Capitol Update: ‘This tax plan has stabilized a dangerous situation’

Rep. Stephanie Clayton
Rep. Stephanie Clayton

Each legislative session, we provide northeast Johnson County’s elected officials with the chance to share their thoughts about what’s happening in the state capitol. Rep. Stephanie Clayton submits this week’s update — the last update of the regular session:

After a weeks-long and sometimes frustrating battle, both chambers of the legislature passed a tax reform package last Monday evening. The Governor promptly vetoed this package, and the legislature then came together to override this veto.

The package had strong bipartisan support, and I was very pleased that almost all members of House and Senate Leadership supported the veto override. It is important to note that this plan has stabilized a previously chaotic financial situation, as is evidenced by the nearly instant upgrade in our Moody’s credit rating. This plan:

  • Eliminates the so-called “LLC loophole”, or the exemption on pass-through business entities,
  • Stops the “march to zero”, or “glidepath” to zero income tax;
  • Provides tax relief in the form of the following deductions and tax credits:

Medical Expenses – allows a 50 percent deduction for medical expenses for 2018 and the amount would increase to 75 percent in 2019 and 100 percent in 2020. Under Governor Brownback, the medical expense deduction was repealed in 2015.

Child and Dependent Tax Care Credit – reestablishes the credit and it would be set at 12.5 percent of the allowable federal amount for 2018, 18.75 percent for 2019 and 25 percent for 2020 and thereafter. 25 percent is the rate that had been utilized prior to the repeal in 2012.

Mortgage Interest and Property Taxes – increases itemized deductions for mortgage interest and property taxes paid, currently set at 50 percent of the federal allowable amounts, to 75 percent for 2019 and 100 percent in 2020.

Low-Income Exclusion Threshold – reduces the low-income exclusion threshold from $12,500 to $5,000 for married filers and from $5,000 to $2,500 for single filers.

Included below are the individual income tax brackets, married filing jointly and revenue projections. As you will note the tax rates in the current bill are lower than income tax rates from 1992-2012.

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Much work lies ahead. The State has suffered under ruinous fiscal policy for years, and it will take years to fully reverse the damage. This tax plan has stabilized a dangerous situation. Further changes to the tax structure are necessary, primarily because the State needs to provide more tax relief to those living on a fixed income. Now is the time to continue reforms by seeking a path to reducing and eliminating a sales tax on food.

Two bills currently sit on the Governor’s desk awaiting signature: the bill that exempts concealed carry from and public hospitals, including mental facilities and KU Med, and the School Finance Bill. It is difficult to tell if the Governor will allow these pieces of legislation to become law. And, most importantly, the legislature awaits a decision from the Courts to determine if the school funding bill it passed reaches Constitutional muster.

Thank you for allowing me to serve you! My next legislative coffee is this Saturday at Foo’s Café in Leawood, from 10-11 a.m. You can also e-mail me at stephanie.clayton@house.ks.gov.