Topeka Faced with a tightening budget, advocates for children and other social service programs are urging the Kansas Legislature to "decouple" from a federal tax cut.
The move would provide $79 million to state lawmakers as they prepare a final budget during the wrap-up session that starts today.
"Decoupling is a viable solution to our state's budget shortfalls, and will better position Kansas in case of further economic downturn," said April Holman, director of Fiscal Focus for Kansas Action for Children.
A provision known as bonus depreciation in the federal economic stimulus act is shorting Kansas $79 million because the state income tax code is tied directly to the federal income tax code. The bonus depreciation allows businesses to claim an immediate deduction of 50 percent of the cost of new equipment, rather than following the standard approach of depreciating that cost over the equipment's lifetime.
The result is that Kansas had to reduce its tax revenue projections for the current and next fiscal years by $79 million. The state could avoid this hit by decoupling the federal business depreciation rules from the state tax code.
Because of the loss of revenue, budget negotiators are wrestling with ways to address various needs such as early childhood education.
But state Rep. Kenny Wilk, R-Lansing, who is chairman of the House Tax Committee, said he would oppose any effort to decouple.
"My argument is that it's a national policy, and if we decouple we put our Kansas businesses at a disadvantage to their competitors in other states," Wilk said.
But Holman said studies have shown that the bonus depreciation is not an effective way to stimulate the economy. Kansas Action for Children said at least 17 states have decoupled from the federal bonus depreciation.