A Kansas Senate committee jumped Tuesday into a murky dispute involving powerful special interest groups eager to claim part of a windfall to the state treasury resulting from changes to federal tax law.
The Legislature's effort to deal with the issue ground to a halt in the 2018 session because nailing down a dollar amount for the Kansas windfall was impossible. A year ago, the windfall was thought to be about $100 million. Since then, Democrats and Republicans have offered ranges from zero to more than $125 million.
In addition, the new bill before the Senate Assessment and Taxation Committee attracted swift criticism from the Kansas Chamber because it left out five provisions sought by the business lobby.
Sen. Caryn Tyson, a Parker Republican and chairwoman of the committee, opened consideration of Senate Bill 13, which would primarily direct windfall tax benefits to individuals rather than corporations. A key piece of her bill would allow Kansans to itemize deductions on state returns while taking the standard deduction on federal tax filings.
“I think we’re going to move forward with this bill. We do need to expedite what we have,” Tyson said.
Senate Majority Leader Jim Denning, R-Overland Park, said he was committed to gaining Senate approval of a windfall bill by the second week of the 2019 session, which opened Monday. Denning wants the legislation to be retroactive to the 2018 tax year rather than kick in for the 2019 tax year.
The Kansas Department of Revenue surprised the committee with a revised cost projection of $92 million for the Senate bill. Tyson said she was under the impression the cost to the treasury would be $60 million.
“Do we really understand the bottom line fiscal impact of this bill?” said Sen. Tom Holland, a Democrat from Baldwin City on the tax committee.
The Senate committee took no action on the bill, deferring broader discussion for another day.
Eric Stafford, a lobbyist with the Kansas Chamber, said the new Senate bill didn’t properly account for damage done to corporate taxpayers by tax cuts passed by Congress and signed by President Donald Trump in late 2017.
He said business capital contributions, repatriated income from abroad, interest deductions and other elements should have been included in a bill adopted by Kansas lawmakers.
“If this committee truly wishes to address the federal windfall Kansas is expected to receive from changes in the federal tax code, we would ask that you adopt all necessary decoupling provisions both for individual and business taxpayers,” Stafford said.
Sen. Larry Alley, R-Winfield, summarized the Kansas Chambers’ critique of the pending Senate bill.
"You don’t have a problem with the bill. You have a problem with what’s not in the bill," Alley said.
Patrick Vogelsberg, lobbying for the Kansas Association of Realtors, said the Legislature should shape the windfall legislation to prioritize tax breaks for private property ownership.
He said Kansas law requires Kansas income tax filers to itemize deductions on state tax filings only if itemizing on a federal return.
Doubling of the federal standard deduction in the bill signed by Trump would compel more than 90 percent of Kansans to take that option on federal returns, he said. Without a change in Kansas tax law, he said, those individuals couldn’t itemize on state tax returns in 2018 and beyond.
“This change is necessary to prevent a backdoor income tax increase on Kansas homeowners,” Vogelsberg said. “Voters strongly support the mortgage interest deduction and agree the tax windfall from federal tax reform should be returned to taxpayers.”
Doug Smith, representing the Finney County Commission and Garden City, proposed the Senate include language authorizing collection of a 0.3 percent retail sales tax adopted by voters in 2017. The tax revenue was earmarked for road, zoo, fire station and law enforcement upgrades.
Midland Care Connection in Topeka, which operates hospice programs in northeast Kansas, renewed a plea for Senate approval of a sales tax exemption. In 2018, the House rejected a bill featuring a sales tax break for hospices in Topeka, Wichita and Dodge City.