Nearly a hundred years ago, a group of Kansas business owners determined politicians in Topeka and Washington, DC were making it difficult for them to expand their companies, hire more employees and support their communities. They established the Kansas Chamber of Commerce to improve the state’s business climate so all Kansas businesses can succeed and support their communities. Today, members of the Kansas Chamber employ nearly 300,000 Kansans across the state.
Each year the Kansas Chamber and its members identify legislative issues important to Kansas businesses and their employees. This year’s focus includes education, health, HR, energy and taxes.
Taxes can be complicated. In fact, Kansas “conforms” with many federal tax codes to help simplify state tax codes. So, when Congress passed the Tax Cuts and Jobs Act (TCJA) in December of 2017 to grow the country’s economy, Kansas tax codes also changed. Unfortunately, some of those changes increased state taxes on Kansas individuals and small and large businesses.
Senate Bill 22 being debated in the Kansas Legislature this session would decouple our state from certain federal tax changes and stop the unintended state tax increases. The Kansas Chamber and its members support Senate Bill 22.
Despite the claims of many, there is nothing in Senate Bill 22 that reduces current tax rates, eliminates any existing tax liability, or collapses tax brackets. To say otherwise is being untruthful to Kansans.
The reasons Kansas lawmakers and Governor Laura Kelly must act to stop the state tax increases are pretty simple.
First, Kansas does not allow individuals to itemize their state tax deductions if they don’t itemize on their federal tax returns. The TCJA significantly increased the federal standard deduction to $24,000. So now, most Kansans will take the federal standard deduction and will not be able to itemize their deductions on their state returns. This will cause their Kansas income taxes to increase.
Because many Kansas businesses (especially small businesses) are LLCs or Sub-s corporations, they are taxed at the individual rate, and therefore, in-action in this area also will increase their state income taxes.
Also, when Congress passed TCJA, it broadened the corporate tax base to bring down rates. Part of broadening the base was the creation of a new tax liability called “Global Intangible Low-Taxed Income” or GILTI. Since the GILTI liability didn’t exist prior to December 2017, Kansas didn’t tax it. If Kansas does not decouple from this provision, this will be a NEW state tax on businesses and increase their taxes.
Another important part of the TCJA is the treatment of repatriated income as a “deemed dividend”. Since in the past these foreign profits weren’t mandated to be repatriated, this would be another new, unexpected tax for Kansas businesses.
Last year’s federal tax cuts were meant to reduce the tax burden of individuals and small and large businesses and to energize our country’s economy.
Make no mistake, if Kansas doesn’t decouple from the federal tax changes to prevent these tax increases on individuals and small and large businesses, our state will be in an extremely uncompetitive position compared to nearly every other U.S. state.
Kansans have long preferred economic liberty. Unfortunately, there are many who are misleading their fellow Kansans so politicians in Topeka can increase the state tax burden on individuals and businesses and then increase state government spending.
Kansans can learn more about the Kansas Chamber and its work to improve the state’s business climate and to make Kansas a top state to do in business at www.KansasChamber.org.
Alan Cobb, President & CEO of the Kansas Chamber, a statewide association whose members are small, medium, and large businesses from a wide variety of industries and professions.