Kansas committee hears bill to let counties levy up to 1% earnings tax to offset property taxes

At a Senate Tax Committee hearing on Senate Bill 108, proponents including state and local officials said the bill would allow counties to place on the ballot a county earnings tax of up to 1% and use all revenue to reduce property taxes; opponents said the change would shift tax burdens, add administrative complexity and risk volatile revenues.

The bill "would authorize counties to impose an earnings tax upon individuals employed or working in such county," Amelia Donahue told the committee in an opening explanation of the measure. Donahue said the tax would apply to "salaries, wages, commissions, and other compensation" earned for work performed in the county, would exclude contributions to deferred compensation plans if those contributions are not subject to Kansas state income tax, and would be capped at 1% per year. She said the measure requires that the revenue "be pledged for general county purposes, and all of the revenue derived from the earnings tax shall be credited in the budget of the county to reduce the amount of revenue otherwise necessary to be raised from the Ad Valorem property tax." She added that the ballot question must be resubmitted every five years to continue the levy.

Supporters: local officials and county leaders argued counties with large nonresident workforces would benefit

Senator David Haley, one of the bill's sponsors, told the committee he was "excited about this" and said the measure would be especially valuable to Wyandotte County, where he said a large share of wages are earned by nonresidents. "I don't know the mechanics exactly, but [revenues] in total [would be applied] toward the reduction of real property taxes," Haley said.

Representative Page, describing herself as "a lifelong resident of Wyandotte County," said she heard property-tax concerns repeatedly while campaigning: "Too much money is driving out of our county," she said, and added the earnings tax could help "anchor residents" by returning wage dollars to the county.

Kansas City, Kansas, Mayor Tyrone Garner told the committee Wyandotte County had taken steps toward being "revenue neutral" and said SB 108 could be another tool to reduce property-tax burdens for seniors and low-income residents. "We believe that coupling this type of legislation with that option of revenue neutral will further that narrative," Garner said.

Leavenworth County Commissioner Jeff Culberson described his county's situation and argued an earnings tax could be transformational for counties with large tax-exempt properties: "The state of Kansas has mandated all 105 counties only use 1 source of income to fund their county budgets, and that is property tax," Culberson said. He told the committee Fort Leavenworth and other tax-exempt properties leave a small base of taxpayers and said an earnings tax "could eliminate Leavenworth County property taxes" in his estimate.

County officials and the Kansas Association of County Commissioners offered general support. Mike Taylor, speaking for the Kansas Association of County Commissioners, said the measure "would not work for every county" but could work for border counties and regional centers where workers commute in from outside.

Opponents: business and free-market groups warned of economic and administrative costs

Opponents said SB 108 would shift tax burdens, raise compliance costs for employers, and create a potentially volatile revenue stream. Dan Murray, Kansas state director for the National Federation of Independent Business, said simply: "We oppose this bill." He listed complexity and competitiveness concerns, and said small-business owners already view taxes as a top concern.

Eric Stafford, vice president of government affairs for the Kansas Chamber, said proponents were "not lowering taxes. We're just simply shifting and replacing where the taxes are paid and how they're paid." He urged the committee to reject the bill and focus on local fiscal choices instead.

Tanner (last name not specified in the record) similarly warned of migration and economic effects and said counties could face instability because "income taxes would fluctuate significantly with economic cycles." Several opponents also raised enforcement and accountability questions about guaranteeing that revenues would actually reduce property taxes rather than be used to expand spending.

Key clarifications and points of debate

Committee members pressed for mechanics and safeguards. Senator Peck asked whether funds collected would "reduce the amount of property tax revenue that needs to be generated," and Donahue replied, "The bill itself does not provide a formula per se, but it does provide that the revenue '. . . would credit those earnings in their budget to reduce the amount of property tax revenue that needs to be generated." Asked about employer collection, Donahue said counties could require employers to collect and remit the tax and that employers would be allowed to retain a percentage of what they collect to compensate for collection unless the county reduced or eliminated that fee by resolution.

The committee heard several numerical claims that senators and witnesses said would need verification. Supporters cited an estimate that as much as 70% of income earned in Wyandotte County is by nonresidents; a witness said Kansas City, Kansas, collects about $35,000,000 in real property tax and that a 0.5% earnings tax might generate about $27,300,000 (figures described in testimony as "initial estimates"). Culberson said Fort Leavenworth has been described in testimony as producing a valuation of about $2.8 billion and making a roughly $2 billion economic impact while contributing little to the county's property-tax base.

No vote was taken. The hearing record includes written testimony submitted by Representative Curtis, Jay Hall and Marcus Winn and neutral/written testimony by Spencer Duncan; the committee closed the hearing without advancing the bill.

"I'll close the hearing on Senate Bill 108," the committee chair said as the committee adjourned and announced it would reconvene Monday with a full agenda.

What's next

No amendment or floor action was recorded at the hearing. Committee members asked staff for additional data and estimates on how an earnings tax would interact with state income tax, local sales taxes and property-tax relief, and several speakers urged that specifics on distribution, any exemption rules, and enforcement be resolved before the committee considered a formal recommendation.