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Kansas’ budget surplus could be a solution to lower taxes

Zinkevych/Getty Images/iStockphoto

Zinkevych/Getty Images/iStockphoto

To discourage retirees from going elsewhere, some Kansas lawmakers aim to use a projected state budget surplus to reduce income taxes on Social Security benefits.

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During a legislative hearing last week, state Senator Caryn Tyson advocated eliminating the state income tax on Social Security altogether, the Kansas Reflector reported. She is among a group of lawmakers in Kansas who have been trying for years to pass legislation that would exempt Social Security recipients from paying taxes on their benefits.

According to the Kansas Department of Treasury, under current law, only individuals with a federally adjusted gross income of $75,000 per year or less have Social Security benefits that are exempt from Kansas income tax. This applies regardless of the registration status. The allowance only applies if benefits are included in your federally adjusted gross income.

Kansas is one of only 12 states to tax some type of Social Security benefit, according to the AARP. The others are Colorado, Connecticut, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, and West Virginia.

One reason Kansas lawmakers want to end or ease taxation of Social Security income is what is known as the “Social Security cliff,” where, as GOBankingRates previously reported, adding just $1 in additional income could increase total taxable federal income by that much than 35%. Adding state income taxes to the mix makes the tax burden on Kansas retirees even heavier. The fear is that some retirees will move to states that don’t collect income taxes on their benefits.

Kansas’ budget surplus — which reached a record $2 billion this fiscal year and is expected to grow by another $400 million — gives the state the fiscal space to ease the tax burden on Social Security recipients.

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“As far as Social Security goes, I’m very interested in addressing the cliff issue,” Kansas State Senator Tom Holland told Reflector. “This, to me, is a real concern for people who pay into Social Security, especially seniors who don’t have other additional sources of income. I think it is imperative that they have access to these funds.”

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This article originally appeared on GOBankingRates.com: Social Security recipients: Kansas’ budget surplus could be a solution to lower taxes

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