by Rachel Mipro, Kansas Reflector
February 14, 2023
TOPEKA — Lawmakers on Tuesday debated the merits of a flat tax proposal that would lower revenues by an estimated $1.5 billion annually and disproportionately benefit the state’s wealthiest residents.
Rep. Christina Haswood, a Lawrence Democrat, questioned during a House committee hearing why the Legislature should favor the flat tax over more equitable tax cut proposals. Democrats, including Gov. Laura Kelly, favor the immediate elimination of the sales tax on food, feminine hygiene products and back-to-school supplies.
The proposed flat tax, Haswood says, “puts the burden on more working class folks.”
The Kansas Chamber and associated proponents pointed to declining populations and said the flat tax would help bring people back to the state. Eric Stafford, lobbyist for the Kansas Chamber, said the flat tax would make the state competitive with others.
“Our state has many great things to offer its residents,” Stafford. “However, money walks and families or individuals considering a move will weigh all financial decisions when considering job openings.”
Kansas Policy Institute CEO Dave Trabert also testified in support of the bill and its potential to reinvigorate the population. Lawmakers questioned him on the link between tax rates and population losses, to which Trabert said there were no statistics.
“There’s no hard data on why people leave because there’s no exit interviews that are done,” Trabert said. “But we know talking to a lot of taxpayers, especially senior citizens, that taxes are the reason they’re going. It’s all combined.”
House Bill 2061 would set a 5% income tax rate for corporations and individuals. An impact study estimated the proposal would dramatically lower state revenues in the next few years, jeopardizing the state’s ability to pay for basic services.
The Kansas Chamber proposed the bill, along with its companion, Senate Bill 61.
Adam Proffitt, the state budget director, estimated that the proposal would decrease the state’s general fund revenue by $428 million in fiscal year 2024, and then by $1.452 billion and $1.541 billion in the next two fiscal years.
Under the plan, the individual income tax rate would be set at 5% for annual income above $15,000. Current law sets the state’s graduated individual income tax rates at 3.1% for income under $15,000, 5.25% for income between $15,000 and $30,000, and 5.7% for income above $30,000. For couples filing jointly, the numbers are doubled.
The current assessments on corporate income in Kansas stands at 4% on taxable income with a 3% surtax on taxable income in excess of $50,000. The bill would set the corporation tax rate at 5% for taxable income. Under the proposal, surtax rates for bank, trusts, and savings and loan associations would be cut by more than 50%, along with other provisions. All of the rate changes would be set for tax year 2024.
The Kansas Reflector asked the Institute on Taxation and Economic Policy, a nonprofit that provides research on state and federal tax policies, for an analysis of the legislation. The institute calculated that 49% of the individual income tax reduction would go to the richest 20% of Kansans. The state’s bottom 20% of earners would get about 4.1% of the tax reduction.
The bill also creates a procedure to allow individual and corporate income tax rates to decrease in future years.
The governor has spoken against the proposed tax plan, comparing it to former Gov. Sam Brownback’s disastrous tax policies.
“There’s actually a proposal out there that would do more damage more quickly than the Brownback tax experiment of 2012 and 2013,” Kelly said during a Jan. 31 “Axe the Tax” public conference.
The bill’s opponents include Kansas Action for Children and the Kansas National Education Association, which opposed the legislation on the grounds of fairness and feasibility, saying the bill would disproportionately harm middle- and lower-class Kansas families.
KNEA spokesman Timothy Graham drew a correlation between tax policy and unconstitutionally low funding of public schools during the Brownback years.
“Kansas tried similar tax strategies in the recent past that left the fiscal health of the state in a state of chaos and uncertainty. Let’s not go through this pain again,” KNEA spokesman Timothy Graham said.
The House panel was scheduled to hear testimony Wednesday on the corporate tax cuts included in the bill, which would primarily favor out-of-state shareholders of large corporations. A Senate panel also planned to begin hearings Wednesday.
Kansas Reflector is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Kansas Reflector maintains editorial independence. Contact Editor Sherman Smith for questions: info@kansasreflector.com. Follow Kansas Reflector on Facebook and Twitter.