Democratic Senator Tom Holland, along with Republican Senators Caryn Tyson and Virgil Peck, shared a light-hearted moment together on Wednesday. They were attending a House-Senate conference committee meeting to discuss the modifications to state property, sales, and income tax policy. The camaraderie between the senators was evident as they chuckled in unison during the session. A screenshot from the Kansas Legislature’s YouTube channel captures this amicable interaction.
Democratic Governor Laura Kelly has given her endorsement to a tax-relief bill that was negotiated by a committee led by Republicans. This bill includes several provisions such as ending the food sales tax early, exempting all Social Security benefits from income tax, expanding the residential property tax exemption, increasing the standard deduction for income tax purposes, and reducing the top income tax rate.
The six-member House and Senate conference committee made recommendations that were included in House Bill 2036. These recommendations consisted of tax policies that had the support of both chambers, as well as tax changes that were not initially anticipated by either chamber.
The state’s 2% sales tax on groceries will be abolished on July 1 instead of Jan. 1, as agreed upon by both the House and Senate. Additionally, there is support for getting rid of the state income tax on Social Security benefits.
The Senate had attempted to implement a single-rate income tax system that would benefit the affluent residents of Kansas. On the other hand, the House advocated for a two-rate model that would lower income tax rates for everyone. However, as part of the agreement, the state would maintain its existing three-rate structure. While the upper-bracket rate would be reduced from 5.7% to 5.5%, no changes would be made to the 5.25% middle bracket and the 3.1% bracket for individuals with lower incomes.
In a message directed towards Democrats, Kelly acknowledged that the bill, although not perfect, offers significant tax relief for all Kansans. While the House and Senate have yet to vote on the package, Kelly emphasized the positive impact it would have on the residents of Kansas.
The bill’s proponents highlighted its significant impact on income tax deductions. They emphasized the estimated $67 million increase in the standard deduction, which would result in a 43% rise for single filers and a 25% boost for married couples filing jointly or head of households. According to them, this increase is the largest of its kind among all tax bills proposed in this session. While the initial House-passed bill aimed to raise the standard deduction for married couples filing jointly from $8,000 to $8,240, the newly agreed-upon version has pushed it even further to $10,000.
For individuals, the new standard deduction would offer a tax relief of $60 for those with an annual income of $50,000 and a $50 tax cut for those earning $100,000 per year.
In January, Governor Kelly rejected the initial tax overhaul bill proposed by Republican leadership. The Legislature was then faced with the challenge of finding an alternative within a two-month timeframe before adjourning for three weeks. Ultimately, a new bill was crafted just two days before the scheduled adjournment.
Kelly expressed his intention to sign the bipartisan compromise when it arrives at his desk.
The state treasury has not made public the cost of HB 2036 and the fiscal estimate for the cluster of other tax bills proposed by the conference committee.
The fine print
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Kansas homeowners could benefit from a negotiated tax bill proposed by Representative Adam Smith. Under this bill, homeowners would be able to exempt the first $100,000 of assessed valuation from residential property tax collected for K-12 public schools. Currently, the exemption is set at $40,000. Additionally, the bill aims to lower the statewide mill levy for K-12 education from 20 mills to 19.5 mills. Although the House bill suggested reducing it to 18 mills, House Speaker Dan Hawkins, from Wichita, stated that any decrease in property tax revenue for public education would be compensated by utilizing the state general fund.
The latest tax plan from the Senate included a child- and dependent-care tax credit worth $60 million. This provision was not present in the House’s tax plan. Additionally, both chambers had previously approved a business tax break for financial institutions, a $120 million income tax exemption for Social Security, and a $63 million reduction in state revenue through an accelerated food sales tax repeal.
“I understand that the outcome may not align with our original visions,” acknowledged Smith, the chairman of the House tax committee. “I have the utmost respect for our leadership and the difficult task of striking a balance in order to advance a viable solution.”
Senator Caryn Tyson, a Republican from Parker and the chair of the Senate tax committee, acknowledged the current situation and expressed a willingness to accept the offered proposal.
Wichita Representative Tom Sawyer, the only House Democrat on the conference committee, expressed his dissatisfaction with the tax package.
Sawyer made it clear that he will not be voting for it.
Tyson chimed in, saying, “Perhaps you won’t be the only one.”
The negotiators persisted through a full day of deliberations to tackle numerous tax proposals brought forward by special interests or legislators.
During a break in the afternoon negotiating session, Tyson expressed her satisfaction in a soft tone to her negotiating partners, Republican Sen. Virgil Peck and Democratic Sen. Tom Holland, regarding the progress made in the negotiations.
Tyson, seemingly unaware that her microphone was still on, turned to Holland and made a candid remark about the predicament of the only Democratic legislator in the room, saying, “You guys are in for a tough time.” Tyson and Holland shared a lighthearted laugh.
Tyson suddenly realized that she had unknowingly been engaged in a private conversation for the last 60 seconds, all while her microphone was still on. Hastily switching it off, she quickly resumed the negotiations without missing a beat.
Additional tax breaks
The House and Senate negotiators have approved several sales tax breaks. These include a $17 million exemption for telecommunications infrastructure, a $1.7 million exemption for custom meat processing services, a $100,000 exemption for Exploration Place in Wichita, and a $600,000 exemption for the Kansas Children’s Discovery Center in Topeka.
Sales tax exemptions were granted to state schools catering to blind and deaf students, as well as for manufacturer’s coupons. Additionally, a sales tax benefit of $33 million was approved for disabled veterans, although its implementation was scheduled for the following year.
The negotiators have expressed their support for a personal property tax exemption for various items such as ATVs, trailers, watercraft, snowmobiles, dirt motorcycles, electric wheelchairs, and golf carts. County clerks have informed legislators that the revenue generated from these items does not justify the effort required to track down the owners and ensure compliance with property tax payments, which amounts to approximately $13 million.
In addition, the negotiators have incorporated a special provision called the “golden years” homestead tax refund, aimed at benefiting elderly Kansans. To further support disabled veterans, the legislation now includes a 75% property tax refund provided by the state. This refund replaces an exemption that would have led to a reduction in the tax base in counties with a significant number of military retirees.
The members of the conference committee have unanimously decided to incorporate a contentious proposal into a bill. This proposal allows proprietors of childcare centers, fitness clubs, and restaurants to be exempt from paying property taxes if any government entity at the state or local level starts offering similar services, thereby competing with existing businesses. The genesis of this idea can be traced back to years of persistent lobbying by the owners of Genesis Health Clubs, based in Wichita. They firmly believed that the Wichita Boys and Girls Club was unjustly undermining their operations.
Neil deGrasse Tyson expressed his belief that the program in question will require a significant amount of time and effort to complete. He acknowledged that it may take anywhere from one to two years to fully develop. However, he also emphasized the importance of beginning the project, recognizing that progress can only be made once the initial steps are taken.
Gov. Laura Kelly supports Kansas tax bill crafted by House, Senate negotiators
