The Kansas House this week passed a wide-ranging package that provides roughly $500 million to taxpayers a year.
The plan received bipartisan support, mostly because it has a much smaller price tag than a handful of tax relief bills that recently passed the state Senate. If the lawmakers meet in the middle of their proposals, the tax cuts would carve out about $1 billion — or about 7.5% of what the state collects — in yearly revenue.
With competing tax proposals, the Republican-controlled House and Senate will likely need to hammer out details before sending a final tax bill to Democratic Gov. Laura Kelly. That could start as early as next week.
Republican state Rep. Adam Smith said the House tax committee wanted to provide broad tax relief to Kansas, but the Senate may try to take the plans in a different direction.
“If we get into negotiations,” Smith said, “it’ll just be a matter of where we end up for a compromise.”
With a $2 billion budget surplus, buoyed by temporary federal aid during the pandemic, the passage of some form of tax cuts looks like a near certainty. Kelly had called for some of the proposed cuts, most notably a faster phase-out of the sales tax on food. But what the final package looks like may still rely on additional negotiations with her administration.
The House plan also may put the Legislature in a better position to negotiate with the governor. Kelly had promised to veto a tax plan she believes would significantly reduce the state’s revenue, and she has already called the Senate’s proposals “irresponsible.”
In its plan, the House created a flat income tax rate of 5.25%, increased the Social Security tax exemption and set the state’s sales tax on food to be eliminated this year.
“This bill is going to provide a lot of tax relief across a wide area,” Smith said.
Several Democrats backed the bill. But some still expressed reservations that the income tax rate provides much more benefit to the richest Kansans than it does for the rest.
Meanwhile, the Senate’s plans go much further by creating a 4.75% income tax rate and eliminating all taxes on retirement income, including Social Security and 401(k) withdrawals. The Senate also called for immediately eliminating the state’s sales tax on food.
All told, those plans would roughly cost the state $1.5 billion in annual revenue.
Republican senators had argued the cuts would help keep retirement-age Kansans in the state and also provide a boost to the state’s economy.
But the price tags led the House to craft a more moderate plan. Democratic Rep. Tom Sawyer said the House plan is not perfect but it is more sustainable than the Senate’s proposals.
“This bill has a lot of good things in it,” Sawyer said. ”It’s a compromise bill. But it does a lot of good things for the people of Kansas.”