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Minutes for HB2457 - Committee on Taxation
Short Title
Providing an income tax rate of 4.95% for individuals and decreasing the normal tax for corporations, increasing the income limit for the income tax subtraction modification for social security income and providing that all social security income qualifies for the subtraction modification commencing in tax year 2026, increasing the Kansas standard deduction for individuals and further increasing the standard deduction by a cost-of-living adjustment, discontinuing the food sales tax credit, decreasing the privilege tax surtax, establishing a 0% state rate for sales and use taxes for food and food ingredients on July 1, 2023, and increasing the extent of property tax exemption for residential property from the statewide school levy.
Minutes Content for Tue, Mar 21, 2023
Chairperson Smith opened the hearing for HB2457.
Mr. Siebers presented an overview on HB2457 that would make changes to the income tax, privilege tax, sales tax and property tax provisions. (Attachment 3) Mr. Siebers stood for questions from Committee members.
Kathleen Smith, KDOR, provided an overview on the fiscal note for HB2457 stating the bill would decrease state revenues by $641.7 million, reduce the state highway fund by an estimated $6.6 million and reducing property tax revenues to support K-12 education by an estimated $55.6 million.
Following are the different components of the bill and the estimated fiscal impact for each of those:
- FY2024 the individual income tax rate, the estimated impact is $132.9 million.
- Effective tax year 2023, the corporate income rate reduction is $124 million.
- Effective for tax year 2023, the privilege rate reduction is $9.6 million
- FY 2024 the social security phase out is estimated to be $49.4 million.
- FY 2024 the standard deduction increase for the single individuals would be $19.8 million and then would increase in FY 2025 because of COLA for all of the different filing status
- Food sales tax credit would expire in tax year 2022 and is a positive $10.3 million for FY 2024 and FY 2025 and then the state food sales tax changes effective July 01, 2023 and for FY 2024 the impact would be $254.1 million.
The state highway fund would see a $6.6 million decrease because of the food sales tax changes and the 20 mill levy exemption would decrease by $55.6 million. Ms. Smith stood for questions from Committee members.
Proponents:
Alex Orel, Kansas Bankers Association, testified as a proponent for HB2457 noting Section 3 and Section 4 would provide a corresponding rate reduction equal to the scheduled corporate rate reductions in (2022) House Substitute for SB347 for Kansas privilege taxpayers. The privilege tax is the financial institution's income tax for banks, savings, loans, and trust companies. Mr. Orel requested the Committee consider allowing a corresponding reduction for privilege taxpayers, as was done for corporate ratepayers in 2022. (Attachment 4) Mr. Orel stood for questions from Committee members.
Eric Stafford, Kansas Chamber, testified as a proponent for HB2457 noting the bill proposes to lower personal income taxes to a single rate of 4.95 percent. As with other income tax reductions, the Kansas Chamber would like to recommend a growth trigger similar to HB2061 to allow for future personal and corporate income tax rate reductions as state receipts grow. (Attachment 5) Mr. Stafford stood for questions from Committee members.
Michael Austin, Americans for Prosperity, testified as a proponent for HB2457 that provides relief to vulnerable Kansans than the current structure, prevents Kansas taxpayers from inflation and bracket creep, puts Kansas in line with other fellow states and economic growth, but needs an automatic growth trigger to give surplus tax revenues back to Kansas families and businesses. (Attachment 6)
Written testimony was submitted by the following as proponents for HB2457:
Dave Trabert, Kansas Policy Institute, (Attachment 7)
Mark Tomb, Kansas Association of Realtors, (Attachment 8)
Opponents:
Donna Ginther, Professor of Economics, University of Kansas, testified as an opponent for HB2457 noting instead of exempting social security income or passing a flat tax that benefits the wealthy, the Legislature should consider increasing the standard deduction by more than the rate of inflation. This approach would preserve progress and elasticity of the income tax while providing meaningful tax relief to all taxpayers. (Attachment 9) Ms. Ginther stood for questions from Committee members.
Timothy Graham, Kansas National Education Association, testified as an opponent for HB2457 stating changes in tax policy should not only consider the impact on the average Kansas citizen but also the impact on the Kansas budget. KNEA opposes any tax policy that would impact the stability of the state budget and/or prevent the constitutional funding of Kansas schools and create an imbalanced tax structure that unfairly burdens low-income families. (Attachment 10) Mr. Graham stood for questions from Committee members.
Emily Fetsch, Kansas Action for Children, testified as an opponent for HB2457 stating the flat tax will limit the state's ability to provide programs and services. The bill is another large tax break for Kansans with the most financial resources, and the giant price tax jeopardizes investments in schools, roads, and public health and safety that build a strong Kansas economy. (Attachment 11) Ms. Fetsch stood for questions from Committee members.
Written testimony was submitted by the following as opponents for HB2457:
Leslie D. Mark, Citizen/Voter, (Attachment 12)
Paula Neth, The Family Conservancy, (Attachment 13)
Jami Reever, Kansas Appleseed, (Attachment 14)
Rabbi Moti Rieber, Kansas Interfaith Action, (Attachment 15)
Brenda R. Sharpe, Reach Healthcare Foundation, (Attachment 16)
Neutral:
Jay Hall, Kansas Association of Counties, testified as neutral for HB2457 stating the KAC does not take a position on several portions of the bill. Mr. Hall stated they are a proponent of establishing 0 percent state sales tax rate for food that is positive legislation for Kansas residents and acknowledging the importance of keeping the full local sales tax in place for communities. HB2457 keeps the revenue available for county governments to use to pay for services such as the local hospital, law enforcement, road and bridge projects, ambulance service, county jails, and basic property tax relief. (Attachment 17) M r. Hall stood for questions from Committee members.
Chairperson Smith closed the hearing for HB2457.
