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


                                                   March 22, 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 2445 by House Committee on Taxation
                  In accordance with KSA 75-3715a, the following fiscal note concerning HB 2445 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). HB 2445 would create a five-bracket
          income tax system beginning in tax year 2024. The individual income tax rates would be set at
          1.5 percent for income under $15,000 (under $30,000 for married filing jointly), 4.75 percent for
          income between $15,000 and $30,000 (between $30,000 and $60,000 for married filing jointly),
          5.25 percent for income between $30,000 and $125,000 (between $60,000 and $250,000 for
          married filing jointly), 7.0 percent for income between $125,000 and $500,000 (between $250,000
          and $1.0 million for married filing jointly), and 8.5 percent for income $500,000 and over ($1.0
          million and over for married filing jointly). The bill also removes outdated language from previous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                            --                 --   ($59,000,000)       ($59,000,000)
             Expenditure                        --                 --         $39,500             $39,500
             FTE Pos.                           --                 --               --                  --
The Honorable Adam Smith, Chairperson
Page 2—HB 2445

       The Department of Revenue estimates that HB 2445 would decrease State General Fund
revenues by $59.0 million in FY 2024, $197.3 million in FY 2025, and $199.3 million in FY 2026.
To formulate these estimates, the Department of Revenue reviewed 1.6 million tax returns from
tax year 2020 and created a simulated tax table. It is estimated that this change will reduce tax
year 2024 individual income tax liability by $196.7 million, tax year 2025 liability by $198.7
million, and tax year 2026 liability by $200.7 million. 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 Department indicates that the bill would require $39,500 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 an estimate of the amount of additional debt setoffs that would be
intercepted as a result of the bill. Any fiscal effect associated with HB 2445 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