Kansas Will Change its Income Tax Policy This Session
We passed a large tax cut in 2012. The 2012 tax cuts lowered personal income tax rates by 27%. After four years we now know the following; rate cuts were too large, the cuts did not produce the rate of economic growth that was projected, Kansas fell into a rural recession, the national economy has been anemic at best, and we did not cut government spending enough to match up with the lower tax revenues. As a result of all these factors, our budget is unstable and we can't pay the cost of our core services. Kansas has had two bond downgrades and we are currently on the negative watch list of the major bond raters. Bottom line is we have to take back some of the large tax cut from 2012 to put Kansas back on sound financial footing.
It appears to get the budget in balance we have to take back about 50% of the large personal income tax cuts from 2012. So the 27% cut in personal income tax cuts will be adjusted down to a 14% personal income tax cut from 2012 levels.
The Senate, House, and Governor's office have all produced plans to fix the budget deficit. All working independently, all have arrived at the figure of $400-450 million needed to structurally fix the budget.
The Governor's plan is to use one time money to raise the necessary revenue. His plan securitizes the tobacco settlement money and shorts KPERs payments. These total $500 million. Problem with this approach is it does not structurally fix the budget. The Governor's plan exhausts in fiscal year 2020 and the deficits return.
Both the House (HB 2178) and Senate (SB 147) have produced tax plans that raise between $400-450 million. About $200 Million came from closing the LLC Tax Loophole, the other $250 Million came from an increase in Kansas Income Tax Rates. Including a retroactive withholding tax on workers' paychecks. Here is where the unfairness occurred and why I did not vote for HB 2178. HB2178 as proposed would have become effective on July 1, 2017, but the increased Kansas Income tax withholding rates on workers' paychecks would have become effective back to January 1, 2017 - a 6 month retroactive period. Most Kansas workers would have been "under-withheld" by at least 50% for their Kansas payroll taxes in 2017. I did not vote for the House plan, HB2178 and it also failed in a veto override attempt in the Senate.
I was unwilling to make Kansas workers to pay an additional $125 Million in payroll taxes in April 2018 because of the retroactive application of a tax increase made effective January 2017. This would have been a surprise tax on all wage earners.
The future tax plans need to have the retroactively on wages removed to gain my vote.
The Legislature is responsible to the citizens of Kansas to solve the financial problems of Kansas - and we will do so. The highest priority for the Legislature is to get Kansas back on sound financial footing.