Legislators who spent this week planning how to get from one Independence Day parade to another in their districts hopefully enjoyed the celebration while it lasted — before the constituents they tossed candy to along the parades notice their paychecks have shrunk.
That happy waving is because it might be a week or so before the effect of the biggest tax increase in state history starts coming out of those voters’ paychecks through higher withholding to pay their higher taxes for the current and next tax year.
Nope, nobody really said much about that during debates in the House or Senate or the debate preceding lawmakers’ override of Gov. Sam Brownback’s veto of the tax bill.
That rejection of the governor’s economic development plan, which never seemed to work as he envisioned, saw 27 senators and 88 House members vote to enact the bill notwithstanding the governor’s veto.
While it was an “us versus Brownback” vote for most legislators who are now home and among us, those folks along the parade routes on the Fourth of July won’t have seen what happens to them with passage of the bill that will raise about $600 million a year in increased state revenues.
Don’t look for a float in those Independence Day parades for those LLC owners and other non-wage income earners. Nope, they’ll be saving up their money for the first state income tax bill they’ve paid in four years.
But also don’t look for a float for the rest of Kansans, who in the days after the parade are going to see their paychecks shrink as their tax rate increases trigger higher withholding from their paychecks. Not much, mind you. Maybe $5 or $10 or a little more depending on just what you earn. But, the check that we’ve gotten used to will be smaller by the end of the month when employers have tallied up the increased withholding necessary for you to make your tax payment without having to sell your car.
If there’s a benefit to that higher-withholding/smaller take-home-pay business, it is that the Department of Revenue has decided to make that change in withholding all at once. That means that the small increase in taxes on your income since Jan. 1 — which is that “retroactive” tax increase business you heard lawmakers wail against during the session — will likely be covered by withholding for the remainder of this tax year.
So that stutter-step partial income tax rate increase for the rest of this year likely will be covered by withholding at the level that will be needed for Tax Year 2018, when the new, higher permanent-until-changed-again rates click in on Jan. 1, 2018.
Yes, the LLCs got their due, but two-thirds of the new revenue for the state is from everyone else. Not much talk about that, was there?
So, while you’re watching the parades, you might try to spot your Senate or House members marching. They’ll probably be the ones looking over their shoulder as they try to keep up with the band. Depending on the political leanings of your town, those legislators (and at least House members who will be seeking re-election next year) might decide to not lead the parade, but maybe march behind the motorcycle club by which time interest will be waning.
Very practically, the tax increase was needed, especially with a new school finance bill and its increased costs waiting for Kansas Supreme Court consideration this month. But, you just gotta wonder whether some Kansans, relieved that the Legislature is out of session and our lifestyles not jeopardized by a mere majority of a quorum, are going to be surprised what happens to their paychecks ...
Martin Hawver is the publisher of Hawver’s Capitol Report. Visit his website at www.hawvernews.com