Senate Tax Committee members during Wednesday’s meeting courtesy of the Senate YouTube channel
TOPEKA, Kan. (AP) – Republican lawmakers narrowed their proposal to cut income taxes in Kansas before the first legislative hurdle was cleared, and a GOP leader said Wednesday that they will put off more action, at least for a short time, to see how the plan could affect the next state budget.
The Republican-controlled Senate Tax Committee approved a bill to reduce income taxes by approximately $ 170 million for the fiscal year beginning July 1. The move, which the committee clarified on Tuesday, would provide relief to businesses and individuals paying more state income taxes because of the changes to federal tax laws in 2017 that were endorsed by former President Donald Trump.
The bill would originally have granted tax breaks of $ 329 million for the next fiscal year, but the committee removed an important provision that would have allowed companies to claim reimbursement for past losses and the ability for individual claimants to claim reimbursements limited. The move went to the Republican-controlled Senate, where the debate is not scheduled until next week.
“We need another week to talk about what our budget might look like,” said Senate majority leader Gene Suellentrop, a Republican from Wichita, on Wednesday.
Top GOP legislators have made the revision of income tax laws a top priority since the federal tax cuts in 2017. They argue that Kansas receives an accidental windfall and compare it to someone finding a wallet filled with cash on the street.
Among other things, the changes made by the federal government have deterred people from requesting individual deductions. Kansas law doesn’t allow people to itemize their state tax returns if they don’t do so on their federal returns – resulting in higher state tax charges.
“The federal government didn’t want state income tax to go up,” said Senate tax committee chairman Caryn Tyson, a Parker Republican. “We need Kansans to have a godsend.”
Tyson said the committee narrowed down the bill to make it more palatable to a wider group of lawmakers.
Democratic governor Laura Kelly vetoed two Republican tax cut bills in 2019, arguing they would undermine the state’s financial health. She warned lawmakers of what she sees as an attempt to revert to a now largely repealed and nationally infamous experiment to cut income taxes under former Republican Governor Sam Brownback in 2012 and 2013, which was followed by persistent budgetary constraints.
Some of Kelly’s fellow Democrats also argue that the bill continues to be too focused on helping large businesses and wealthy individuals.
Senator Ethan Corson, a Prairie Village Democrat, said that if the state could afford to cut taxes, it would want the discounts for businesses on Main Street, as well as for middle class and working families. He also asked if there is “room” for tax cuts in the COVID-19 pandemic.
He also said President Joe Biden’s administration may pursue changes in federal tax law and, “It probably makes sense to understand what those potential changes might be before undertaking any major (state) tax reform.”
The state’s budget picture has brightened in the past six months, despite officials acknowledging that economic uncertainties persist due to the pandemic.
Officials issued a financial forecast in November that was more optimistic than the previous one in April. From July 1, 2020 to January 31, tax revenue exceeded state projections by 3.3%, or $ 170 million.
Kelly proposed a budget of $ 20.9 billion for fiscal year beginning July 1, which would leave Kansas with a financial cushion of $ 680 million.
However, its spending plan is partly based on several proposals that the GOP had previously rejected. This includes a “Netflix tax,” which will reduce the state’s sales tax on online music, film and video streaming services, sales on sites like Etsy and eBay, and a reduction in the state’s annual payments to its teacher pension scheme and government employees would raise.