2013 Newsletter Header
May 19, 2013 - In This Issue:
Denning Official Senate Photo
  • Kansas unemployment rate continues to improve
    • Drops to 5.5% in April 2013 compared to 5.8% in April 2012.
  • 12,300 new private sector jobs created since April 2012 (Source; Kansas Department of Labor)
  • Unemployment claims drop 11.5%
    • 13,187 in April 2013 compared to 14,701 in April 2012 (Source; Kansas Department of Labor)
  • Wednesday May 22nd is the 90th day of the legislative session
    • Typically the day we try to have the session wrapped up
  • Federal Reserve maps exit from stimulus
    • Wind down $85 billion per month bond buying program
    • Fed chairman Ben Bernanke hinted could begin as early as this summer
    • Watch the rising yield on 10 year T-Bill.  Trading close to 2%.  Has not consistently yielded more than 2% since 2011
    • Will result in higher borrowing costs

This was our second week of veto session. When we return Monday for hopefully our final week of work this session we, will finalize the two major outstanding issues. The major items remain the Budget for the next two fiscal years and Tax Policy for the next decade.


House and Senate Plans are Close

BudgetThe total Kansas budget will be around $14.5 billion for 2014. This includes State General Fund (SGF) spending as well as federal funds and other tax and revenue sources. The portion of the budget that centers around tax collections is commonly referred to as SGF spending.  Next year the SGF spending will be around $6 billion. The table below illustrates how close the two year budgets are. These are my estimates and should be considered as such.





A breakdown of the $91 million difference is below.

As you can see the difference is narrow and compromise will be achievable. Once a compromise is reached
,I can see the difference being reduced to around $60 million. This would be the Senate accepting the House positions on remaining items and resulting in a $80 - $100 million dollar budget cut from the Governors initial recommendation.

Shift From Taxing Productivity To Taxing Consumption

Now that the budgets are close we can finish up the tax policy for the next several years. The shift in Kansas tax policy began January 1st of this year. Effective January 1st personal income tax rates were reduced sharply and combined into two brackets from three brackets. This will result in about a $600 million income tax cut to Kansas workers. Non-wage income in LLC's, Sub Chapter S corporations, and other similar tax styled partnerships will pass through and not be taxed. This will result in small business owners being able to invest an additional $200 million in their businesses to grow their businesses and create new jobs. The table below shows the 2012 tax rates and brackets being reduced and flattened out in 2013.






The House and Senate tax plans approach paying for the 2013 tax cut of $800 million and future tax cuts differently. Both raise the necessary tax revenues to have a stable budget, fund essential services, and continue with future tax cuts. Much discussion has surrounded the 6.3% sales tax rate. The sales tax rate is scheduled to automatically roll back to 5.7% on July 1, 2013. The Senate tax plan relies on keeping the rate at 6.3% going forward. The logic here is we want to move away from taxing productivity to taxing consumption. To accomplish this we need to keep the sales tax rate at 6.3%. The difference between 5.7% and 6.3% is commonly referred to now as the "6/10th sales tax difference."


The House tax plan which was discussed at a joint meeting on Thursday takes a different approach to raising revenue. Although the amount of revenue raised is almost identical to the Senate plan the House accomplishes through a combination of sales tax and modification to income tax drivers. The House plan proposes to reduce sales tax from 6.3% to 6.0%. We will call this the "3/10th sales tax difference."  In addition, the House plan further proposes to roll back the standard deduction and phase out Charitable deductions based on declining tax rates effective January 1, 2013. 


The table below shows a side by side comparison. The amounts are my estimates and should be considered just that, estimates.



As the above table demonstrates, the House and Senate plans approach tax policy differently. The sunlight on the plans indicate that the amount of tax revenue needed to have a stable budget, fund essential services, and continue with future tax cuts are very close between the Senate and House tax plans. The Senate plan relies more on a consumption tax with proposing to keep the sales tax at 6.3%. The House plan relies less on consumption tax with proposing to reset sales tax at 6.0% and more on traditional income tax variables. The Senate and Governor prefer emphasis on moving towards consumption tax. The House prefers a combination. The tax conference committees will come up with a compromise they think will pass both of our chambers and meet with the Governors approval.

Capitol Office

300 S.W. 10th Street, Room 541-E

Topeka, KS 66612




Overland Park
8416 W. 115th Street
Overland Park, KS 66210

Paid for by "Jim Denning for Kansas Senate"
Kathy Vance, Treasurer

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