Income Tax

Kansas Tax Law Fight Continues, Voters Support Reform

By Anthony SanFilippo
January 2020

The fight over Kansas tax law wages onward and property owners are caught in the crossfire.

“As the Kansas Legislature returns, the issue of decoupling from federal tax law will be important to Kansas home and property owners,” said Gehle, CEO of the Kansas Association of REALTORS®. “Federal tax reform of 2017 doubled the federal standard deduction. Kansas requires taxpayers who take the federal standard deduction to take the state standard deduction. If the legislature does not act, most families and individuals who have itemized on their state taxes will pay more in State income tax.”

Because of the way Kansas’ tax laws are written, many Kansas property owners are paying more in taxes as a result of changes to the federal tax law that President Donald Trump signed at the end of 2017.

Currently, Kansas residents are not allowed to decouple their tax deductions. As such, filers who take the standard income tax deduction are unable to itemize deductions on their state returns, creating a tax increase.

The Kansas Association of REALTORS® (KAR) is supporting the strengthening of the mortgage interest deduction. Kansas used to have a 100 percent deduction, but that was trimmed back to 70 percent in 2012 during the administration of then Gov. Sam Brownback. Brownback later approved a plan to reduce it further and froze it at 50 percent.

“Nearly two-thirds of Kansans who claim both the mortgage interest and property tax deductions are middle-class homeowners.”

However, Brownback’s tax reform program from 2012 proved to be a fiscal challenge for Kansas, and in 2017 legislation was passed repealing almost all of that program. That legislation included language that would restore the mortgage interest deduction to 100 percent by 2020. However, changes to federal tax laws since then regarding itemized deductions have prevented that from happening.

“Tax benefits specifically for home ownership should be prioritized,” said Karen Gehle, CEO of KAR. “The state of Kansas should be encouraging home ownership rather than making home ownership harder.”

KAR was not pleased with Kelly’s veto in May of 2019, which is why it is one of the leading organizations pushing for another round of reforms in 2020.

“Nearly two-thirds of Kansans who claim both the mortgage interest and property tax deductions are middle-class homeowners,” said Marsha McConnell, 2020 president of Kansas Association of REALTORS. “Policymakers should be encouraging people to buy houses in Kansas. Loss of these deductions is bad for Kansas homeowners and the Kansas economy.”

According to data culled from the Internal Revenue Service, hundreds of thousands of Kansans take advantage of these tax deductions. Based on its figures, nearly 250,000 claimed the mortgage interest deduction and over 305,000 claimed the real estate property tax deduction in 2017. Of those that took the deductions, about half had an adjusted gross income less than $100,000.

“Policymakers should be encouraging people to buy houses in Kansas. Loss of these deductions is bad for Kansas homeowners and the Kansas economy.”

“The median home sale generates about $61,000 in economic growth for the Kansas economy,” said Gehle. “Eliminating these deductions reduces incentives for home buyers and impacts industries, for example construction and real estate, that make up 15% of the state’s economy. We look forward to working with the Governor and the Legislature… to put policy before politics, and pass legislation with this needed fix.”

KAR commissioned a statewide poll conducted by American Strategies that found that 70 percent of Kansas voters believe the mortgage interest deduction is a factor in the decision to buy a home and that weakening the ability for residents to have access to that deduction would negatively impact the Kansas housing market and the state economy.

Major findings include:

  • 70 percent of Kansas voters say the mortgage interest deduction is a factor in encouraging homeownership.
  • Nearly two-thirds see elimination of the state mortgage deduction as a negative for both the housing market (63%) and the overall Kansas economy (64%).
  • Overwhelming support (72%) for a proposal to change the Kansas tax law so that families and individuals who take the new federal standard deduction can itemize on their state income taxes.

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