Nearly a year after the Legislature raised taxes, largely ending former Gov. Sam Brownback’s tax cut experiment, Kansas lawmakers will soon decide whether to give people a tax cut.
At a time when the state budget has stabilized and officials project a surplus of hundreds of millions next year, supporters say a tax cut would put money back in taxpayers' pocket.
Opponents say a tax cut could lead to budget problems as the state pays for a large school funding increase.
Some lawmakers are pushing to raise the standard deduction for income taxpayers, which would exempt more earnings from taxes for people who 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.
“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, Kan., 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.”
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 only have 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.