What Savings Do Kansans Get With HB 2239?
There are some decent savings coming Kansans’ way through HB 2239, which has been approved and amended by both the House and the Senate. If signed by Kansas Governor Laura Kelly, then HB2239 would provide increased standard deductions, a property tax freeze for elderly citizens, and a SALT Parity act to better align the Kansas tax code with the 2017 Tax Cuts and Jobs Act. Legislators should remember that this legislation isn’t a cure-all for the variety of tax issues concerning Kansas. As with almost every bill in any legislative body there is plenty to not like in the bill as well. This piece focuses solely on the implications for most Kansas taxpayers and not concerning provisions in other areas of tax law.
The first part of the bill enacts a “golden years” homestead property tax freeze to allow a maximum of a $2,500 refund for tax increases. This applies to people who are either 65 years or older or a disabled veteran, and with an income less than $75,000 as well as a property appraised at $485,000 or less.
This policy could, for instance, help bring down the high property taxes of a hypothetical retired couple living in a $250,000 home from $3,423 to $923. However, more work is needed to drop Kansas’s rank as the 3rd worst state for retirees according to Kiplinger’s. This is because private retirement plans and out-of-state pensions are all fully taxed. Making Kansas a “forever home” means doing things like reducing these taxes to make policies towards fully-taxed retirees more equitable to those for Kansas government employees, whose pensions aren’t taxed.
Perhaps the biggest component of the bill is the creation of SALT Parity. This means that pass-through entities such as S corporations or partnerships can elect to pay state income tax at the entity level, meaning they would be taxed at the highest individual rate of 5.7%. Then, the pass-through entity could claim a deduction at the federal level for state and local taxes paid. This legislation prevents double taxation of resident owners of multi-state pass-through entities which interact with similar laws across state lines.
The Treasury Department and IRS have endorsed SALT Parity reforms as a means to resolve tax deduction cap issues from the 2017 federal bill. Colorado signed a similar bill into law last year, and so Kansas’ adoption of these reforms would help keep the state modernized and competitive with our neighbors by maximizing savings.
Similar to SALT parity reforms around deductions for businesses, HB 2239 increases the standard deduction for different filers, including an increase to $3,850 for single filers and $8,800 for married filers. Increasing standard deductions instead of itemized deductions is ideal because it provides relief in the form of easier filing to a larger group of taxpayers.
While the savings are HB 2239 are good, Legislators should expand on these reforms with more changes to reduce the government burden on Kansans and make the state more affordable. Kansas could use tax reform to become a more competitive state. 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.