The Senate passed SB-22 a few weeks ago and sent on to the House. SB-22 is not a tax cut. It must pass to avoid an unintended tax increase. The senate version had two main components.
The simple part of the bill would allow Kansas filers to take the new federal standard deduction but still reserve the option of itemizing their Kansas returns. When Congress made changes to the federal tax code last year, it triggered the need for states - like Kansas - to take action so that families in our state wouldn't be penalized. That's what this bill is about. If we don't act, these taxpayers will receive a tax increase as a result of no longer being able to itemize their mortgage interest, property taxes, charitable contributions, and health care expenses on their Kansas tax form. For some, the extra tax could be similar to a car payment or a month's groceries.
- For Individuals - adjusts the Kansas tax code so that Kansans with itemized deductions that total between $7,000 and $24,000 can continue to itemize on their state income taxes even if they no longer itemize on their federal income taxes. Some middle-income tax filers might not itemize at the federal level this year due to recent changes Congress made to the federal tax code to raise the standard deduction. Without this bill, these middle-income tax filers would no longer be able to itemize at the state level, triggering a higher state income tax liability for these families.
The complex part of the bill is with repatriation and global intangible low-taxed income at the corporate level. Neither have previously been taxed in Kansas.
- For multi-national companies - clarifies language in the Kansas tax code so that changes in the federal tax code do not trigger unintended tax hikes at the state level. Without this bill, these Kansas companies would be subjected to additional taxes at the state level, making Kansas a more expensive state for businesses to operate in. Kansas is one of a handful of states who has not addressed this new international tax phenomenon. Missouri has already addressed this and will not add this tax. We need to act to stay competitive with Missouri and other neighboring states.
In Committee, the House added two major additions to SB-22. The first addition is a 1% reduction on sales tax on food. This was a major campaign promise made by Governor Kelly. The second addition was language to tax purchases on the internet similar to the way the purchases are taxed locally. This is seen as a fairness issue and helps with the fiscal note associated with lowering sales tax on food purchases by 1%. The House will debate SB22 on their floor in the next week or so.
Tax rates remain the same, that is to say SB22 does not modify either individual or corporate income tax rates.
Individual tax rates remain unchanged from July 1, 2017.
Corporate tax rates remain unchanged.
- 4% up to first $50K
- 3% surcharge on earnings above $50K