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Committee hears concerns over large fiscal cost of proposed insurance savings accounts
Summary
Senate Bill 25 would create insurance savings accounts with tax benefits; the Department of Revenue estimated large revenue losses, and senators raised concerns the benefit could skew to higher-income taxpayers.
A Senate committee debated Senate Bill 25, which would create an “insurance savings account” program allowing individuals and corporations to deposit money into accounts for insurance-related expenses with accompanying tax additions and subtractions under the Kansas Income Tax Act.
Amelia summarized the proposal: the accounts could be established on or after Jan. 1, 2026; maximum annual contributions would be $6,000 for individuals, $12,000 for married joint filers and $25,000 for corporations; excess contributions could subject income earned on the excess to tax. Funds could be used for eligible insurance expenses, transferred to a newly created account, invested in certificates of deposit and used to pay service fees to financial institutions.
The Department of Revenue’s fiscal estimate provided in committee was substantial: staff reported the bill could decrease state revenues by $73.1 million in fiscal 2026 and rise to as much as $249.3 million per year thereafter, though an alternate utilization example (10% utilization and 3.5% effective tax rate) would estimate about $29.9 million per year. Senators criticized the distributional effects and practicality of the proposal.
Senator Schallenberger said he believed the tax break would be used disproportionately by higher-income taxpayers and underutilized by lower-income households who cannot easily set aside funds; he opposed the bill. Senator Peck asked whether means testing (limiting eligibility by income) could be constitutionally implemented; the committee agreed to consider means-testing as a possible refinement after additional income-tax hearings.
The committee did not record a final vote on the bill in the transcript; senators signaled they would revisit the measure after related income-tax discussions and further fiscal analysis.
