Kansas lawmakers consider using state’s surplus to cut Social Security taxes

Kansas projected to have millions in surplus for next fiscal year

by Rachel Mipro, Kansas Reflector

Topeka — Kansas legislators want to use a projected budget surplus to address the state’s “Social Security cliff,” which they say is driving retirees out of the state.

Kansas taxes income from Social Security benefits, with an income tax exemption for those who make $75,000 in federal adjusted gross income or less. Critics of the tax policy say retirees are put under unnecessary financial strain.

During Friday’s legislative hearing on taxation, Sen. Caryn Tyson, R-Parker, said she supported removing state income tax on Social Security entirely. Tyson and other lawmakers have tried to pass legislation on this subject for the past few years.

Most recently, lawmakers tried to pass House Bill 2597 in 2022, which would have exempted several thousand dollars in retirement plan income and provided for that amount to annually increase by the Internal Revenue Code cost of living adjustment.

“All the committee members, we definitely made an attempt, a great attempt, to address this last year and in previous years,” Tyson said. “If there’s any type of tax on social security that plays into it and discourages people at different levels to not work. We engineer behavior through our tax structure.”

With Kansas carrying a record surplus of more than $2 billion this fiscal year and a surplus of $400 million expected next year, lawmakers are trying to decide what to do with the extra money.

Surplus estimates for the 2023-2024 state general fund were produced by the Division of the Budget and Kansas Legislative Research Department using a consensus process. The governor and the Legislature use these estimates when making the annual budget and spending blueprint.

For the 2023 fiscal year, the estimate increased in November from previous estimates made in April by $794.2 million. Total tax estimates increased by $773 million, and other revenue estimates increased by $21.2 million, making the revised estimate for the 2023 fiscal year $9.701 billion.

The initial estimate for fiscal year 2024 is $10.124 billion, a 4.4% increase from the 2023 fiscal year estimate. The amount of total taxes is estimated to increase by 0.9%, following an increase in 2023.

Gov. Laura Kelly campaigned for reelection on a platform of more quickly eliminating Kansas’ 6.5% sales tax on groceries, fully funding special education and working to reduce the Social Security income tax cliff. Kelly’s budget will be released in January, and it’s expected that some of these issues will be addressed in the budget.

Sen. Tom Holland, D-Baldwin City, said Social Security issues needed to be a priority in the upcoming legislative session.

“As far as it comes with Social Security, I am very interested in addressing the cliff issue,” Holland said. “That’s a real problem to me, for people who have paid into Social Security, particularly for those who are seniors who don’t have other additional sources of income. I think it’s imperative that they get access to those funds.”

Kansas Reflector stories, www.kansasreflector.com, may be republished online or in print under Creative Commons license CC BY-NC-ND 4.0.
See more at https://kansasreflector.com/2022/11/22/kansas-lawmakers-consider-using-states-surplus-to-cut-social-security-taxes/

Senate committee advances constitutional amendment limiting new taxes, rate increases

Skeptics say ‘dangerous’ measure ties hands of lawmakers who need to be nimble

by Tim Carpenter

Topeka — The Kansas Senate’s tax committee advanced a proposed state constitutional amendment requiring two-thirds majority votes of the House and Senate to create a new tax or to increase the rate of an existing tax.

Chief proponent Sen. Virgil Peck and central critic Sen. Tom Holland, not surprisingly of different political parties, touched on why Senate Concurrent Resolution 1620 could be viewed as an important restraint on growth of government or an abandonment of the democratic process. The committee sent it to the full Senate on a partisan voice vote Thursday after receiving ideologically clashing testimony from lobbyists.

“This is something I have wanted to see the Legislature pass since I first heard of the idea around 2003,” said Peck, a Havana Republican who has been in House or Senate for 13 years. “Hopefully, it would make it through the process.”

Holland, a Baldwin City Democrat also on the tax committee, said he was disappointed the GOP-led committee moved ahead with a sweeping piece of legislation without resolving core questions, including determination of whether the amendment raised the bar on imposition of state fees.

He said the amendment trampled territory reserved for the Senate Ways and Means Committee’s members responsible for crafting a blueprint of the state budget.

“To have a tax committee charge off and go down this path and … basically shackle our budgeting committee with this to me is inane. This is basically undemocratic legislation,” Holland said. “This bill is not only dangerous, now it has devolved into stupidity.”

To place the amendment to the Kansas Constitution on statewide ballots in November, the current House and Senate would need to affirm the resolution by two-thirds majorities. Republicans have the capacity to accomplish that feat because they hold supermajorities in both chambers, but passage of the amendment wouldn’t be a political slam dunk.

Gov. Laura Kelly doesn’t have veto authority over placement of constitutional amendments on the ballot. Registered Republicans, independents and Democrats would be asked to make the call on basis of a simple majority vote in the upcoming general election.

Nuts and bolts

If approved by Kansas voters, the addition to Article 11 in the Kansas Constitution would fundamentally alter the Legislature’s budget process. The House and Senate would be able to initiate tax rate increases or impose new taxes only with support of 27 of 40 senators and 84 of 125 representatives. A governor could veto such a tax bill, but the House and Senate would retain the right to override the governor with backing from two-thirds of members in both chambers.

The roster of taxes falling under the Senate resolution would include property, income, sales, compensating use, excise, estate or inheritance taxes.

Then-Gov. Sam Brownback signed a budget bill in 2015 raising the state’s sales and cigarette taxes in anticipation of generating $384 million annually in new revenue. Controversially, he argued it didn’t amount to a tax hike. The bill was passed by the House and Senate with simple majorities. Under the amendment, that tax hike agreed to by Brownback would have required two-thirds majorities of the Legislature to reach his desk.

In 2017, the Legislature rolled back deep tax cuts championed by Brownback. He was the force behind adoption in 2012 of the aggressive income tax reductions, but the policy created massive revenue shortfalls that placed state government in dire financial straits. Brownback vetoed the tax repeal bill, but was overridden by the GOP-led House and Senate with two-thirds majority votes.

Emily Fetsch, lobbyist with Kansas Action for Children, said the organization opposed the amendment because it would limit legitimate options of elected representatives in state government.

“A constitutional amendment will make it difficult for lawmakers to respond to constituent needs and honor the democratic process,” Fetsch said. “Policies like 1620 can be harmful during unexpected events like recessions, natural disasters, pandemics or terrorist actions.”

Highways, budgets

Branden Lowe, representing businesses and organizations involved in Economic Lifelines, and Michael White, executive director of the Kansas Contractors Association, said the constitutional amendment could make it difficult to finance highway construction in the future as the transportation system became more reliant on electric and hybrid vehicles. A chunk of state highway funding is linked to revenue from gasoline taxes, which could drop as the fleet mix transitioned.

Looking ahead, for example, would enactment by the state of a $250 annual charge on all electric vehicles to gain access to paved roads in Kansas be viewed as a tax or a fee?

Eric Stafford, who represents the Kansas Chamber, said about 15 states had some form of majority-vote restraint on tax increases. He said Arizona and Florida had a two-thirds metric, while Delaware adopted a three-fifths barrier and Arkansas had a three-fourths limit that excluded sales and liquor taxes.

“Ultimately,” he said, “this encourages the Legislature to consider cuts versus automatically looking to raise taxes when faced with tough budget decisions.”

Elizabeth Patton, a lobbyist with Americans for Prosperity, said the organization supported the proposed amendment because it would encourage legislators “to consider more effective and efficient spending strategies.”

Kansas Reflector stories, www.kansasreflector.com, may be republished online or in print under Creative Commons license CC BY-NC-ND 4.0.
See more at https://kansasreflector.com/2022/03/11/senate-committee-advances-constitutional-amendment-limiting-new-taxes-rate-increases/