A divided Kansas Senate completed swift approval Thursday of a bill clearing a path for corporations and individuals to avoid about $190 million in state income taxes.
All but two Republican senators locked arms in support of Senate Bill 22, which was forwarded to the House on a vote of 26-14. No Democrat backed the bill, but opponents included Sen. Mary Jo Taylor, R-Stafford, Sen. John Skubal, R-Overland Park, and Sen. John Doll, a Garden City independent.
The Senate legislation was developed in collaboration with influential Kansas business lobbyists in response to a 2017 law signed by President Donald Trump. The bill would adjust Kansas statute to enable individuals to itemize income tax deductions on state returns and take a higher standard deduction on federal returns. In addition, it would allow corporations to avoid state taxes on foreign earnings returned to Kansas.
Sen. Susan Wagle, a Wichita Republican who serves as Senate president, said the bill would prevent an unintended tax increase for individual Kansans and that passage of the legislation demonstrated Kansas stood against stifling of business investment.
“Today, we say no new barriers that suffocate job creation,” said Wagle, who formed and chaired the special tax committee that handled the bill.
Criticism centered on the GOP leadership’s decision to push the tax legislation before resolution of appropriations bills on public education and other basic functions of state government.
Sen. Ed Berger, R-Hutchinson, voted for the Senate bill because of its benefit to individuals and companies and despite apprehension about accuracy of the estimated $190 million value of the tax breaks.
“Lack of a reliable estimate on the fiscal impact of SB 22 is very troubling to me. Kansas is a state that has a very fragile economy, and we have had two months with lower than expected (state) revenues,” Berger said.
GOP and Democratic senators have speculated Gov. Laura Kelly would veto the bill. Senate Republicans, at this juncture, don’t have the two-thirds majority needed to override a veto.
Rep. Steven Johnson, an Assaria Republican and chairman of the House Tax Committee, said provisions of the Senate bill would be thoroughly evaluated by the House.
“I want to start where the Senate is,” Johnson said. “We want to have a good handle on how it affects Kansans.”
Under the Senate bill, corporations repatriating foreign assets to the United States would avoid state tax on that revenue. Individuals would be permitted to itemize deductions on state tax returns and take an enlarged standard deduction on federal returns.
The bill would deliver about $137 million to corporations, including multinationals Cargill, Pfizer, AT&T, Seaboard and Spirit Aerosystems. Another section of the bill would provide at least $50 million to individual filers, specifically those who want to decouple their approach to deductions on state and federal returns. The cost to the state treasury levels out to an estimated $115 million annually in the next two fiscal years.
Sen. Barbara Bollier, D-Mission Hills, said she stood opposed to the bill because lawmakers had yet to fully fund public schools, eliminate the waiting list for services to people with disabilities and expand eligibility of Medicaid. The basics of state government should be addressed before steps are taken to slash revenue, she said.
“At this time, I find it fiscally irresponsible to support a change to our tax code that diminishes our state revenues, especially when the actual amount is speculative,” she said.
The Legislature ought to weave into the tax policy conversation the idea of lowering the state’s 6.5 percent sales tax on food, said Sen. Carolyn McGinn, R-Sedgwick.
Sen. Marci Francisco, D-Lawrence, said the state’s decoupling from the federal tax code would create new auditing responsibilities at the Kansas Department of Revenue. The state should use any windfall to lower the food sales tax or increase the state’s standard deduction for the purpose of “equity, adequacy and ease of administration,” Francisco said.
This article was originally published on The Topeka Capital-Journal website, here.
Paid for by Senate Democratic Committee, Will Lawrence, Treasurer