TOPEKA, Kan. — Kansas Gov. Kathleen Sebelius warned Thursday that a new Missouri tax law that hits Kansans in the pocketbook could lead to legislative retaliation. Gov. Matt Blunt responded that he favors repealing the law.
The two governors — Sebelius is a Democrat and Blunt is a Republican — exchanged letters about the tax law. Both agreed their two states have worked together more in recent years on issues affecting the two states, particularly in the Kansas City region.
“I do not want to see the cooperative spirit that exists between our two states diminished,” Blunt wrote in his letter. “I will support a correction of this provision during the next regular session of the Missouri General Assembly.”
Before the new law, residents of other states who worked in Missouri could deduct the property taxes they paid in the other states from the income Missouri taxed. The new law ended the deduction and is expected to cost residents in other states $11 million annually.
Kansas still has a law that allows residents of Missouri and other states who work in Kansas to deduct the property taxes they pay in their home states from any income they earn in Kansas.
In her letter, Sebelius said she was disappointed by the change in Missouri law because, “This runs directly counter to our attempts at greater collaboration and threatens to hamper future cooperation.”
Sebelius said Kansas legislators had started talking about changing their state’s law in response. Rep. Kenny Wilk, a Republican from Lansing, Kan., who is chairman of the House Taxation Committee, said Kansas will have no choice if Missouri doesn’t go back to its old law.
“Are we prepared to respond to the Missouri action? The answer is, absolutely yes,” Wilk said. “Our preference would be for them to take a second look at what they have done.”
Blunt told Sebelius that he signed the tax bill because it eliminated a state tax on Social Security benefits, something he said was one of his highest priorities this year. He said he never proposed the provision dealing with the tax deduction for other states’ residents.
Sebelius said restoring the deduction “would go a long way toward enhancing our two states’ ability to cooperate productively in the future.”
However, if Missouri realigns itself with Kansas tax policy, it could place itself on unequal ground with neighboring Illinois, which offers a property tax credit on its income taxes only for its residents — not for those who work in Illinois but live elsewhere.
“This is not really a Missouri versus Kansas issue,” said Maura Browning, a spokeswoman for the Missouri Department of Revenue. “This is merely the state of Missouri ending a property tax deduction for people who don’t live in Missouri and who are deducting property taxes paid to other states. There are other states that have similar types of programs.”