Bill Summary – FastDemocracy

Division of the Budget
Landon State Office Building                                                                       Phone: (785) 296-2436
900 SW Jackson Street, Room 504                                                                    larry.campbell@ks.gov
Topeka, KS 66612                                  Division of the Budget                          http://budget.kansas.gov
Larry L. Campbell, Director                                                                      Laura Kelly, Governor


                                                       January 28, 2020
                                                          REVISED

         The Honorable Steven Johnson, Chairperson
         House Committee on Taxation
         Statehouse, Room 185-N
         Topeka, Kansas 66612
         Dear Representative Johnson:
                   SUBJECT:         Revised Fiscal Note for HB 2278 by House Committee on Taxation
                 In accordance with KSA 75-3715a, the following revised fiscal note concerning HB 2278
         is respectfully submitted to your committee.
                HB 2278 would create a new two bracket income tax rate system beginning in tax year
         2020. For tax year 2020 and all future tax years, the individual income tax rates would be set by
         a formula for income under $50,000 ($100,000 for married filing jointly) and by a different
         formula for income over $50,000 ($100,000 for married filing jointly). Each income tax rate
         formula would be based on taxable income and the number of filing periods.

                                              Estimated State Fiscal Effect
                                         FY 2020         FY 2020            FY 2021        FY 2021
                                          SGF            All Funds            SGF          All Funds
            Revenue                               --                 --      $5,600,000     $5,600,000
            Expenditure                           --                 --         $68,991         $68,991
            FTE Pos.                              --                 --               --              --
                The Department of Revenue estimates that HB 2278 would increase State General Fund
         revenues by $5.6 million in FY 2021. The fiscal effect to state revenues during subsequent years
         would be as follows:
                                                              FY 2022          FY 2023
                                  State General Fund         $4,300,000       $4,400,000
                 The fiscal note was calculated by simulating the new two bracket income tax rate system
         and current law with tax return data from tax year 2018. The Department of Revenue compared
         the taxes generated from the two methods and indicates that the new proposed two bracket income
The Honorable Steven Johnson, Chairperson
Page 2—HB 2278

tax rate system would have generated an additional $4.2 million in tax year 2018 compared to the
current law tax system. The Department of Revenue indicates that the proposed upper-bracket
formula is exactly the same as the current Kansas top-bracket formula. The individual income tax
estimate for FY 2021 includes 100.0 percent of tax year 2020 tax liability and 30.0 percent of tax
year 2021 tax liability. The individual income tax estimate for FY 2022 includes 70.0 percent of
tax year 2021 tax liability and 30.0 percent of tax year 2022 tax liability.
        The Department of Revenue indicates that it would require a total of $68,991 from the State
General Fund in FY 2020 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. Since the original fiscal note was issued, the
Department of Revenue recalculated the fiscal effect with tax return data from tax year 2018
instead of data from tax year 2017, and lowered its estimate on administrative costs needed to
implement the bill.
        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 decreased, the amount available for possible debt setoffs is also reduced. However, the
Department is unable to make an estimate of the amount of debt setoffs that would no longer be
intercepted as a result of the bill. Any fiscal effect associated with HB 2278 is not reflected in The
FY 2021 Governor’s Budget Report.


                                                      Sincerely,

                                                      Larry L. Campbell
                                                      Director of the Budget


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