In their eagerness to pass tax cuts, Kansas Republicans are choosing to ignore that the federal government just passed one of its own.
On Tuesday, the Kansas Department of Revenue broke the news that state coffers will be deprived of $360 million in tax receipts over the next three years.
The deficit comes from a federal income tax deduction that allows individuals and corporations to deduct funds they received through the Paycheck Protection Program in COVID-19 relief legislation.
The federal legislation is automatically passed down to the state level, allowing Kansans to deduct the PPP loans on their state income tax returns as well.
Of course Kansas’ loss is to the gain of its taxpayers.
More than 89,500 Kansans received PPP loans, and are delighted they will not be required to pay taxes on the generous stipends.
Like the PPP loans, the Legislature is targeting its relief for business owners.
TOGETHER, the tax cuts would come to more than $600 million.
In what has been a surprising year, Kansas is emerging from the COVID-19 pandemic with an enviable 3.2% unemployment rate and money in the bank.
Compared to a year ago at this time, the state is ahead by $66.7 million in total tax collections.
Rosy, but by no means enough to absorb cuts 10 times as much.
To enact the additional tax cuts would likely mean reductions the state can ill afford.
HOPING TO come to the rescue is Attorney General Derek Schmidt who is suing the federal government, yes, again, for dictating how the forthcoming funds allocated in the American Rescue Plan are to be spent.
Schmidt, who is campaigning for governor, has joined a dozen other state attorney generals in arguing the one-time funds can be used however states want, including to underwrite tax relief.
Congress, however, inserted a provision in the legislation that says the funds can’t fill in holes created by tax cuts. Though the law’s parameters are broad, it specifically says states and local governments can’t use the funds to make pension payments or offset lost revenue from state and local tax cuts enacted since March 3 of this year.
States found to violate the law’s provisions will be required to return the money.
Kansas is due to receive $1.6 billion.
SCHMIDT’S argument is off-base for another two reasons.
First, Rescue Act funding is a singular event and as such is not a long-term revenue stream necessary to fund a budget.
It’s like a bonus, not a raise.
Second, the funding is the largest positive fiscal jolt to state budgets in decades and as such Kansas should do its darndest to get the most bang for its buck for the most people.
Tax cuts ain’t it.
The Rescue Act is intended to not only stabilize state budgets, but also take them into a more fiscally secure future.
Kansas can start by rehiring state employees furloughed during the pandemic, including those in law enforcement and first responders and those contracted with agencies that provide vital social services.
We need to invest the funds in projects that create jobs. Many private businesses need additional capital to hire more staff and boost their productivity.
The money can be used to upgrade water, sewer and broadband infrastructure.
In every town across Kansas, our 100-year-old water and sewer systems are a network of patches. There’s not a winter where antiquated pipes don’t burst, requiring immediate and costly repairs. The country also has miles and miles of lead-based water pipes that are a proven health hazard. Systemwide, old lines and lead-based pipes need to be replaced.
The inadequacies of broadband internet continue to keep Kansans on an unequal playing field, highlighted ever more starkly during the pandemic when people are forced to work or attend school from their homes.
And though it appears its ship has once again sailed this legislative session, Kansas desperately needs to invest in its people by expanding Medicaid, a measure that would create more than 3,800 new jobs by serving an additional 165,000 low-income Kansans currently without health insurance. Talk about a win-win.
THIS is how you prepare for the future. If that’s your goal.
— Susan Lynn