KANSAS CITY — Kansas lawmakers are upset about a new law in Missouri that eliminates an income tax deduction for Kansans who cross the state border to work.
Kansas legislators said they have been hearing from angry constituents, and some lawmakers are talking retaliation if Missouri doesn’t rescind the provision.
“It’s downright unneighborly,” said Kansas Senate Majority Leader Derek Schmidt, R-Independence. “A little cross-border dialogue would be in order.”
Gov. Matt Blunt signed a bill this month providing an income tax break for Missourians who receive Social Security, which also contained a provision eliminating the deduction for real estate taxes paid outside Missouri.
People who pay property taxes in another state had been allowed to deduct that from the income tax they pay in Missouri, just as Missourians are allowed to deduct their in-state property taxes from their income taxes.
When asked this month about increasing taxes on Kansans, Blunt said his focus was on reducing taxes for residents in his state.
The comments and decision-making attracted criticism from Kansas.
“That’s just an example of Governor Blunt’s youth and immaturity on full display,” said Kansas Rep. Kenny Wilk, R-Lansing.
Based on commuting patterns, Johnson County’s Economic Research Institute estimates that more than 71,000 residents from eight nearby Missouri counties work in Johnson County. At least 53,000 from the Kansas county work in those Missouri counties.
Retaliation, “would actually be fairly easy to do,” said Wilk, chairman of the Kansas House Taxation Committee.
“Why shouldn’t we raise taxes on Missourians working in Kansas?” asked Rep. Arlen Siegfreid, R-Olathe.
One option is to enact a provision similar to Missouri’s, which would increase the tax on Missouri residents working in Kansas, said Joan Wagnon, Kansas secretary of revenue.
When told about a risk of a retaliatory tax, Blunt said the two states’ tax codes probably have all sorts of things for people to complain about. He signed the legislation, he said, because its main provision was to phase out income taxes on Social Security benefits.
The Missouri Senate added the tax increase on out-of-state residents to the measure. Blunt said he did not support that change, but neither did he strongly oppose it.
“I looked at the bill as a tax cut for Missourians, particularly seniors, and it had no negative implications for Missourians,” Blunt said.
They deduction also affects people living in Nebraska, Iowa, Illinois, Kentucky, Tennessee, Arkansas and Oklahoma.
If Kansas retaliates, however, some of Blunt’s constituents would pay more.
The Missouri Revenue Department said the average federal return from Missouri deducted $2,178 in real estate taxes in 2006. If out-of-state residents paid the same average real estate taxes, the new tax would generate more than $14 million a year for Missouri.
For Kansas residents, the higher Missouri taxes would be offset by lower taxes owed to Kansas, because Kansans get a credit on their state returns for income taxes paid elsewhere.