TOPEKA — The Kansas Chamber’s chief lobbyist wants to break the partisan logjam at the Capitol on a bill linking the state and federal tax codes so Kansans would be able to take itemized deductions on state income taxes and benefit from standard deductions on their federal returns.
Eric Stafford, vice president of government affairs for the business organization, told the Kansas Legislature’s joint committee working on COVID-19 economic recovery issues Monday that it was a mistake for Gov. Laura Kelly to have vetoed a decoupling bill in 2019. It would have retroactively allowed Kansas income taxpayers the opportunity to avoid a portion of state and federal income taxes.
In the 2021 session scheduled to start in January, he said, the GOP-led Legislature should adopt the income tax change despite the governor’s opposition.
“It was vetoed in 2019. We tried it in 2018 — fell three votes short in the House,” Stafford said. “It’s not all about taxes, but they surely matter.”
State and county restrictions on bars and restaurants continue to stagger the industry and the shifting restrictions on operation of the businesses may lead to litigation, said Scott Schneider, of the Kansas Restaurant and Hospitality Association. Eagerness to temporarily shut down these businesses as the virus ebbs and flows cannot be justified by science, he said.
“I still contend that the government actions they’ve taken, whether it’s through the state order or through the local orders, is the largest government taking in state history,” Schneider said. “We do have some serious concerns about what due process looks like in this emergency management phase. We also have some concerns about what equal protection laws look like. Why are we treated so differently?”
He asserted the Kansas Department of Health and Environment was unable to prove restaurants were a leading source of COVID-19 transmission.
Wichita accountant John Trowbridge, representing the Kansas Society of Certified Public Accountants, said it was important legislators consider a state income tax exemption for businesses that accepted federal loans under the emergency Payroll Protection Program.
Businesses in Kansas racked up $4.9 billion in PPP loans under the CARES Act in response to the coronavirus, he said. If companies complied with federal law by keeping workers on the payroll, those businesses wouldn’t have to repay the federal loans nor pay federal income tax on the money.
Alex Orel, of the Kansas Bankers Association, said the Legislature and Congress ought to concentrate on long-term solutions. The key is to keep business doors open and capable of paying taxes to support schools, roads and law enforcement, he said.
“The bottom line is the business sector has been impacted so heavily because of COVID,” he said. “We need to do anything possible that can help the business communities through this process because they have sacrificed so much already and are going to be asked to do more.”
Property tax issues
House and Senate members on the committee also discussed a bill vetoed earlier this year by the Democratic governor that would have compelled city and county governments to send notices to taxpayers, conduct a public hearing and take a specific public vote when approving a year-to-year net increase in property tax revenue.
The legislation didn’t apply the same restraint on property tax collections by state government or K-12 public school districts. The 2020 Legislature didn’t attempt to override the governor’s veto, but the bill is likely to resurface in the 2021 session. And, the arguments by skeptics will be again in play.
“Why isn’t the state being held to that standard?” said Rep. Stephanie Clayton, an Overland Park Democrat who voted against the property tax legislation. “I’m not going to ask them to do anything that I’m not going to do myself.”
Rep. Sean Tarwater, a Stilwell Republican on the COVID-19 recovery committee, said he was frustrated with decisions by the Johnson County Commission to quietly raise property taxes. He said their method involved dramatic increases in property valuations and small cuts to the property tax mill levy that result in a net gain of property tax revenue to the county.
“The commissioners who voted for that had the gall to send out tweets and Facebook that they actually lowered our taxes,” Tarwater said.
Dave Trabert, who is a lobbyist with the Kansas Policy Institute in Wichita, said most county governments in Kansas had for decades orchestrated property tax increases far in excess of the inflation rate. In terms of Johnson County, he said, property taxes assessed by cities, counties, townships, fire districts combined increased 254% from 1997 to 2019.
In that same period, inflation in the populous eastern Kansas county increased 52%. The county’s population went up 44% over those years. But the mill levy in Johnson County climbed only 24% in the span — a number that fuels an “honest gap,” Trabert said.
“Don’t tell me it’s raining outside while a dog is whizzing on my shoes,” he said.
He said property tax increases by local government had increased during the period by 134% in Shawnee County despite a population rise of 4%.
Here are comparable figures for other Kansas counties: Sedgwick, 160% rise in property tax and 17% population increase; Linn, 227% jump in property tax and 7% population rise; and Crawford, 138% jump in property tax and 6% higher population.
Rep. Jim Gartner, a Topeka Democrat, asked if organizations opposed to the property tax restriction embraced by Trabert and others would be invited to speak to the joint House and Senate committee.
Sen. Julia Lynn, the committee chairwoman and an Olathe Republican, initially said no. She revised her answer to say wider participation could be possible if legislative leadership granted the committee more time for meetings in December.
During the Capitol hearing, Kansas Department of Revenue secretary Mark Burghart urged lawmakers to amend state law to compel Amazon and other companies facilitating Kansans’ purchase of out-of-state goods to pay a compensating use sales tax.
He said the change would add an estimated $30.4 million annually to the state treasury. Kansas is among four states without this law.
Galena Republican Sen. Richard Hildebrand said lawmakers should determine whether property taxes paid by utility companies were in line with neighboring states. In the effort to reduce utility costs to consumers, he said, the state “shouldn’t leave any stone unturned.”
Legislators should consider requiring the number of tax-assessing townships in Kansas to be reduced from 1,500 to around 420, said Sen. Gene Suellentrop, a Wichita Republican.
He said there were too many local entities with the ability to add to the property tax burden, and perhaps it would be better for each county to be limited to four townships each.