TOPEKA — Kansas could have a perfect romance with a wide-ranging tax proposal, Rep. Stephanie Sawyer-Clayton said, comparing her tax bill amendment to dating a dreamboat of a man.
“Right now, this bill is like a really nice guy,” Sawyer-Clayton, an Overland Park Democrat, said. “It’s really nice, but it’s not our dream date.”
Her amendment to the bill was rejected, but fellow Democrats also stood in support of a Republican-engineered tax proposal that would change the landscape of income, property and food sales taxes across Kansas. Sawyer-Clayton’s amendment would have done away with time limitations for a property tax proposal.
Kansas currently operates on a tiered income tax system. The bill would get rid of this system and implement one rate for all individuals above a certain threshold, an idea originally panned by critics who said a flat tax proposal would benefit the wealthiest Kansans while not offering much to the state’s lowest income earners.
The House Substitute for Senate Bill 169 would implement a 5.25% income tax rate for Kansas filers, beginning in tax year 2024. The tax would apply to single filers making more than $6,150 and $12,300 for married individuals filing jointly.
The flat tax plan would also reduce taxes for corporations and financial institutions starting in tax year 2024, reducing the corporation tax rate to 3%. The current tax rate is 4% for corporations, though the tax rate is scheduled to be reduced to 3.5% in 2024 due to a business incentive program.
Rep. Tom Sawyer, a Wichita Democrat, said the income tax portion of the bill initially gave him “heartburn” because he would prefer more of a tiered system, but he supported homeowner tax relief.
“I’m not king; we have to compromise,” Sawyer said.
Sawyer successfully added an amendment on residential property taxes. Under his amendment, residential property valued up to $80,000 would be exempt from a statewide property tax beginning in tax year 2023. Currently residential properties valued up to $40,000 are exempt.
“I think it’s important that we give our homeowners a little more tax relief,” Sawyer said. “I don’t think this does break the budget.”
House Minority Leader Rep. Vic Miller, a Topeka Democrat, also spoke in support of the amendment.
“It’s something, and I stand in strong support of it,” Miller said of the property tax provision.
Under the bill, banks would have their tax rate reduced from 2.25% to 1.625%. percent. Other corporations, such as savings and loan associations, would have taxes reduced from 2.25% to 1.61% starting in tax year 2025.
Another bill provision would eliminate state sales tax on food this year, instead of following the current plan of phasing out the tax by 2025.
Other provisions include an income tax exemption expansion for Social Security benefits, and an increased exemption of residential property from the statewide mill school finance levy.
The State Highway Fund would also receive 18% of sales tax revenue beginning in July, instead of the currently planned increase, which would provide the 18% beginning in January 2025.
A Senate version of the bill passed 22-17 as a 4.75% flat tax income rate. The tax plan was carried on the floor by Sen. Caryn Tyson, R-Parker, who chairs the Senate Assessment and Taxation Committee, and has been championed by Senate President Ty Masterson, R-Andover. The Senate flat tax proposal would cost the state $568.5 million in the first full fiscal year after it takes effect, according to the state’s estimate.
Rep. Adam Smith, a Weskan Republican and Chair of the House Taxation Committee, introduced the bill. Smith said the bill was focused on sustainability and the will of Kansans.
“This bill is going to provide a lot of tax relief across a wide area,” Smith said. “We wanted to focus the tax cuts on the broadest number of Kansans that we could.”
Lawmakers voted to advance the bill, with a final vote on the proposal expected soon.