The state would shift money from the working poor to elderly or disabled homeowners under a bill approved by the Senate on Monday.
Republicans said the shift would give more people more money to help them with the most hated tax in the state – property tax. And they say that Kansas would still be above the national average for how much it provides to the working poor through its earned-income tax credit.
“It will help more people… that is a big thing for somebody that’s on a fixed income and not able to work,” said Sen. Les Donovan, R-Wichita.
Democrats call it an attack on the working poor triggered by tax cuts approved last year that benefit the wealthy and business owners, and they said many of the poorest Kansans don’t own property to take full advantage of the tax rebate.
Sen. Oletha Faust-Goudeau, D-Wichita, said most people use the credit — which averages $380 — to buy groceries, shoes for their kids and other essentials.
“This little bit of money means a lot to those individuals who are the working poor and our Bible says that we must care for them,” she said.
House Bill 2060 cuts the value of the state earned-income tax credit from 17 percent of the federal credit to 9 percent in the 2013 tax year. Kansas is one of about 25 states that offer the program on a state level in addition to the federal credit, and it’s about in the middle of the pack in terms of value.
It would shift that $42.2 million from the working poor who qualify for the EITC to a property tax rebate claimed by homeowners who are born before 1957 or are permanently disabled or have a dependent child. It increases the maximum income to qualify for the rebate from $32,400 to $34,400 to include more people.
To qualify for the EITC in 2012, an individual filing alone had to have made less than $13,980. A married couple that filed jointly and had two qualifying children had to have made less than $47,162.
The bill would leave the federal share of the EITC untouched, and it would use some of the shifted state EITC money to increase the maximum property tax rebate from $700 to $1,200.
While the bill is a dollar-for-dollar shift in its first year, it would ultimately leave the state with about $4.5 million more over five years.
Senators approved the bill on a voice vote after about two hours of debate. They plan to conduct a final vote Tuesday.
The debate came as lawmakers grapple with how to bring in more revenue to make up for impending deficits caused by income tax cuts for individuals and elimination of nonwage income taxes for about 191,000 businesses and farms signed into law by Gov. Sam Brownback last year.
Competing House and Senate tax cut plans would reduce the value of tax deductions. The Senate plan, which is most similar to a proposal pitched by Brownback earlier this year, would also indefinitely extend a six-tenths of a cent sales tax due to expire in July.
Brownback had proposed reducing the state’s EITC, but it was one of the parts of his tax-cut plan that drew the most criticism. Lawmakers rejected that aspect of his plan before drastically altering more of it.
Senate Vice President Jeff King, R-Independence, said shifting money from the EITC to the property tax rebate would not hurt the working poor. He said expanding the homestead property tax relief program would help the most-vulnerable and poor.
Sen. Tom Holland, D-Baldwin City, said the state took away the food sales tax rebate, taking about $154 per household from about 300,000 qualifying Kansans.
Those people don’t make enough money to pay income tax, he said, but will suffer from losing the food rebate and from a lesser amount of earned-income tax credit.
“I just can’t imagine the shock that will go through those people’s minds and they’re figuring out how to cope going forward,” he said.