The Kansas House on Wednesday approved a bill gradually moving the state to a single tax rate as income tax revenues beat inflation.
The House voted 84-38 to pass a bill backed by the Kansas Chamber of Commerce that gradually cuts individual income taxes to 4% when the state generates $5.96 billion dollars that come from income taxes plus inflation.
The bill now goes to the Senate as the regular session quickly winds down and Republicans work to deliver on their promise of tax cuts this session.
The House legislation also would subsequently cut the tax rates for corporations as well as banks after individual income tax rates are reduced.
The proposal calls for using the money in excess of $5.96 billion plus inflation to lower the state’s two personal income tax brackets simultaneously – now 5.58% and 5.2% – to 4.5% when there would be just one rate.
Individual income tax rates would be reduced first, with both tax rates reduced proportionally until the lower bracket reaches 4%, at which time only upper bracket rates would be reduced until the upper bracket rate reaches the same level.
When the individual rates hit 4%, surtax rate for corporations and the normal tax rates for financial institutions would start in corresponding amounts.
Those cuts would continue until the combined normal tax and surtax for corporations reaches 4%, and the combined normal tax and surtax for banks reaches 2.6%.
The state’s corporate rate is now 3.5% plus a 3% surcharge on taxable income over $50,000.
The combined normal tax and surtax for trust companies and savings and loan associations would be lowered until reaching 2.62%.
The House bill contains a clause that would keep taxes from being lowered if the state’s rainy-day fund, which totals about $1.7 billion currently, dips below 15% of state general fund tax receipts. The fund is now at
It’s hard to know the immediate fiscal impact of the bill because the legislation is different in the sense that it limits how much revenue the state can take in compared to other tax cuts that actually lower revenues coming into the state.
Democrats called the bill a “dangerous” piece of legislation, saying that it would tie the state’s hands to respond to dire financial times or other emergencies.
“One of the main functions of democracy here is to slow down bad bills. We have an opportunity to do that,” said Democratic state Rep. Stephanie Sawyer Clayton.
Eric Stafford, the top lobbyist for the Kansas chamber, praised the House for passing the bill.
“This places Kansas on the map as a very competitive state for business investment and affordability for families. We look forward to the Senate acting on the bill,” Stafford said.
Democrats in the House and Senate objected to the bills out of fear it would restrict the Legislature’s ability to make policy decisions in the future.
“Why would we want to have legislation that would essentially prohibit us from considering anything other than automatic income tax rates?” Democratic state Sen. Ethan Corson of Fairway said when a similar bill was debated in the Senate last week
“If we do have a really good year when it comes to the revenues and we do have the ability to cut taxes, why wouldn’t we want to at least be able, as a body, to consider maybe we should focus on property taxes. Maybe we need to address our sales tax.”
“If this were to be enacted, we would be really tying our hands to make decisions that are the most responsive for that particular legislature based on the will of our constituents at that particular time,” he said.
