TOPEKA — A property tax bill adopted with bipartisan support in the Kansas Senate was notable for delivering for retirees struggling to stay in their homes, advocates of public school funding and the smaller retailers hit with government orders to temporarily close during the pandemic.
The bundle of tax legislation shipped to the Kansas House was broadened with addition of Sen. Tom Holland’s amendment to provide qualifying Kansans over 65 years of age or disabled veterans the opportunity to have residential property taxes “frozen.” Under the Baldwin City Democrat’s amendment, the state would moderate property tax increases at the local level by issuing rebates of no more than $5,000 each year per applicant.
“The biggest gripe, complaint, comment, whatever,” Holland said, “is every year I get people telling me, ‘Tom, I’m getting taxed out of my home. What are you going to do about it?'”
The “golden years” tax measure could cost the state $1 million in 2022 and escalate to nearly $14 million by 2024, Holland said.
The full 20-mill property tax that generates $750 million annually for K-12 public schools was inserted into the bill to make it more appealing to skeptical legislators and Gov. Laura Kelly. The bill also featured expansion of a law permitting Kansans in the military to be exempt from paying property tax on two vehicles.
In addition, House Bill 2313 required a property tax refund from state and county governments to support small businesses forced to close, trim capacity or limit hours amid the COVID-19 pandemic in 2020 and 2021. Big-box retailers allowed to stay open, including grocery, liquor and hardware stores, don’t qualify for this property tax break.
Eligible businesses could have no more than $2.5 million in annual revenue and couldn’t have accepted in excess of $150,000 in other pandemic financial assistance. The individual business benefit under the program would be capped at $7,500 per year.
In the first year, property tax refunds would involve an estimated 23,000 parcels and cost the state treasury $29.7 million and counties a total of $14.6 million. The estimated second-year cost of rebates would fall to $16.6 million for the state and $8.2 million for counties.
Another section of the bill would mandate city, county and state governments waive property taxes after Jan. 1, 2022, for any business compelled to close during a government-declared disaster.
The mounting price tag of tax reductions approved by the 2021 Legislature has produce anxiety among some legislators about development of a new state budget that spent more than collected in tax revenue and made it harder to adequately finance basic functions of government.
“We have continuously given tax breaks and avoided funding core government services,” said Senate Minority Leader Dinah Sykes, a Democrat from Lenexa. “For the last five years, my priorities have been being fiscally conservative and trying to pass a sustainable budget where we can go in and fix these broken systems.”
She said it was wrong for the Legislature to dismiss proposals to improve compensation for state government employees. The governor recommended a 2.5% raise for state workers.
Senate Republicans denounced lawmakers who questioned soundness of property tax legislation moving through the Capitol. On Monday, the GOP-led House and Senate voted to override Kelly’s veto of a bill imposing income tax cuts.
“I know that each of us have different priorities in this chamber and in life,” said Sen. Caryn Tyson, a Parker Republican. “We had businesses that were shut down, not allowed to make any income, but they are obligated on their property taxes. We need to do everything we can to keep these businesses intact.”
Sen. Kristen O’Shea, a Topeka Republican, said it was difficult to understand why some of her peers thought it was appropriate to grapple with COVID-19 by forcing closure of businesses and demanding those companies meet tax obligations so a portion of revenue could be used to reward government personnel with a pay hike.
“Government workers that entire time were getting paid. Businesses weren’t getting paid,” O’Shea said.
The bill approved by the Senate on a vote of 33-6 didn’t include a property tax exemption sought by a Wichita businessman who owns Genesis Fitness Clubs and was represented at the Capitol by lobbyist Lynn Jenkins, a former Kansas congresswoman. Genesis owner Rodney Steven sought a waiver of property taxes for businesses like his because nonprofits such as the YMCA and presence of municipal recreational facilities made it more difficult to operate profitably.
The bill sent to the House would require the Legislature’s auditing division to study influence of tax policy on businesses that “compete” with nonprofits or government entities in delivery of goods or services.