Week 3 Newsletter
Week three of the Kansas Legislative session is winding down and we continue to “drink” through the firehose of information here in Topeka. Its truly fascinating to learn some of what makes the government function. Interesting fact this week: Kansan’s spent $269,777,123 in Lottery in FY 2018. That amount BLEW me away and didn’t include the $404,508,001 spent at the 4 state owned Kansas Casino’s. In total, $674,285,124 was spent. WOW!!! If you want to know where all that money went, send me a note and I will be happy to share it with you. While this is super interesting information, I wanted to discuss something that has been a topic of the media and legislators over the past couple weeks.
You might have heard about the inadvertent tax increase called the “Windfall”. Like most of you, I didn’t fully understand it until I sat in on a briefing by Representative Steven Johnson that helped put it in context. Last year, President Trump signed into law the largest tax reform since the 1980’s. It was a mix of personal and business deductions meant to stimulate the economy. While we have seen tremendous economic growth on a national level, Kansas hasn’t enjoyed the same prosperity and incidentally, for some people, ended up with a tax increase on a state level.
The primary disparity is who can itemize their deductions on a state level. Itemized deductions include mortgage interest, charitable giving, real estate taxes, and a few others. If all of your itemized deductions equal more than the standard deduction, you can use them for an additional tax offset. If not, it only makes sense to use the higher standard deduction. When the tax reform was passed, it raised the standard deductions for single individuals to $12,700 and for families, it was raised to $24,000. So why is this significant?
According to current law, Kansas conforms with federal law. So if you itemize on your federal tax return, you then itemize on your state tax return. If you take the standard deduction on your federal tax return, your required to do the same on your state tax return. This creates a significant imbalance as the increase in the federal standard deduction wasn’t simultaneously increased on the state level; thus you would be required to take the standard deduction on your state return even though it is a much smaller deduction. Let me illustrate:
If you were married filing a joint tax return and had $17,500 in itemized deductions, you would of course take the $24,000 standard deduction on your federal return because it is more than your itemized deductions and would result in less taxes. However, on your state tax return, the potential impact would be:
$17,500 Itemized Deductions
- $7,500 Standard Deduction
= $10,000 in “lost” deductions
X .057 (assuming highest marginal tax bracket)
= $570 in Additional Kansas Income tax Liability
So, what is the answer? Well that is currently being studied on various committees. Some suggest we should “decouple” meaning we should allow you to take the standard deduction on federal and itemize on state if you wish. Others have suggested increasing the Kansas standard deduction. There are a few other ideas floating around as well.
There is one consistent theme coming from the Republicans. This is YOUR money and if it isn’t returned to you, the taxpayer, the state will receive the benefit of your federal tax cut. The unintended result is a Tax Increase that none of your legislators voted for and the state didn’t ask your permission to have.
My vote? It is your money and you deserve to receive the benefit. I firmly believe it is my responsibility to keep as many of your dollars in your pocket as possible.
Thank you for allowing me the honor and privilege of serving as your State Representative.
If I can be of assistance, please don’t hesitate to reach out. If you happen to come up to Topeka, please swing by and say hello. This is your house after all.
Rep. Stephen Owens
PH: (785) 296-7500