Kansas policy could block more tax cuts amid high inflation

Kansans hoping to keep more money in their wallets could still see more tax cuts this year, but politicians disagree as the 2022 election season approaches.

“We know inflation is hitting everyone hard, including here in Kansas,” Governor Laura Kelly said. “All the costs are going up. In Washington, they’re bickering about this stuff. In Kansas, we’re doing something about it.”

His comments came during a bill-signing ceremony outside an East Topeka home, surrounded by families and a bipartisan group made up mostly of Shawnee County lawmakers.

“We can’t solve the inflation problem in the United States overnight, but we’re going to put money back in people’s pockets to help them manage higher costs,” Kelly said.

Lawmakers have already slashed taxes by $1 billion over three fiscal years, thanks to a phased cut in the food sales tax and a massive package of 29 separate bills. Some are pushing for more tax breaks as state coffers expect to have more than $1 billion in surplus by the end of the next fiscal year. But lawmakers also struggle with the political lens.

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Attorney General Derek Schmidt, the frontrunner in the GOP governor’s primary, does not support efforts by Republicans or Democrats to cut taxes further.

“It’s a very comprehensive tax package,” Schmidt said of the legislation that’s already passed, “and probably coming back at the 11th hour and trying to bring in another idea from any faction is not maybe not the safest thing to do.”

Schmidt criticized “the continued, rapid, and almost explosive growth in government spending” and warned of an economic downturn.

“What goes up eventually comes down,” he said. “It’s true in business cycles. It’s true in government budgeting.”

Democrats push for tax cuts

Kansas lawmakers join Governor Laura Kelly in a bill signing ceremony Wednesday outside a home in Tecumseh.

Overall, Democrats are the ones pushing for more tax cuts this year. Bob Beatty, professor of political science at Washburn University, said that was not the normal political dynamic.

“In a generic political season, Republicans would say, ‘Hey, there’s all that money in the bank in Kansas. There’s all this excess money, and it has to come back to the people,” Beatty said.

“It happened in previous years. It was in the form of income and corporate tax cuts. But the quickest way is, of course, a sales tax cut. Because it can be immediate, it can literally happen one day and the next day you go to Dillons, you don’t pay that much money for your groceries.”

House Minority Leader Tom Sawyer, D-Wichita, disagrees that the 2022 tax debates are atypical.

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“I’m kind of used to Democrats being the ones advocating for tax cuts,” he said, pointing to various pieces of legislation over the past three decades. “But the last few years it’s been different because they had Brownback. We push for sensible tax cuts that affect working families.”

Beatty said the sales tax cut will be important to Kelly’s re-election campaign, “which is why many Republicans have struggled with it.” He said there’s an argument, especially among Democrats, that at least part of the tax cut would have passed immediately if a Republican sat in the governor’s mansion.

“The big deal in Kansas politics — I teach this for my classes — is taxes, regardless of year, regardless of candidates,” said Beatty, who added that unlike tax policies more mundane that “won’t get masses of super, super-energized voters, taxes always do.”

past tax cuts

The tax reductions enacted in HB 2239 total approximately $310 million over three fiscal years. The residential property tax exemption is by far the largest tax reduction in the bill, totaling approximately $134 million over this period.

The property tax reduction amounts to $46 per year for most homeowners.

“This is going to make a real difference for families in our state,” Kelly said.

The bill includes tax cuts for farm fencing, teachers’ classroom supplies, homesteads, railroads, the aviation industry and disabled veterans, among other relief.

“These are sensible tax cuts that will put money back in people’s pockets,” Kelly said. “We’re able to cut taxes because we manage the budget smartly and responsibly – just like Kansas families do every day. Now we have a record budget surplus, and we got those tax cuts. taxes because we brought Democrats and Republicans together.”

Lawmakers also passed HB 2106, which Kelly promised to sign. The Republican-drafted bill gradually reduces the state’s 6.5% sales tax to 4% in January 2023, 2% a year later and 0% in 2025. It will cost the state about $741 million dollars over three years.

“Going forward, Republicans will continue to consider broad tax reform that will help all Kansans, not just election-year theaters,” said House Majority Leader Dan Hawkins, R-Wichita. , in a newsletter.

While praising the grocery and home tax cuts as an inflation relief, Hawkins said “Kansasians know best” because Kelly “is trying to portray herself as a major supporter of the cuts.” of taxes”.

Potential for more tax cuts

Governor Laura Kelly poses with a family after a bill signing ceremony Wednesday outside a home in Tecumseh.

In addition to the $1 billion budget surplus and $750 million in a rainy day fund, tax revenues continue to exceed forecasts.

April tax receipts exceeded estimates by $178 million, primarily due to personal income tax collections.

“There are still tax issues on the table,” said Rep. Jim Gartner, D-Topeka. “Maybe we should look at a couple of those things to cut taxes even more. With $178 million we saw above estimates in April, we can do all of those things.”

Kelly and his fellow Democrats are pushing for lawmakers to at least move the start date for the food sales tax cut to July 1.

“We can do more,” Kelly said. “This tax revenue reiterates the fiscal health of the state.”

Sawyer said it’s possible to get a more immediate sales tax cut “if voters let their lawmakers know they want zero now, because clearly we can afford it, help them change their minds.” opinion and we can do it”.

It seems that HB 2597 would be most likely to be adopted. This package contains provisions increasing the standard deduction, widening income tax exemptions for social security benefits and retirement income, exemptions on the taxation of sales of utilities and relief from property tax for retail stores impacted by COVID-19, among other policies.

The tax cuts would cost $432 million over three years.

House GOP leaders have indicated they want HB 2136, which contains some exhibits that are also in HB 2597. Senators have expressed interest in SB 331, which repeals the ban on companies adding a surcharge for credit and debit card payments.

Republican infighting

Republicans have faced internal divisions over tax cuts this session — and not just the handful of rank-and-file members who oppose the GOP leadership for backing Kelly’s food sales tax plan. .

When lawmakers returned to Topeka from their April recess, House GOP leaders appeared to scuttle the HB 2597 tax cut package that Senate Republicans had wanted.

The legislation was later resurrected in an after-midnight debate in the Senate.

The package was originally hammered out at a March conference committee, where House Tax Committee Chairman Rep. Adam Smith R-Weskan proposed putting in bigger or more controversial tax cuts in a separate bill.

Senate Taxation Committee Chair Sen. Caryn Tyson, R-Parker, expressed concern at various points during the negotiations that some tax policies might not pass if moved to the second bill. She asked for help to defend the package.

“I’m afraid we’ll lose it if we move it,” Tyson said of a provision creating a cost-of-living adjustment for the standard deduction. “We will take it in good faith that your intention is to help us get this through.”

“Oh absolutely,” Smith said.

But something changed during the April break.

The House GOP leadership asked to remove some parts from HB 2597, dump the contents into a casing of HB 2136, and forget the rest.

Weskan told a group of tax policy officials that he “has been informed that some priorities have changed.” Smith said he was “sad to see a lot of these other pieces disappearing”, but promised “to come back strong next year”.

Tyson was not happy.

“It has to be this year,” said Tyson, who is running for treasurer, noting that not everyone will return to the Legislative Assembly. “I understand House leaders want to pull the plug.”

Sen. Gene Suellentrop, R-Wichita, then asked the Senate to vote on the bill.

His motion, which arrived shortly before 2 a.m., became mired in a debate about breaking the rules. Tyson agreed to call it a night as long as the GOP leadership promised to allow a tax debate when lawmakers return later this month. Senate Speaker Ty Masterson, R-Andover, said he would.

“We still have the option of returning some of these funds to taxpayers,” Suellentrop said. “This is a simple and practical tax policy in a year of record revenues.”

Jason Tidd is a reporter for the Topeka Capital-Journal. He can be reached by email at [email protected] Follow him on Twitter @Jason_Tidd.

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