A Senate committee on Thursday approved a package of tax cuts, including reductions in property taxes and a new sales tax holiday for school supplies.
The Senate tax committee moved forward three separate bills, including two cutting property taxes that some fear could hurt funding for higher education in Kansas as well as elementary and secondary schools.
Supporters say the property tax cuts are an attempt to address one of the chief complaints they get from constituents about taxes.
The package of bills would end a 1.5-mill property tax that goes toward rehabbing and repairing buildings at state universities and for maintaining state hospitals, veterans homes and the schools for the deaf and blind.
The Senate tax committee also passed out a bill raising the property tax exemption for the statewide mill levy for public education.
The proposal calls for increasing the property tax exemption for the statewide 20-mill levy from the first $20,000 of residential property to $65,000 with future increases based on inflation in the years to come.
The bill originally called for increasing the exemption to $100,000, but the committee lowered it to $65,000 with the promise that it would increase each year based on the average percentage change in residential property values for the preceding 10 years.
Fiscal analysts predicted that an inflationary increase – as of now – would be about 3.9%.
A third bill that passed out of committee creates a sales tax holiday for back-to-school sales, including clothing, school supplies, school instructional materials, school art supplies, prewritten computer software and personal computers.
The sales tax holiday would occur on the first Thursday in August at 12:01 a.m. and end at midnight the following Sunday. It would start this August.
Sixteen states have some sort of sales tax holiday, including neighboring Missouri and Oklahoma, which have sales tax holidays from Aug. 5 through Aug. 7.
Lawmakers backing the bill say it helps Kansas keep up with other states – and maybe surpasses them – that have sales tax holidays on the books.
Republican state Sen. Virgil Peck of Havana said the proposal puts Kansas ahead of other states because it doesn’t cap the amount on purchases exempt from sales tax, and the tax holiday spans four days.
“We are bleeding to the east and to the south,” Peck told the committee earlier in the week. “A lot of citizens from Kansas are traveling to our neighboring states.”
“I would ask you not to look at this legislation as what might Kansas lose in sales tax revenue, but what will Kansas gain by incentivizing our citizens, and even some of our neighboring states, to make purchases in Kansas for back-to-school supplies.”
The total cost of the tax cuts was hard to estimate after the property tax exemption increase was reduced to $65,000 from $100,000.
The sales tax holiday was estimated to cost about $8.3 million, while ending the 1.5 mill tax levy would be about $66 million.
The cost of the raising the tax exemption was uncertain, although it would have cost $147 million if it was raised to $100,000.
Republican state Sen. Caryn Tyson, chair of the Senate tax committee, said property taxes are one of the biggest complaints lawmakers hear about.
“This is an attempt to decrease property taxes so (Kansans) will see actual relief in the states of Kansas,” Tyson said. “This is a property tax savings for all Kansans.”
The property tax cuts caused some angst because of how it would affect education funding, especially financing of public schools.
The property tax bills require the Legislature to offset the loss in revenue from the state general fund, but that still caused some concern.
The Kansas Board of Regents opposed eliminating the 1.5-mill property tax levy of which 1 mill, or $41.8 million, goes to a fund for building upkeep at state university buildings.
The other half mill, or $20.8 million, goes to state hospitals, veterans homes and the schools for the deaf and blind.
The bill would transfer $41.8 million from the state general fund to higher education in 2024 with a 2% increase each year in in the future to make up for the tax cut.
Similarly, the bill also would transfer $20.9 million to the fund for other state buildings in 2023 with with a 2% increase each year.
Blake Flanders, president and CEO of the Board of Regents, said ending the 1.5-mill property tax “would disrupt a vital and stable source of state funding for the state universities.”
“Because facilities are such an important aspect of what we offer our students, we are opposed to legislation that would result in fewer state dollars available for maintenance annually,” Flanders told the committee in written testimony.
Flanders noted that there are 1,139 state university buildings covering 38 million square feet with a total replacement value of $10.7 billion.
He pointed out that state universities have a backlog in deferred maintenance projects totaling an estimated $1.3 billion.
Democratic state Sen. Ethan Corson supported the sales tax holiday but not the property tax cuts because of how they could affect schools.
Corson said it’s hard to support tax cuts that could affect funding for public schools after the state has emerged from years of litigation over whether the state was adequately funding elementary and secondary schools.
“I’m not supportive of anything that would destabilize school funding,” Corson said.
“That’s a red line for me personally that I won’t cross because I think we have finally got to the point where we’re funding schools, we should continue to fund schools and anything I see as destabilizing to that, I can’t support.”