A bill headed to the floor of the Kansas House could simplify the tax code, lower sales tax on food and increase state revenues. House Bill 2395 would establish a flat tax rate, increasing income tax rates for nearly every filier in the state.
“It is a five percent rate, starting in 2018,” said Rep. Don Schroeder (R-Hesston). “Curently there are two tiers, one is at 2.6 and the other 4.6. This raises some money, it is a question of how much.”
The bill would raise an estimated $850 million over two years. The state faces projected budget shortfalls totaling more than $1 billion through June 2019.
“They increased the standard deductions also,” Schroeder said.
Shroeder said the bill, to his knowledge, does not address tax credits — but does lower the sales tax on food.
Despite the increases to deductions and sales tax adjustment, the bill will not be supported by Rep. Tim Hodge (D-North Newton)
“They will hurt more people at the bottom end of the spectrum than those that actually have gotten away scot-free for the past six years,” Hodge said. “If they pass the flat tax, they will hurt more people at the lower and middle class than the people who can actually afford it. It is an incredible political mistake to continue to throw their their party's problems on the backs of the working class. That is what they are doing.”
Hodge referenced an LLC exemption passed in 2012.
The committee meeting on HB 2395 started Wednesday. The bill as originally drafted would have decreased overall tax revenue by about $85 million per year, but one of the first actions taken by the committee was to restructure the plan to make it a revenue-generating plan.
Amendments as explained in committee would repeal the LLC exemption retroactive to Jan. 1, 2017, create a single income tax bracket and double the standard deduction rates beginning Jan. 1, 2018, and then lower the state sales tax rate on food to five percent beginning Jan. 1, 2019.
The committee continued discussions Thursday, with ideas of lowering the overall rate, a failed amendment to make the income tax retroactive to Jan. 1 this year, and an amendment to make the single deduction equal to one-half of the married filing jointly, which passed and sets the standard deduction rates in the bill at $7,500 for single filers and $15,000 for married filing jointly.
The committee voted 14-7 to sends the bill to the House for debate.
The vote was along party lines with Democrats opposing it. Some Republicans didn't like the bill either but said the House should debate it. The bill is upsetting Hodge.
“For the party to even bring this up, should speak volumes to working class voters,” Hodge said. “The party is saying they do not like you. … Working class folks need to reconsider if they are part of the right team. They are voting against themselves when they choose a party that would bring this idea up.”
“I want to say this nicely,” Schroeder added. “There are some people in the Legislature that want to see a flat tax, and that is partly where this is coming from. I think the adminstration would like to see that as well. … Quite a few times in the last few days I have said to people, 'you know, if everyone made the same amount of money a flat tax rate would be fine, but that is not how it is.' I don't think it is really fair, especially to the lower income folks, even with the changes to the deductions.”
The bill was read on the House floor Thursday.
The bill will now be available for General Orders in the House, most likely to be scheduled next week. The Senate Tax Committee will likely consider a flat tax proposal on Monday.
— The Associated Press contributed to this story.