Itemize This: Kansas Tax Fight Could Change Your Return

By Stephen Koranda – Kansas News Service/KCUR

Republicans and Democrats are braced for a fight over whether state government in Kansas should cash in on the ramifications of the 2017 federal tax cut. The sides are staking out their positions and could come to loggerheads sooner rather than later.

Republican legislative leaders want to push the tempo and pass legislation in time for the upcoming filing season to return what they call a “windfall” to Kansas taxpayers. Democrats want to hold off and say lawmakers need to wait and see if there even is a windfall.

When Congress, at the behest of President Donald Trump, overhauled the federal tax code in late 2017, that meant a minority of Kansans who itemized on their state tax returns could no longer do so. Some Kansans will end up paying more to the state without the option to itemize.

At stake are millions of dollars. Estimates vary, but the boon to the state from the federal overhaul may be upwards of $100 million. Legislation could give all of that back to Kansas taxpayers by letting them itemize again and tweaking business tax rules. The cost to the state could be bigger if lawmakers include other tax relief.

Republican Senate President Susan Wagle has created a special committee to swiftly tackle the issue.

“Provide relief to Kansas families and businesses, allowing them to fully benefit from the Trump tax cuts,” Wagle urged in a statement.

The committee could debate and even vote on a bill as soon as next week.

Wagle has reportedly called for them to come up with a clean bill, one that would return the windfall and not get bogged down by delving into other areas of tax policy.

An effort to address the windfall last year narrowly failed with Democrats and some Republicans concerned that the legislation had ballooned with unrelated tax cuts that prompted unanswered questions about the financial impact to the state budget.

Sen. Caryn Tyson, chairwoman of the standing tax committee, was the Senate’s top negotiator in that failed effort. She is conspicuously absent from Wagle’s new special committee.

Still, Tyson would support legislation that comes out of the special committee.

“This money was intended for the Kansas taxpayer,” she said in an interview. “It was not intended to grow Kansas government.”

Tyson wants a fix in place before most Kansans file their 2018 taxes. Democrats say it would be more prudent to wait until the state has a better handle on collections.

The top Democrat in the Kansas House, Rep. Tom Sawyer, points out that the federal tax cut came with a lot of changes to the tax code — some with positive effects on the state coffers and others with negative effects.

Sawyer said the updated state revenue forecast in May will reveal the true impact of the federal overhaul.

“I think it’s really way too soon to work on this issue,” he said.

Kansas has been riding a tax rollercoaster over the last eight years. The 2012 tax cuts were followed by budget deficits and then tax increases. In 2017, lawmakers pulled the plug on the 2012 tax cuts by reversing nearly all of them.

Kansas is now projected to have around $900 million in reserves, and Democratic Gov. Laura Kelly doesn’t want to disturb the state’s newfound financial stability.

When asked if she’d support simply fixing the itemizing change, the governor reiterated her opposition to tinkering with taxes.

“We have no idea if there’s a windfall,” Kelly said Thursday. “Let the dust settle on everything.”

If there is a windfall but Republicans in the Senate push a broader bill, Sawyer and other Democrats are ready with legislation in the House that only fixes the itemizing issue for taxpayers. But the timing is critical.

“I think it has broad support in our caucus,” Sawyer said. “I think it’d be better if we did it later in the session when we know hard numbers.”

Stephen Koranda is Statehouse reporter for the Kansas News Service, a collaboration of KCUR, Kansas Public Radio, KMUW and High Plains Public Radio covering health, education and politics. Follow him on Twitter @kprkoranda.

Kansas News Service stories and photos may be republished at no cost with proper attribution and a link to ksnewsservice.org.