legislation,” said Republican Sen. Caryn Tyson, the Senate tax committee’s chair.
Economic Equity Concerns and Republican Justifications
During the first 14 days of their annual 90-day legislative session, lawmakers acted. GOP leaders regarded the tax issues as routine and rushed up-or-down votes on a package in each House.
Kelly presented her own suggestions for sales, property, and Social Security taxes last week. Her income tax proposal would enhance the basic deductions that all individual filers can claim. Her entire plan would reduce taxes by a total of $1.1 billion over three years.
Kansas is discussing tax cuts at a time when the national tax-cutting trend appears to be moderating as a revenue spike driven by federal spending and inflation fades. Kelly supporters claim that his plan is more cost-effective for the state in the long run, costing $324 million per year in revenue vs $583 million under the Republican proposal. Republicans reject this, but neither side has made their long-term estimates public.
Kelly still mentions Republican Gov. Sam Brownback’s ambitious tax-cutting experiment in 2012 and 2013, which was followed by massive, long-term budget imbalances until the majority of the cuts were reversed in 2017.
“Kansans have seen reckless tax experiments that hurt our schools, roads, and economy before, and they don’t want to go back,” Kelly spokesperson Brianna Johnson said in an email.
According to Neva Butkus, a state policy researcher at the left-leaning Institute on Taxation and Economic Policy, the GOP plan will exacerbate the gap between the poorest families, who already pay a higher percentage of their income in taxes and the wealthiest.
Butkus noted that while the package’s provisions would benefit impoverished families, “It is definitely not capable of counteracting the giant tax cut that you’d be seeing at the top.”
However, other Republicans claimed that a simpler income tax structure is more equitable and that Kansas should compete with other states.
According to the Tax Foundation’s 2022 research, Kansas residents pay more of their income in taxes than inhabitants of most other states.
Iowa will implement a flat tax in 2022, with an initial rate of 4.4% and a reduction to 3.9% over time. Republican Governor Kim Reynolds is now trying to lower the rate to 3.65% for this year. Kansas Senate President Ty Masterson, a Wichita-area Republican, stated that keeping an income tax with several rates would put Kansas “behind the eight ball” economically. “It’s not the future,” he said.