Democratic Gov. Laura Kelly and Republican leaders are likely to clash over tax policy in the wake of recent federal changes as the 2020 Legislative sessions gets underway.
Republicans may take another run at tax changes after the governor last session vetoed their proposals — including helping businesses — due to concerns they would cause budget troubles.
Republicans, however, say that some Kansans and businesses saw their state taxes go up in response to federal changes, which is something the GOP wants to counteract. Larger businesses with overseas income would have benefitted under the vetoed bills.
Trying to get those changes through is again a priority for some lawmakers and the influential Kansas Chamber of Commerce.
“Corporate income tax liability in Kansas increased,” Chamber President Alan Cobb said last month. “We’re at a corporate competitive disadvantage.”
Many lawmakers want to cut the food sales tax, which is a popular idea that’s difficult to accomplish because of the cost. Cutting it by a single percentage point would reduce tax revenue by more than $60 million.
Kelly has proposed reinstating a food sales tax refund, which lower-income Kansans would file for on their taxes. The thought is lessen the financial burden for people who need it most while limiting the impact on the state budget.
Meanwhile, the governor wants extra time to pay off the $9 billion in state pension debt so that Kansas’ budget doesn’t fall off a cliff.
Lawmakers have made strides in recent years paying down a long-term deficit in the state pension, the Kansas Public Employees Retirement System. Still, the shortfall amounts to $9 billion.
There’s a plan in place to pay off the debt in about 15 years. Kelly said the payments will grow in the coming years to approach $1 billion annually, and the state should extend the payoff period for smaller payments. That’s known as re-amortizing.
Her idea was roundly rejected by lawmakers last year, because extending the payoff period could ultimately add billions to the cost of eliminating the shortfall. Republican Senate President Susan Wagle hasn’t warmed up to the idea, either, saying on the first day of this session: “I just don’t think that’s a healthy thing to do for a budget.”