Senate committee hears SB 283 to cut income tax rate and phase out HPIP, PEAK and affordable-housing tax credit

TOPEKA — The Kansas Senate Assessment and Taxation Committee on Tuesday heard testimony on Senate Bill 283, which would reduce individual income-tax rates to a single 5.2% rate by tax year 2028 and discontinue several state tax-credit programs, including the High Performance Incentive Program (HPIP), the Promoting Employment Across Kansas (PEAK) payroll-withholding benefits, and the Kansas affordable housing tax credit.

The committee heard a bill summary from staff and an outline of statutory changes that would take effect after the specified tax years. The bill would phase the top individual income-tax rate from 5.58% now to 5.53% for tax year 2025, 5.45% for 2026, 5.35% for 2027 and 5.2% for tax year 2028 and thereafter, at which point the two-bracket structure would disappear. The bill also would discontinue HPIP, PEAK approvals and additional benefits after specified cutoff dates, prohibit transfers of certain credits after Dec. 30, 2025, and allow existing carryforwards in specified circumstances.

Committee members were told the Department of Revenue is finalizing a fiscal estimate. "We are finalizing our estimate right now, and then it would be passed on to the Division of Budget. I would assume we'd have something probably within the next couple of days," said Kathleen Smith of the Department of Revenue.

A staff estimate presented to the committee by Department of Revenue staff summarized prior comparable analyses and suggested the bill contains both revenue-positive and revenue-negative provisions. The staff overview cited roughly four major revenue-positive items (sunsetting certain credits and discontinuing crediting to the Job Creation Program Fund) and a revenue-negative component from the proposed individual income-tax rate cuts. Using prior comparable bills, the presenter gave ranges for impacts on HPIP and PEAK and noted an approximate per‑0.01 percentage‑point annual revenue impact of $6 million to $6.5 million once fully implemented, but the committee was told those numbers would be refined when the department completes its formal fiscal note.

State economic-development officials and business witnesses urged the committee to oppose the sunsets. Joshua Jefferson, deputy secretary of the Kansas Department of Commerce, testified in opposition and warned the proposal would "crush established Kansas companies" and "send the wrong message to the economic development world." Jefferson told senators PEAK currently supports roughly 200 active agreements statewide; 34 new agreements in 2024 are projected to create more than 2,800 PEAK jobs with $228 million in projected annual payroll and about $730 million in projected capital investment. He said the active PEAK agreements have helped create or retain about 30,000 jobs and that 54% of those were with existing Kansas companies.

Business witnesses from manufacturing, aerospace and development firms presented project-level appeals to retain HPIP, PEAK and the housing credit. Daniel Osea, tax director for Ashgrove Cement Company, said HPIP helps secure large capital allocation decisions and that the company plans "up to half a billion dollars" in investment that would be harder to direct to Kansas without HPIP. Mark Jewell, chief financial officer of Arise Aerostructures, said HPIP and related supports helped the company grow to more than 650 Kansas employees and invest in multiple facilities.

Developers and housing advocates urged the committee not to eliminate the Kansas affordable housing tax credit. Josh Adrian, a developer with Prime company, said the state's housing shortage makes the affordable-housing credit essential for projects outside metropolitan counties, adding that rural and smaller cities lack private financing alternatives that make projects feasible without the credit. Scott Gales of AIA Kansas noted the credit has supported development of thousands of homes since 2022 and said affordable housing stabilizes small-town labor markets and local businesses.

Several senators pressed witnesses about return-on-investment calculations and the relationship between program incentives and state revenue estimates. Senator Schallenberger questioned why legislative post-audit results and proponents' ROI figures differed; witnesses replied that methodology and timing (the lag between project investments and state revenue recognition) can explain apparent discrepancies. Jefferson and other proponents said some economic benefits appear first at the local level and that state revenue gains can be delayed by statutory limits and the timing of carryforwards or credit redemptions.

Project-specific testimony illustrated potential near-term impacts if programs are eliminated. Tony Adams, founder of Golden Waves Grain, described a planned $160 million flour-mill and bakery project that would employ more than 140 people and said the financial structure for that project depends on HPIP credits. Josh Adrian said the state's housing program supports projects in Garden City and elsewhere that take multiple years to develop; he warned that removing the credit could wipe out the final year of ongoing projects.

The committee did not take a final vote on SB 283. Chair Tyson announced the hearing was suspended and would continue the next day; the Department of Revenue’s formal fiscal note remained pending.

The hearing record includes detailed statutory citations and program provisions discussed by staff and witnesses but contains no committee action or recorded votes on the bill during the session.

Provenance: Discussion and quotes above summarize opening bill explanation, revenue-staff estimate and witness testimony recorded in the committee hearing transcript.