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Minutes for HB2061 - Committee on Taxation
Short Title
Providing an income tax rate of 5% for individuals and corporations, decreasing the surtax for entities subject to the privilege tax and providing that future income tax rate decreases be contingent on exceeding revenue estimates.
Minutes Content for Wed, Feb 15, 2023
Continuation of HB2061, Corporate income tax and privilege tax testimony
Proponents:
Alex Orel, Kansas Bankers Association, testified as a proponent for HB2061 requesting the Committee support inclusion of a corresponding tax reduction for privilege taxpayers. Banks, savings and loans, and trust companies are businesses also, but subject to a separate tax. (Attachment 1) Mr. Orel stood for questions from Committee members.
Dan Murray, National Federation of Independent Businesses, testified as a proponent for HB2061. The bill would eliminate the individual income tax for taxpayers with income under $15,000 ($30,000 for married filing jointly) and set the individual income tax rate to 5.0 percent for income over $15,000 ($30,000 for married filing jointly). HB2061 would also lower the corporate tax rate to 5.0 percent and bill would create a trigger to reduce the individual and corporate tax rates based upon future revenue. (Attachment 2) Mr. Murray stood for questions from Committee members.
Eric Stafford, Kansas Chamber, testified as a proponent for HB2061 which will reduce the personal and corporate income tax rates to 5.0 percent. If Kansas were to reduce its corporate income tax rate to 5.0 percent, Kansas would have the second lowest rate in the region behind Colorado's 4.63 percent. Kansas currently ranks 21st in the nation due to the Wayfair decision, decoupling on GILTI provisions, and expensing which were some of the tax policies that took place in 2021 and 2022 that were passed and became law by the Legislature and the Governor. (Attachment 3) Mr. Stafford stood for questions from Committee members.
In response to a question, Mr. Penner, stated the Department of Revenue's most recent annual report reflects returns processed in CY 2020 of 33,000 corporate income tax filers and more than 20,000 of those had no taxable income; therefore, they would see no impact by this change. Another 8,0000 or approximately 26.0 percent have taxable income between zero and $75,000 and with the combined effect of the rate changes where the surcharge starts at $75,000 is the breakeven point. About 61.0 percent are unaffected and 26.4 percent are below the breakeven point but those 26.4 percent make up less than 1.0 percent of the total corporate income tax liability which is a exceedingly top heavy distribution within the corporate income tax.
Chairperson Smith noted that there was written proponent testimony from Dave Trabert, (Attachment 4); Michael Austin, (Attachment 5); and Shawn Mitchell, (Attachment 6).
Opponents:
Emily Fetsch, Kansas Action for Children, testified as an opponent for HB2061 noting the corporate part of the bill is another change to the corporate income tax that would make the tax code even more upside down and in favor of non-Kansas residents. The corporate portion HB2061 would overwhelming benefit non-Kansas residents with over 80 percent of the dollars in the corporate portion going to the out-of-state tax filers. She noted this means that non-Kansans avoid their tax obligation to Kansas while removing substantial revenues to make investments to our schools, roads, public health, and safety that build a strong Kansas economy. HB2061 helps mostly large corporations doing business in Kansas limit their state tax liability. (Attachment 7) Ms. Fetsch stood for questions from Committee members.
John Lee, Tax Simple Center testified as an opponent for HB2061. (Attachment 8)
Chairperson Smith noted that there was written opponent testimony for HB2061 from Paula Neth, (Attachment 9); and Mary Sinclair, (Attachment 10).
Chairperson Smith closed the hearing for HB2061.
