The historic Tax Cuts and Jobs Act (TCJA) signed into law by President Donald Trump more than two years ago has spurred economic growth across the country. Unfortunately, Kansas has yet to see the full benefit.
One of the basic tenets of good tax policy is to broaden the tax base and lower rates. This is exactly what the TCJA did.
The new federal tax code broadened what was defined as income and then lowered the federal tax rates. Because Kansas conforms with federal definitions of income, the state’s definition of income also broadened but state tax rates weren’t lowered — meaning the income tax burden of Kansans increased.
A major part of the TCJA increased the standard deduction to $24,000 for a married couple filing jointly. However, since Kansas does not allow its taxpayers to itemize deductions if they don’t itemize their federal tax return, tens of thousands of Kansans lost their ability to do so.
Some class-warfare warriors like to say allowing Kansans to itemize their federal returns is only for the wealthy. The fact is around 50% of Kansas households that itemized had a household income of $100,000 or less, and now they are unable to itemize, which increased their Kansas tax burden.
There also is the problem of competitiveness as many states — red, blue and purple — have adjusted their tax code so their citizens and businesses were held harmless with their state tax liability. Some states even rushed to do so, while some Kansas legislators were wringing their hands not wanting to revisit the Brownback tax cuts. Kansas is an outlier state in this regard.
What might be an even bigger “no-no” for ideal tax policy is to increase state tax burdens without any action by the Kansas Legislature. That is a terrible precedent and not a good way for Kansas to be unique.
A recent scientific poll conducted by CHS & Associates for the Kansas Chamber found taxes are the overwhelming concern of Kansas employers and that nearly 70% believe that lower taxes would help the Kansas economy.
The Kansas Chamber calls on the Kansas Legislature and Gov. Laura Kelly to allow Kansans to realize the full positive effects of the Tax Cuts and Jobs Act.
The 2018 Kansas Legislature got close but couldn’t muster the necessary votes during the waning days of the session.
As more legislators began to understand that this effort was simply to hold Kansas taxpayers harmless, the 2019 Kansas House and Senate passed the appropriate legislation to rectify this problem by large majorities. But Gov. Kelly vetoed this common-sense legislation, decrying reckless tax cuts that will damage the state budget. To be clear, this legislation does NOT cut Kansas tax rates.
The Kansas Chamber believes our state needs comprehensive tax reform and not piece-meal tax policy. That’s why we worked with the Tax Foundation to publish the “Kansas Tax Modernization Report.”
The legislation we continue to ask to be passed and signed into law simply keeps Kansas tax code neutral, prevents our state from becoming less competitive than the majority of states and sets the stage to have a robust conversation on what the Kansas tax code should look like in the future.
Alan Cobb is president and CEO of the Kansas Chamber, a statewide association whose members are small, medium and large businesses from a wide variety of industries and professions.