Last year, State Rep. Tim Hodge, D-North Newton, popped the hood open and scrutinized Kansas’ tax policies that keep the state running.
Last week, his recommended fixes emerged as bills in the Legislature.
“For way too long, he said, Kansas families have been bearing the brunt of the tax burden. “My goal is to give them a well-deserved and overdue break,” he said.
Millionaires and big corporations have enjoyed a “major tax holiday for over five years” in Kansas, and the new federal income tax cut will send them a windfall, he said.
It’s time for them to be good stewards, he said.
Hodge’s tax bills start with proposals to:
Cut the 6.5 percent state sales tax in half, to 3.25 percent for food sales. HB 2616 sales tax break would not be extended to tobacco and alcohol purchases. When the draft came back, Hodge said, it showed the lower tax also would not apply to candy and soft drinks purchases. That hadn’t been his original proposal, but he thought, “'Hey, that’s OK,'” because it would encourage healthy eating.
Double the child care income tax credit. HB 2615 would increase from 12.5 percent for the tax year 2018 to 25 percent, and reach 50 percent by 2020.
Create a child income tax credit. HB 2614 would allow an individual income tax credit of $200 for each child who is under age 18.
Establish an income tax credit for employers who boost their payroll. Private, non-profit, or public employers who increase their payroll would be able to gain a tax credit in an amount equal to 20 percent of the increase of the total salaries paid to the employer's Kansas employees in the preceding year. The amount of the tax credit deduction could not exceed $4,000 in a tax year.
Help school employees pay tuition. HB 2653 would reduce the income tax liability for a USD employee completing additional education or certification to attain a different position within a USD. Five years after the employee has completed the extra education and started work in the new position, he could claim an income tax credit equal to 20 percent of the tuition cost. The employee would have to commit to working for that school district for at least five years in the position.
Offer a gym membership tax break. HB 2655 would allow an individual to get an income tax credit equal to 20 percent of the expense paid for membership fees or dues at a fitness facility. The amount of credit could not exceed $250 for any taxpayer in any tax year.
To offset the tax breaks, Hodge proposed increases and special luxury taxes on:
Million-dollar incomes. Married taxpayers filing jointly and showing a taxable income of over $1 million a year would have an extra 10 percent tax rate applied to that portion in excess of $1 million, under HB 2618. Individuals with a taxable income of over $500,000 a year would have the added 10 percent tax applied to the sum over $500,000.
Million-dollar corporate profit. Corporations showing a profit of over $1 million annually would have an extra 10 percent tax applied to the profit in excess of $1 million, under HB 2661.
Million-dollar homes. House Concurrent Resolution 5024, unlike the other Hodge bills, would require approval by two-thirds of the House and the Senate and approval by voters. It would add 10 mills to the real estate property tax rate on a home with an appraised value of $1 million or more. The revenue generated by the 10 mills would flow into the state general fund.
Recreational vehicles. Starting in January 2019, the calculated tax on a recreational vehicle with a selling price of more than $100,000 would be multiplied by two, under HB 2656.
Selling expensive cars: Gross receipts received from the sale of a motor vehicle with a selling price of over $100,000 would be taxed at the state rate of 13 percent, Also, HB 2659 says, the selling price shall be calculated before taking into account the value of any trade-in property received by the seller.
Expensive cars, boats. The tax rate on motor vehicles valued at $100,000 or more would be 22 percent, and 20 percent for all other motor vehicles. Watercraft with an appraised market value of $50,000 or more would be assessed at 5.5 percent, another increase under HB 2660.
Hodge, an attorney, asked state staff how many individuals with a million-dollar annual income live in his district.
He was told they couldn’t reveal that data because it would be too revealing. That meant the number was less than five, Hodge said.
Hodge pointed out the new tax for corporations won’t affect small farmers or small businesses because it does not target a corporation’s overall value but the profit.
“This is hitting Wall Street, not Main Street,” he said.
Corporations with taxable income showing a $1 million or more profit could be motivated to avoid the new tax by spending profits to increase wages, start pension programs, or to purchase more equipment, he said.
“This is all back-of-the-envelope at this point,” Hodge said of the bills’ fiscal impact. The state supplies a fiscal note for proposed legislation, but as of Friday, the Hodge bills had no fiscal notes.
Estimates, Hodge said, indicate the tax on $1 million-plus incomes would generate $165 million a year and the $1 million-plus corporate profit tax would generate about $165 million a year, too. The tax hikes on luxury items - cars, RVs, boats - would raise another estimated $74 million, he said.
“I did a lot of my homework over the summer,” Hodge said. He’s “not tilting at windmills,” he said by requesting tax cuts with no offsetting increases.
Hodge regards the food sales tax reduction and the two children-related tax breaks as his top priorities, although he also hopes the bill to help cover teachers’ educational costs succeeds. "I want them all," he said.
Another Hodge tax bill surfacing last week, HB 2654, would allow for tax credits to help colleges in the Kansas Collegiate Athletic Conference - including Bethel College in North Newton - construct health or education facilities. Private colleges in the KCAC are looking for help for projects, and the big thing seems to be health-related facilities, Hodge said.
The Hodge tax bills have been sent to the House Taxation Committee. Chairman Steven Johnson, R-Assaria, noted to The News that Hodge entered them at the deadline. Johnson did not elaborate on the committee’s plans for a hearing.
Hodge said he was advised by Rep. Tom Sawyer, D-Wichita, the ranking minority member on the Taxation Committee, to package the bills together in preparation for a hearing. The News did not reach Sawyer, but Hodge is “encouraged” the bills will get a hearing.
If the bills languish in the committee, he is prepared to offer the tax proposals as amendments to other bills that come up for a vote in the House, he said.