Tax Relief

Governor Laura Kelly and Republicans face tax break plans

Governor Laura Kelly and Republican lawmakers will argue over the best way to lower taxes on Kansans as the Conservatives advance their long-standing plan to ease individuals and corporations who pay higher than intended taxes.

The Kansas Senate approved the Republican tax plan Tuesday after nearly five hours of debate, albeit with a few changes that will further increase the cost of the legislation to well over $ 400 million in its first year of enactment.

Conservatives have touted this proposal, Senate Bill 22, to return Kansan’s savings from a major tax overhaul passed in 2017 at the behest of former President Donald Trump.

It is neither the first nor likely the last time Kelly and Conservatives have disagreed on this issue. But this time around, the showdown brings a twist: a new proposal from the governor that would increase the standard deduction, a plan she touts as fully paid thanks to nearly $ 100 million in new tax revenue.

Kelly called the Republican proposal “irresponsible” and said it would only benefit 6% of taxes filed in the state. She also compared it to major tax cuts implemented in 2012 under former Governor Sam Brownback, which resulted in cuts in government services and did not deliver the economic gains that supporters had hoped for.

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Governor Laura Kelly and Republicans in Kansas Legislature discuss tax cuts.

“It is unthinkable that legislature would even think about such action during a health and economic crisis like we have not seen in 100 years when we are trying to lead Kansas to recovery from the pandemic,” Kelly said during a statehouse press conference.

Their plan would increase the standard deduction by 20% in 2021 and 35% in 2022, using $ 97 million of revenue from a tax on digital goods like Netflix and Spotify and using so-called marketplace intermediaries like Amazon. Etsy or eBay to pay taxes on transactions they conduct on behalf of third parties.

The governor got her wish – in part.

The Senate accepted their plan to raise the standard deduction but rejected the digital sales tax and marketplace intermediary components as Republicans ridiculed these elements as injured working class people using streaming services and shopping online.

This move came at a cost, however, and the rapidly rising price of the bill killed some members. Four Republicans, along with all Democrats, voted no to the bill.

Senator Jeff Longbine, R-Emporia, opposed the legislation, saying he was reminded of previous tax charges promising that costly items at the Kansas House would be struck down in vain.

He made explicit reference to the 2012 tax cuts, which “took up a reasonable, responsible tax bill” and “blew up”.

“Make a fool of me once, but you can’t fool me twice,” Longbine said.

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The bill also accepted other significant additions.

Specifically, these included two provisions proposed by Senator Dennis Pyle, R-Hiwatha, that would exempt social security and retirement benefits from income tax.

Pyle designed it as a means of improving the quality of life for seniors in the state, though the two elements will add over $ 210 million to the bill in the first year alone.

“We need to stop sending our retirees to other states so they can protect their nest egg,” Pyle said.

At the core of the legislation lies in the 2017 bill that kept residents from listing their federal taxes while some state deductions disappeared under the legislation. This meant that residents were paying more taxes to the state despite cutting their federal bills.

SB 22 would address this and allow Kansans to take advantage of the federal changes while taking advantage of a breakdown of their government returns.

Senator Caryn Tyson, R-Parker, speaks with Senate President Ty Masterson (right), R-Andover, and Majority Leader Gene Suellentrop (R-Wichita) on Tuesday before the Senate entered the caucus ahead of debates on a tax bill.

“It allows Kansas taxpayers to get the money they should be,” said Senator Caryn Tyson, R-Parker, and said, “There’s something for everyone on that bill now.”

It would also carve provisions of state tax legislation out of federal law. The most significant of these changes would give companies more flexibility to bring overseas profits back to Kansas without paying taxes on them.

Democrats, Senator Tom Holland, D-Baldwin City, called the bill “pure Wall Street”.

“We need to end the flyers and focus our tax breaks and economic policies on developing healthy communities,” said Holland.

However, the legislation was scaled down last week, removing certain elements in the committee to make it more palatable to a wider range of people. For example, there is no longer a provision that would allow companies to receive a tax break on losses in previous years, which is allowed under federal law.

It’s unclear whether the legislation will continue to be overhauled in-house, but Tyson told reporters she was happy with the current form and that changes to the bill were awaited.

Senate Majority Leader Gene Suellentrop, R-Wichita, took a wait-and-see approach, telling reporters that the final form of the bill would likely depend on whether a federal aid package could include direct aid to state governments.

“We don’t know the source of revenue that will ultimately come from the government to remedy all areas of the budget,” he said.

Kelly did not commit to veto the legislation, but turned down a similar bill in 2019 on the grounds that it was tax irresponsible. Republicans pressed for the veto to be overridden but ran out of time.

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