Feb. 17, 2019 – Bonus edition!
I fell behind last week, so this week is an edition of my newsletter, with bonus content for free. Or it’s a BOGO newsletter, a 2-for-1 special.
One of the big things to talk about this week is taxes, and this “windfall” you’ve likely heard about. If you haven’t heard about it yet, don’t worry – I have a hunch you’ll hear about it soon enough, in the form of grotesque postcards that will litter your mailbox come next election.
If you want to see some additional thoughts on this topic, check out the column I wrote for The Hutchinson News this week. http://www.hutchnews.com/news/20190210/who-will-benefit-from-windfall
But here’s the quick and dirty version of it: Thanks to changes in federal tax code, Kansas has the option to make changes to its tax code – often termed “decoupling.” The changes at the federal level increased the standard deduction, meaning that Kansas’ standard deduction is relatively low by comparison. The solution, as presented in SB22, is to allow Kansans to itemize their tax returns, even if they don’t on their federal returns – something that’s not been allowed before, since we’ve been “coupled” to federal tax law.
Oh, I nearly forgot – there are also a whole bunch of corporate tax changes that would make Mr. Burns very, very happy.
I’ve said all along that I’d keep an open mind on this windfall business, but I wanted to see who benefited, and to what extent. At its core, it can viewed this simply: Of the projected $190 million tax savings, roughly $50 million ends up in the hands of real people, while roughly $140 million is for corporations.
My rudimentary math tells me that depending on one’s income tax bracket, the average individual taxpayer can save somewhere between $6 and $45 a year. That’s an oversimplified average, of course, but at the individual level, it’s not like this tax cut is going to make the difference between struggling to keep the lights on or taking that Caribbean Cruise you’ve been dreaming of. And according to data from the Kansas Department of Revenue, we’re effectively talking about changing tax policy for roughly 43.000 taxpayers, out of 1.192 million tax filers.
I’ve included some charts here from the Kansas Department of Revenue and the Division of Budget. See for yourself. I think you, like me, will see that the savings for the average person aren’t all that big. And in the mix of all this is the reality that the state’s budget is far from stable. After so many years of playing amateur scientist with the state’s budget policy, it seems we sort of wrecked the joint. We now have a governor who has put her primary focus on stabilizing the state’s budget. Deduction Analysis by Status and Income
Fiscal Impact by Status and Income-TY2017 (002)
I said it in my column, but it bears repeating: If this conversation was really about saving the average taxpayer money, we’d be talking about raising the standard deduction in Kansas. That would be the simplest and most straightforward way to create tax savings for Kansas that mirrors the federal changes. But we’re not talking about that. At all. We’re talking about a huge tax plan that saves big corporations a lot of money, and a handful of other people a little bit of money. Instead, we’ve lumped all these tax changes together so that various groups can generate campaign fodder for the next election.
And don’t even get me started on the long list of tax credits some of these giganti-corps ask for – in addition to all these proposed tax cuts.
It’s also worth looking at what’s been happening to our three legged tax stool over the years. This was presented in our rural revitalization committee. What it tells me is that when we cut down the income tax, particularly on business, the balance falls to other areas – like sales and property taxes.
We voted this week on the Governor’s recommendation to re-amortize our KPERs debt – debt that exists because we’ve done a terrible job of staying on top of these payments. In fact, we’ve missed our required payments 15 times in the last 9 years.
Refinancing the debt over the next 30 years adds $7.4 billion to the state’s long term debt. I don’t like that one bit. So I wasn’t excited about this plan, but I was open to the governor’s reasoning on this.
While the long term debt presented a barrier for me, on the other side of the equation is the fact that under the current KPERs plan, our annual contributions climb to more than $900 million. Based on past experience, I have little faith that the Kansas Legislature will make its required payments at those levels.
So, the question was really this: Take on more long term debt to make the immediate payments manageable, or try and force the state to make higher annual payments to prevent the long term debt. Not the sort of easy, cut-and-dried decisions I’d like to see all the time. But making difficult policy decisions that hold the potential for significant consequences is part of the job.
Ultimately, I voted for the reamortization plan. Though I had misgivings about it, I did so for the following reasons:
- Re-amortization will not affect benefits for retirees. In fact, it could be argued that it better protects those benefits since the yearly payments will be less, albeit for a longer time.
- This move levels yearly payments and makes them more manageable, while not doing it will see them to rise dramatically to levels I think the state won’t be able to pay.
- The KPERs board reviews the option of re-amortization every several years, and it’s quite likely with or without last week’s vote, this will be done in the next several years.
- This is part of a broader conversation about the state’s budget. It’s not yet stable, and KPERs payments next year will be upwards of $700 million. Re-amortization takes that payment down to around $500 and gives us a little breathing room to fund other priorities, like education, transportation, and health care, and to have some cushion in the event of an economic downturn.
The bill was rushed through committee and to the House floor for a vote – where it was roundly defeated.
I had the chance last week to testify about my bill to extend pre-existing conditions protections to individual policies. I was grateful for the opportunity, and I hope this bill gets worked in the House Insurance committee and advanced to the House floor. This is really an incremental progression – one that takes current state-level protections one step further.
If you’d like to read the bill, go here.
Earlier this year, The Hutchinson News wrote a story about some of the legislation I planned to introduce this year. One of the items they reported on was a plan to put a fee on every of wastewater injected into a Class II injection well. After talking to more people about this, I decided to change course a bit. Instead, I’ve introduced HB2224.
This bill imposes a one-time fee on every oil and gas well in the state – both Class I and Class II – and diverts the proceeds to the Kansas Geological Survey for the purposes of drilling their own monitoring wells around the state. This, in my opinion, is a good way to get some concrete data about what is happening in the state. No one – including the oil industry people I’ve talked with, seem to have an objection to getting more data. This measure doesn’t interfere with operators at all, and doesn’t impose an onerous fee. It simply allows us to collect more information as a way to make better policy decisions. I think that’s something we all ought to be able to support. Unfortunately, we’re running short on time, and the bill has been referred to the House Utilities committees, which I’ve been told has a full schedule.
People from home visit Topeka!
I love it when people from home come to Topeka to visit. I didn’t get pictures of everyone, but I love it when you all are up here. It makes the work here a lot more fun!
As always, feel free to reach out to me with your thoughts.