Joined by small business owners, state legislators, the Governor’s Council of Economic Advisors, the Governor’s Cabinet and Lt. Gov. Jeff Colyer, Kansas Gov. Sam Brownback signed one of the largest tax relief measures in Kansas history into law at the Statehouse in Topeka. The new law cuts state income tax rates for all hard-working Kansans by 14 to 24 percent and eliminates state income taxes on more than 191,000 small business owners.
Brownback likened the legislation to a shot of adrenaline into the heart of the Kansas economy.
“My faith is in the people of Kansas, not the government’s ability to tax and redistribute,” Brownback said. “They know better how to spend their money, and I believe they will do incredible things with it. Today’s legislation will create tens of thousands of new jobs and help make Kansas the best place in America to start and grow a small business. Now is the time to grow our economy, not state government, and that’s what this tax cut will do.”
Kansas Revenue Secretary Nick Jordan said the new law will leave $1.1 billion in Kansans’ pockets during the next two years to save, spend and invest.
“After the lost decade for jobs in Kansas, Governor Brownback has been incredibly focused on creating a pro-growth environment that will increase Kansas families' income and accelerate small business growth,” Jordan said. “This focus has turned the budget deficit he inherited into a strong surplus, and, with historic tax relief now in place, Kansas is poised to lead America's economic recovery.”
The law collapses the current three-bracket structure for individual state income taxes (3.5, 6.25 and 6.45 percent respectively) into a two-bracket system using rates of 3.0 and 4.9 percent. The business income exemption eliminates certain non-wage business income for small business owners (income reported by LLCs, Subchapter-S Corporations, and sole proprietorships on lines 12, 17, and 18 of IRS Form 1040).
The law also flattens the tax structure and increases the standard deduction amount for single head-of-household filers from $4,500 to $9,000 and for married taxpayers filing jointly from $6,000 to $9,000.
Dynamic projections show the new law will result in 22,900 new jobs, give $2 billion more in disposable income to Kansans and increase population by 35,740, all in addition to the normal growth rate of the state.
Kansas Speaker of the House Mike O’Neal praised the new tax law.
“By reforming income taxes in Kansas, our state will start building a solid tax foundation that will create a strong economy for the years to come,” O’Neal said. “We must continue down a path that brings prosperity to the residents of Kansas and HB 2117 will move our state toward a healthy and vibrant economy.”
State Rep. Arlen Siegfreid, House majority leader, said the new tax plan paints a brighter future for the state.
“There's a reason surrounding states are racing to keep pace with Kansas in providing tax relief,” Siegfreid said. “They recognize this was a significant victory in a constant battle to attract jobs and grow our economy.”
The chairman of the House Taxation Committee, State Rep. Richard Carlson, said Kansas is raising the bar on pro-growth tax policy.
“Kansas is embarking on and setting the threshold for the nation with a pro-growth, pro-jobs tax reform policy,” Carlson said. “Lowering taxes on individuals and small businesses will jump start the private sector growth in Kansas, allowing Kansans to grow Kansas. We invite the nation’s businesses to come grow with Kansas.”
The bill, Senate Substitute for House Bill 2117, passed the Senate by a vote of 29-11 and the House by a vote of 64-59.