TOPEKA — Republican Sen. Caryn Tyson is frustrated with an inability to enact legislation bringing more transparency to valuation-driven property tax increases by city and county governments, while Democratic Gov. Laura Kelly is keen to defend a series of tax-bill vetoes and to gain traction for her own commission’s stalled package of reforms.
These Kansas political veterans will by no means be the lone champions of tax policy change in the 2021 legislative session convening Monday at the Capitol.
Independence Rep. Jim Kelly has already filed a bill to grant county treasurers an opportunity to establish payment plans for taxpayers. Wamego Rep. Ron Highland is intent on adjusting the manner in which agriculture land is valued for property taxes. Wichita Sen. Gene Suellentrop is considering restrictions on the number of tax-assessing townships in each county. And, Baldwin City Sen. Tom Holland will take another run at freezing property tax rates for seniors.
“We do have a tax burden,” said Sen. Julia Lynn, a Johnson County Republican who didn’t run for re-election in 2020. “It does affect economic development. It does affect families.”
Work during the upcoming legislative session on taxes will be influenced by projections of a revenue shortfall after lawmakers spent down about $1 billion in reserve funding and the COVID-19 pandemic undercut business operations and negatively influenced tax collections. Halfway through the state’s fiscal year tax collections have surpassed expectations by about $70 million, but the wheels could fall off as Kansans file 2020 tax returns.
A tax reform council appointed by the governor urged Congress to backfill a portion of state and local government tax receipts that collapsed in the wake of the COVID-19 crisis. However, the GOP-led U.S. Senate and President Donald Trump in December declined to endorse that type of aid in the latest federal stimulus package.
Chris Courtwright, a member of the governor’s council who worked for more than 30 years as an economist for the Kansas Legislature, said the magnitude of state budget cuts, sleight-of-hand budget tricks and other unattractive options under consideration in Kansas would be much worse if Congress and the president failed to deliver more state and local aid.
Absence of supplemental assistance, he said, would make it difficult for Kansas to move ahead with grocery sales tax relief or income tax breaks sought by large companies.
“At that point,” Courtwright said, “anyone upset about tax and budget decisions around our state in 2021 should be able to draw a straight line back to the people who obstructed the legislation in Washington, D.C.”
Tyson, a Parker Republican and chairwoman of the Senate’s tax committee, plans to give new life to a bill designed to control ever-surging property appraisal values that enable municipal governments to boost property tax revenue without hiking the mill levy. Her bill — easily approved by legislators last year but vetoed by Kelly — would have required a vote by governing bodies to elevate property taxes.
“I just want to make it clear so that our constituents understand the governor vetoed transparency in our property tax system,” Tyson said.
The same bill vetoed by Kelly would have removed penalties and interest on tax payments for 90 days, a move considered necessary due to economic slowdown of COVID-19.
Kelly said the vetoed package would have deprived local government of essential funding at a time when it was needed to meet higher demand for police, fire, emergency medical and other services.
There’s lingering resentment about Kelly’s veto in 2019 of bills that would have slashed state tax revenue $245 million to $500 million — a budget hit deemed too high for the Democratic governor. One provision would have eliminated the state income tax on revenue repatriated to Kansas by multinational corporations holding income overseas. Another would have provided individual Kansas income taxpayers with flexiblity when deciding on state and federal deductions. The legislation would have slowly bought down the state’s 6.5% sales tax on food.
Steve Morris, co-chair of the Kansas Governor’s Council on Tax Reform and a former state Senate president, said the council would renew recommendations submitted to the 2020 Legislature, which wasn’t able to complete work on a series of tax bills because of the pandemic.
Among notable proposals from the council were implementation of a food sales tax rebate based on federal adjusted gross income and targeted toward Kansans who need it most, Morris said. The proposal could help as many as 400,000 Kansas households offset state and local sales tax paid on groceries. Elimination of the food sales tax rebate program in 2012 coupled with sales tax rate increases during the administration of Gov. Sam Brownback exacerbated the regressivity of the Kansas tax structure, Morris said.
He said the advisory council requested the Legislature finance the Local Ad Valorem Tax Reduction Fund to help local governments keep their property taxes low. These payments from the state to local government have been suspended since 2002, but renewal of the initiative should be altered to distribute additional funds to rural counties with the highest property tax mill levy.
In addition, he said, the governor’s council recommended an exemption be made in existing property tax lids to allow for local government investment in transportation projects.
The council also said the state ought to tax online sales of digital books, music and subscription services as well as require companies such as Amazon, which acts as a third-party facilitator of internet transactions, to collect and remit sales tax on products sold into the state of Kansas. The third-party tax reform would help level the tax playing field that for 50 years has been skewed in favor of out-of-state retailers and against in-state Main Street retailers, the council’s report said.
“The most important in my view is doing the third-party facilitators,” Morris said. “It’s a fairness issue.”