TOPEKA — Lawmakers on Tuesday debated the merits of a flat tax proposal that would cut revenues by about $1.5 billion a year and disproportionately benefit the state’s wealthiest residents.
Representative Christina Haswood, a Democrat from Lawrence, asked during a House committee hearing why lawmakers should favor the flat tax over more equitable tax cut proposals. Democrats, including Gov. Laura Kelly, favor an immediate elimination of the tax on sales of food, feminine hygiene products and back-to-school supplies.
The proposed flat tax, Haswood says, “places the burden on more working-class people.”
The Kansas House and associated supporters pointed to the population decline and said the flat tax would help bring people back to the state. Kansas House lobbyist Eric Stafford 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 employment opportunities are considered.”
Kansas Policy Institute CEO Dave Trabert also testified in support of the bill and its potential to invigorate the population. Lawmakers questioned him about 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 from talking to many taxpayers, especially older people, that taxes are the reason they leave. It’s all combined.
House Bill 2061 would set an income tax rate of 5% for corporations and individuals. An impact study estimated that the proposal would drastically reduce state revenues over the next few years, jeopardizing the state’s ability to pay for basic services.
The Kansas House proposed the bill, along with its companion, Senate Bill 61.
Adam Proffitt, the state budget director, estimated that the proposal would reduce state general fund revenues by $428 million in fiscal 2024, and then by $1.452 billion and $1.541 billion over the next two fiscal years.
Under the plan, the individual income tax rate would be set at 5% for annual income greater than $15,000. Current law sets the state’s graduated individual income tax rates at 3.1% for incomes less than $15,000, 5.25% for incomes between $15,000 and $30,000, and 5.7% for incomes greater than $15,000. 30,000. For couples filed jointly, the numbers are doubled.
Current corporate income assessments in Kansas stand at 4% on taxable income with a 3% surcharge on taxable income exceeding $50,000. The bill would set the corporate tax rate at 5% for taxable income. Under the proposal, surcharge rates for banks, trusts and savings and loan associations would be reduced by more than 50%, along with other provisions. All rate changes would be set for the 2024 tax year.
The Kansas Reflector asked the Institute on Taxation and Economic Policy, a nonprofit organization 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 break would go to the top 20% in Kansas. The poorest 20% of the state would get about 4.1% of the tax break.
The bill also creates a process to allow for the reduction of personal and corporate income tax rates in future years.
The governor has spoken out against the proposed tax plan, comparing it to former Governor Sam Brownback’s disastrous tax policies.
“There’s actually a proposal out there that would do more damage faster than the Brownback tax experiment of 2012 and 2013,” Kelly said during a Jan. 31 “Ax the Tax” public lecture.
Opponents of the bill include Kansas Action for Children and the Kansas National Education Association, who have opposed the legislation on grounds of fairness and workability, saying the bill would disproportionately harm lower and middle-class Kansas families .
KNEA spokesman Timothy Graham drew a correlation between fiscal policy and the unconstitutionally low funding of public schools during the Brownback years.
“Kansas has tried similar fiscal strategies in the recent past that have left the state’s fiscal health 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 benefit out-of-state shareholders of large corporations. A Senate committee also planned to begin hearings on Wednesday.
