Rep. Fred Gardner, R-Garnett, is optimistic about a tax reform bill, despite a likely veto from Kansas Gov. Laura Kelly.
Gardner stopped by the Register office on Friday, fresh off the first week of the 2024 legislative session. It was a busy week, capped by the passage of a tax reform bill that would set a 5.25% “flat” income tax rate. Kelly vetoed a similar proposal for a 5.15% tax rate last year, saying it predominately benefits the wealthy and would create budget shortfalls.
This new bill was tailored to address some of Kelly’s own budget priorities, Gardner said. It exempts Social Security income and would accelerate the end of a state sales tax on food.
Under the flat tax proposal, married couples would not pay taxes on the first $12,300 of income, while all other individuals would not pay taxes on the first $6,150. It also would increase the standard deduction based on a cost-of-living adjustment, and slightly raise the personal exemption from $2,250 to $2,300.
“That’s a pretty important part of this bill because it greatly increases the amount of money people make before they start paying income tax,” Gardner said.
Other elements of the bill would increase the amount of the appraised value of residential property exempt from the state’s 20 mill school finance levy from $60,000 to $100,00, and would give a tax cut to banks and other financial institutions excluded from a corporate tax reduction that was part of recent Kansas economic development deals on projects in De Soto and Wichita.
UNDER the new 5.25% flat tax, an individual making less than $11,950 would have no income tax. That’s based on the $6,150 initial exemption, the $3,500 standard deduction and the $2,300 personal exemption.
A married couple with two kids making less than $29,500 would pay no taxes.
Currently, the state has three tax brackets based on income. Gardner said he likes to think of the flat as having two rates: zero and 5.25%, based on the increase in the number of Kansans who will pay no income taxes.
Reports show those with lower and higher incomes (above $100,000) would see the greatest tax breaks.
Just 3% of taxpayers will get 45% of the benefits.
Gardner said, “It sounds bad, so why are we doing this? Those same 3% are paying 42% of the taxes now, so it’s proportional for the amount of tax they are paying. It’s fair to everybody. The wealthy get more dollars because they are paying more dollars. And these are people who, for the most part, own successful businesses. They don’t just bury that money in the backyard, they invest it.”
The bill is expected to cost the state about $1.6 billion over the next three years.
Kansas is projected to have a $2.8 billion surplus in the state treasury and $1.7 billion in a separate rainy day fund by June 2024. Kelly has offered a bipartisan plan devoting about $1 billion to state tax cuts.
Gardner said the state should take advantage of the opportunity to cut taxes in order to be more competitive with states that have lower or no income taxes. Those states use that as a business recruitment tool.
