Kansas Chamber of Commerce’s tax cut proposal could cost the state $1.5 billion a year

A powerful Kansas business lobbying group’s flat tax proposal is projected to cost the state roughly $1.5 billion in annual revenue.

The Kansas Chamber of Commerce introduced a bill earlier this month that would establish a flat tax rate of 5% for all income over a tax filer’s first $15,000. All income under $15,000 would be non-taxable. The bill would allow for a gradual reduction of the rate when revenue comes in higher than estimated.

If passed in its current form, it would risk quickly decimating Kansas’ budget surplus, currently estimated to be $2.3 billion by the end of the current fiscal year.

A legislative fiscal note prepared by Democratic Gov. Laura Kelly’s budget director Adam Proffitt predicted the chamber’s proposal would reduce Kansas revenue by $428 million in its first year, $1.45 billion in its second year and $1.51 billion in its third year.

Currently Kansas taxes income in three brackets. People earning up to $30,000 yearly pay a rate of 3.1%, people earning between $30,000 and $60,000 pay 5.25% and those earning more than $60,000 pay 5.7%.

In a statement Alan Cobb, the chamber’s president, said the high cost was expected because of the exemption for all Kansans’ first $15,000 of income.

“Another approach to a single-rate that would ensure all Kansans see their tax burden lowered, but in a more cost-effective manner, would be to increase the state’s standard deduction,” Cobb said. “The Kansas Chamber looks forward to working with legislative leaders to craft comprehensive tax reform that moves Kansas from the bottom half of region and makes the state more competitive and attractive to investment and workforce.”

But this bill is not likely to move forward in its current form. Sen. Caryn Tyson, a Parker Republican who chairs the Senate Assessment and Taxation Committee, said the cost of the chamber’s bill is too high and that she is working on her own bill but waiting on a cost study to move forward.

“Hopefully we can find great legislation for Kansans to cut taxes this year. I don’t think we’re looking at a billion dollar fiscal note,” she said. “If we put all of our resources in a single change then we won’t be able to make changes elsewhere.”

Tyson said she didn’t have a specific number on what she’d be comfortable spending on tax cuts but said she believed her number was higher than GOP leadership in the Senate.

Kelly warned Republican lawmakers not to pass “irresponsible” tax policy in her state of the state address last week and would likely veto the Chamber’s bill if it came before her.

Kelly was first elected to statewide office in 2018, running on promises to repair state agencies after years of budget shortfalls that came as a result of income tax cuts pursued by former Republican Gov. Sam Brownback. The chamber’s flat tax proposal has already garnered comparisons to the Brownback tax cuts.

Kelly is pursuing her own tax agenda this year, advocating for the elimination of sales tax on food, diapers and feminine hygiene products, lower income taxes on social security and a four day sales tax holiday on school supplies. Kelly has said her proposals would cost about $500 million over three years.

The Star’s Jenna Barackman contributed to this story.