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


February 27, 2023


The Honorable Adam Smith, Chairperson
House Committee on Taxation
300 SW 10th Avenue, Room 346-S
Topeka, Kansas 66612
Dear Representative Smith:
SUBJECT: Fiscal Note for HB 2175 by House Committee on Taxation
In accordance with KSA 75-3715a, the following fiscal note concerning HB 2175 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 5.7 percent for income $30,000 and
over ($60,000 and over for married filing jointly). HB 2175 would create a procedure to allow
individual income tax rates to decrease in tax year 2024 and tax year 2025 contingent on the 7.5
percent ending balance requirement being met for the State General Fund in FY 2023 and FY
2024. On July 1, 2023, the Director of Legislative Research would certify to the Secretary of
Revenue and the Director of the Budget that the ending balance requirement was met in FY 2023
and the Secretary of Revenue would publish the new tax year 2024 rates by October 1, 2023. For
tax year 2024, the bill sets the new individual income tax rate at 3.0 percent for taxpayers with
income under $15,000 ($30,000 for married filing jointly) and set the new individual income tax
rate to 5.35 percent for income over $15,000 ($30,000 for married filing jointly). If the ending
balance requirement is not met in FY 2023, but then met in FY 2024, the procedure will allow the
above rate reductions to occur beginning in tax year 2025. If the ending balance requirement is
not met in both FY 2023 and FY 2024, then no reductions to individual income tax rates would
occur.
If the ending balance requirement was met in FY 2023 and then again in FY 2024, then on
July 1, 2024, the Director of Legislative Research would certify to the Secretary of Revenue and
the Director of the Budget that the ending balance requirement was met in FY 2024 and the
Secretary of Revenue would publish the new tax year 2025 rates by October 1, 2024. For tax year
The Honorable Adam Smith, Chairperson
Page 2—HB 2175

2025, the bill sets the new individual income tax rate at 2.9 percent for taxpayers with income
under $15,000 ($30,000 for married filing jointly) and set the new individual income tax rate to
5.0 percent for income over $15,000 ($30,000 for married filing jointly). The individual income
tax rates in future fiscal years would be set at the lowest rates published by the Secretary of
Revenue. The bill also removes outdated language from previous tax years.

Estimated State Fiscal Effect
FY 2023 FY 2023 FY 2024 FY 2024
SGF All Funds SGF All Funds
Revenue -- -- ($51,700,000) ($51,700,000)
Expenditure -- -- $98,252 $98,252
FTE Positions -- -- -- --
The Department of Revenue estimates that HB 2175 would decrease State General Fund
revenues by $51.7 million in FY 2024, $247.9 million in FY 2025, and $425.7 million in FY 2026.
To formulate these estimates, the Department of Revenue simulated this tax policy change based
on actual tax return data from tax year 2020. The estimate for FY 2024 includes 30.0 percent of
tax year 2024 tax liability. The 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 estimates assume the ending balance
requirement is met in both FY 2023 and FY 2024 and individual income tax rate reductions occur
in both tax year 2024 and tax year 2025.
If the ending balance requirement was met in FY 2023, but not met in FY 2024, the bill
would decrease State General Fund revenues by $51.7 million in FY 2024, $172.7 million in FY
2025, and $174.5 million in FY 2026. If the ending balance requirement is not met in FY 2023,
but met in FY 2024, the bill would decrease State General Fund revenues by $52.2 million in FY
2025 and $174.5 million in FY 2026. If the ending balance requirement is not met in both FY
2023 and FY 2024, then the bill would not have a fiscal effect on State General Fund revenues.
The Department indicates that the bill would require $98,252 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
The Honorable Adam Smith, Chairperson
Page 3—HB 2175

are increased, the amount available for possible debt setoffs is also increased. However, the
Department is unable to make a precise estimate of the number of debts setoffs that will be
intercepted as a result of the bill. Any fiscal effect associated with HB 2175 is not reflected in The
FY 2024 Governor’s Budget Report.


Sincerely,

Adam Proffitt
Director of the Budget

cc: Tamara Emery, Department of Administration
Lynn Robinson, Department of Revenue


Statutes affected:
As introduced: 79-32