TOPEKA — The Kansas Legislature approved a tax overhaul bill Tuesday raising the standard deduction on Kansas income taxes, applying the state’s sales tax to relatively large out-of-state internet retailers and handing multinational corporations a tax exemption on income held overseas.
Adjustments to state tax law passed 81-43 by the House were subsequently approved by the Senate 30-10 and must now avoid a veto by Democratic Gov. Laura Kelly. The margin in the House fell below the two-thirds majority necessary to override a potential veto by Kelly, who previously rejected tax policy contained in this bill.
The House and Senate were previously more than $100 million apart on how much tax revenue the state government ought to forgo.
Rep. Pat Proctor, R-Leavenworth, said he was disappointed Senate Bill 50 included the tax on online retailers with more than $100,000 in annual sales. He said rural residents of Kansas were reliant on this method of obtaining goods not otherwise available at local stores. Nevertheless, he said, he was compelled to vote for the bill because Kelly’s response to COVID-19 had so ravaged the state’s economy.
“Jeff Bezos and Amazon aren’t paying this tax. Our neighbors are,” Proctor said. “In the smallest communities in our state, many Kansans depend on internet retailers to get the items they need to live their lives. But the other provisions of this bill are vitally needed to recover from Gov. Kelly’s disastrous coronavirus economic shutdown.”
Under the bill, Kansans would have the option of itemizing deductions for state income tax purposes while taking the standard federal income tax deduction raised during the administration of President Donald Trump. At this point, Kansans cannot decouple those decisions. The state’s standard deduction for single filers would be raised by $500 to $3,500 and for married couples by $500 to $8,000.
The legislation would make expenditures for meals tax-deductible to comply with federal law and guarantee Kansans receiving Paycheck Protection Program funding wouldn’t have to pay state income tax on that coronavirus relief.
Rep. Kathy Wolfe Moore, D-Kansas City, said the House-passed tax bill combined with the House’s proposed budget would leave the state with a projected $35 million deficit on July 1.
House Minority Leader Tom Sawyer, D-Wichita, said he was unimpressed by action of the House GOP to block amendments during a lengthy debate Monday. The chamber rejected amendments that would have provided tax relief to unemployed Kansans, moderated the state’s sales tax on food and amended the standard deduction on state income taxes.
The votes show the GOP majority is insufficiently interested in the tax status of average Kansans, he said.
“All so they could further to line the pockets of the wealthiest multinational corporations in our state that evaded paying their fair share by hiding money overseas,” Sawyer said. “Year after year the majority party campaigns on the promise of lower taxes, but given the opportunity, they consistently chose the state’s largest corporations over the well-being of average Kansans.”