Bill Summary – FastDemocracy

Division of the Budget
Landon State Office Building                                                                        Phone: (785) 296-2436
900 SW Jackson Street, Room 504                                                                    adam.c.proffitt@ks.gov
Topeka, KS 66612                                Division of the Budget                            http://budget.kansas.gov
Adam Proffitt, Director                                                                          Laura Kelly, Governor


                                                   January 17, 2023


          The Honorable Caryn Tyson, Chairperson
          Senate Committee on Assessment and Taxation
          300 SW 10th Avenue, Room 548-S
          Topeka, Kansas 66612
          Dear Senator Tyson:
                    SUBJECT:      Fiscal Note for SB 7 by Senator Steffen
                  In accordance with KSA 75-3715a, the following fiscal note concerning SB 7 is
          respectfully submitted to your committee.
                  Under current law, individual income tax rates are set at 3.1 percent for income under
          $15,000 ($30,000 for married filing jointly), 5.25 percent for income between $15,000 and $30,000
          (between $30,000 and $60,000 for married filing jointly), and at 5.7 percent for income $30,000
          and over ($60,000 and over for married filing jointly). SB 7 would reduce the individual income
          tax rates for residents living in a rural equity decline county to 1.55 percent for income under
          $15,000 ($30,000 for married filing jointly), 2.625 percent for income between $15,000 and
          $30,000 (between $30,000 and $60,000 for married filing jointly), and at 2.85 percent for income
          $30,000 and over ($60,000 and over for married filing jointly). The bill defines a rural equity
          decline county as any county in Kansas with a population of 15,000 persons or less according to
          the most recent decennial census taken and published by the U.S. Census Bureau, where the
          population of the county decreased between the dates of the two most recent censuses. The rate
          change would become effective beginning in tax year 2024.
                                            Estimated State Fiscal Effect
                                       FY 2023         FY 2023            FY 2024           FY 2024
                                        SGF            All Funds           SGF             All Funds
             Revenue                            --                 --   ($41,900,000)     ($41,900,000)
             Expenditure                        --                 --         $97,246           $97,246
             FTE Pos.                           --                 --               --                --
                 The Department of Revenue estimates that SB 7 would decrease State General Fund
          revenues by $41.9 million in FY 2024. The fiscal effect to state revenues during subsequent years
          would be as follows:
The Honorable Caryn Tyson, Chairperson
Page 2—SB 7

                                                 FY 2025               FY 2026
               State General Fund            ($139,400,000)        ($140,400,000)
        To formulate these estimates, the Department of Revenue reviewed county population data
from the U.S. Census Bureau. There are 63 counties and 144,053 taxpayers in counties with a
population that declined between the 2020 and 2010 Census that would be considered a rural equity
decline county under the provisions of the bill. Tax liability is estimated to be reduced by $139.6
million in TY 2024, and by $140.0 million in both TY 2025 and TY 2026. Taxpayers in these 63
counties currently receive $1.2 million in Rural Opportunity Zone tax credits and the new rates
would reduce the credit value by $600,000 beginning in FY 2025. The individual income tax
estimate for FY 2024 includes 30.0 percent of tax year 2024 tax liability. The individual income
tax estimate for FY 2025 includes 70.0 percent of tax year 2024 tax liability and 30.0 percent of
tax year 2025 tax liability.
       The Department indicates that the bill would require $97,246 from the State General Fund
in FY 2024 to implement the bill and to modify the automated tax system. The required
programming for this bill by itself would be performed by existing staff of the Department of
Revenue. In addition, if the combined effect of implementing this bill and other enacted legislation
exceeds the Department’s programming resources, or if the time for implementing the changes is
too short, additional expenditures for outside contract programmer services beyond the
Department’s current budget may be required.
        The Department of Administration indicates that adjusting state income tax collections has
the potential to have a fiscal effect on the amount of revenue collected from its debt setoff program.
This program intercepts individual income tax refunds and homestead tax refunds and applies
those amounts to debts owed to state agencies, municipalities, district courts, and state agencies in
other states. Debts include, but are not limited to child support, taxes, educational expenses, fines,
services provided to the debtor, and court ordered restitution. As the dollar amounts of refunds
are increased, the amount available for possible debt setoffs is also increased. However, the
Department is unable to make a precise estimate of the amount of debts setoffs that will be
intercepted as a result of the bill. Any fiscal effect associated with SB 7 is not reflected in The FY
2024 Governor’s Budget Report.

                                                      Sincerely,

                                                      Adam Proffitt
                                                      Director of the Budget

cc: Lynn Robinson, Department of Revenue
    Tamara Emery, Department of Administration
Statutes affected: 
As introduced: 79-32