(Updated to include Department of Revenue memo breaking down who benefits from plan)
The Kansas Senate late Thursday night approved a bill overhauling the state’s income tax structure, moving to a single rate for Kansas taxpayers that critics fear could return the state to the era of former Gov. Sam Brownback.
The Senate agreed to a bill late Thursday night that calls for collapsing three income tax brackets into one where individual Kansas taxpayers would pay 4.75% on their earnings.
It passed 22-17, well short of the 27 votes needed to override a veto from the governor if she decides the bill poses a fiscal threat to the state.
The tax would only apply to taxable income in excess of $10,450 for married individuals filing joint returns and $5,225 for all other taxpayers.
The proposal would cost the state about $1.3 billion in revenue over three years, according to state fiscal analysts.
The bill would not affect taxpayers’ ability to deduct from their taxes.
The bill’s price tag evoked memories of the tax cuts enacted during the Brownback administration that were blamed for blowing holes in the state budget and were ultimately reversed.
“We’ve seen this train wreck before,” said Democratic state Sen. Tom Holland of Baldwin City.
“What I’m trying to avoid is Brownback 2.0,” Holland told the Senate.
Holland said the state is in good financial shape, sitting on a healthy surplus and putting more money into reserves while bolstering its pension system.
“We are looking financially healthy. We’re in a good spot right now,” he said.
“We really need to moderate and watch where we’re heading.”
Senate President Ty Masterson shrugged off the Brownback comparisons as Democratic rhetoric.
“What’s new about talking about Brownback and Kansas?” Masterson said. “That’s the only thing they have left in the drawer.”
“This is nothing like what the Brownback tax cut was,” he said.
He noted that the plan passed Thursday night moved the state to a single tax rate compared to the Brownback tax plan, which exempted an entire class of businesses from paying income tax.
A Department of Revenue memo shows that the flat tax would benefit taxpayers earning more than $250,000 the most, saving them an average of about $5,300 a year.
Taxpayers earning under $25,000 a year would save about $42.43 a year.
And Kansans earning $50,000 to $75,000 would see a savings of about $194 a year.
The flat tax proposal is different from one offered up initially by the Kansas Chamber of Commerce, which would have set the tax rate at 5% for individuals.
However, the chamber proposal exempted more income from taxes.
The chamber proposal exempted income under $15,000 for single filers and $30,000 for married couple from income taxes.
The chamber’s proposal was projected to cost the state more than $3 billion over three years.
The chamber testified on behalf of the new income tax structure.
“We believe shifting to a single rate for personal income taxes would not only simplify returns but would result in stronger economic growth due to a lower top marginal rate,” chamber lobbyist Eric Stafford said in testimony.
Stafford said the chamber viewed the bill “as a reasonable, predictable tax proposal to help individual and businesses with their income tax burden.”
His view was shared by other conservative groups such as Americans for Prosperity and the Kansas Policy Institute.
The bill was opposed by Kansas Action for Children, the Kansas National Education Association and Game on for Kansas Schools.
“Lawmakers must champion tax reform that strengthens Kansas’ ability to invest in the future,” said Emily Fetsch, director of fiscal policy for Kansas Action for Children.
“A flat tax will limit the state’s ability to provide crucial programs and services,” Fetsch said in written testimony.
The flat tax debate has been spreading across the country with an increasing number of states adopting a single flat tax rate.
In the last two years, Arizona, Iowa, Mississippi, Georgia, and Idaho have moved from a graduated income tax rate to a flat rate.
Since 2021, the number of states with flat income tax structures on the books has climbed from eight to 13.
Massachusetts had a flat tax, but voters last year amended their constitution to increase taxes for millionaires.
However, some Kansas lawmakers were scared off by the cost of moving to a single tax rate and what that would mean for the state’s fiscal health.
“I tried to just kind of add it up in my head how much money that we’re cutting out, it’s over a $1 billion,” said state Rep. John Doll of Garden City.
“I think we saw this show last decade. I’m not sure I like the way it ended,” Doll said, alluding to the Brownback tax cuts.
