From Iowa to South Dakota, Kansas’s Truth in Taxation legislation from 2021 is being hailed as a model example for property tax reform. The simple fact is that transparency and accountability are central to having a government that respects the rights and well-being of its citizens. HB 2597, is a “trailer bill” to that Truth in Taxation package and is currently sitting in committee with an eye to it passing when the legislature returns the last week of April. The bill contains more cuts than just property tax reform though, such as more deductions.
You can read more about the property tax provisions of 2597 here. But, as with most bills still being considered in the Kansas legislature this time of year, there are several other tax policies included as well – some good, some bad. This piece focuses solely on the implications for most Kansas taxpayers and not concerning provisions in other areas of tax law. Amongst those other provisions are:
- Increased standard deductions.
- Expanded income tax exemption for Social Security benefits up to $85,000, with the upper bound increasing by $5,000 each year.
- $2,000 for single filers or $4,000 for married joint filers subtracted off retirement plans taxed.
- Allow Atchison County to run an election question to voters on a sales tax of up to 1.0% for the purposes of “funding joint law enforcement communications and solid waste disposal.”
Standard deductions and more savings for retirees are great but are only the start. Kansas is ranked as the 3rd worst state for retirees according to Kiplinger’s because private retirement plans and out-of-state pensions are all fully taxed. Long-term rate cuts could help Kansans save even more money in the long run compared to just increasing deductions.
The bill also contains the removal of sales taxes on utilities – something already in place for residential consumers. Property tax refunds for businesses closed by the COVID-19 pandemic and new loss carryforward provisions so taxpayers can subtract federal net operating losses from their adjusted gross income within the next 20 years. These policies help businesses recover from the COVID-19 downturn via savings.
These policies are good, but not a stopping point for making Kansas a healthier state for businesses. Large business subsidies contribute to Kansas’ highest effective tax rates on mature businesses. These subsidies haven’t corrected Kansas having some of the worst private job creation in the country. Property tax reform could relieve rural businesses and households of some of the highest property tax rates in the country. There’s still a lot of room for improvement to create more cuts for taxpayers.
HB 2597 expands on the transparency efforts of previous, successful transparency legislation brought about to slow the growth of Kansas’s high property taxes. Kansas has the distinction of having the highest effective tax rate on commercial properties in a city the size of Iola. High taxes push businesses out of rural areas in Kansas into other states, and also may scare new investors away. Getting Kansas out of its five-decade economic slough is going to take much more fundamental changes to boost savings versus a few temporary fixes.
