Tax 'Weight Loss' Bill's Effect On Kansas Budget, Individuals Unclear
Proponents of a bill to give businesses tax credits if an employee receives less public assistance after being hired couldn’t estimate the proposal’s financial impact, and the complicated nature of public assistance doesn’t help the task.
House Bill 2626, also known as the Kansas Tax Weight Loss Act, would offer employers incentives to hire people who receive more than $10,000 annually in welfare benefits. Businesses and nonprofits that hire someone, who then receives less public assistance, would receive a sales tax exemption and a tax credit of up to 75 percent of the value of the public assistance the employee no longer receives.
For example, if an employee’s public assistance fell from $10,000 to $6,000, the employer could receive up to $3,000 in tax credits.
The Kansas Division of the Budget couldn’t estimate the bill’s impact on the budget due to a lack of information about the number of individuals or businesses that might participate, how much assistance they might no longer need and whether expenditures on employment services might go up as more people sought or obtained work.
Rep. Blaine Finch, an Ottawa Republican, testified in favor of the bill when the House Tax Committee considered it during a Tuesday hearing.
The bill would encourage business growth and boost employment, he said. “We want to make sure we can keep jobs increasing.”
The bill refers to an individual’s tax weight, but it isn’t clear if the $10,000 threshold would apply to a household or how the state could disentangle public support for adults and from that for dependents in a household. Most assistance programs take the number of family members into account when deciding how much a household should receive.
The Kansas Department for Children and Families couldn’t estimate the number of people who receive more than $10,000 in benefits from its programs. Even if DCF could provide estimates, the measure would be imperfect because other welfare programs are administered through the Kansas Department of Health and Environment, the Kansas Department for Aging and Disability Services and federal agencies.
Also unclear is the number of workers who would come out ahead financially if they participated. The bill’s provisions would create a minimum annual income of $7,540, based on minimum wage and at least a 20-hour work week.
Counseling services may be needed to help people plan for the reduction of welfare benefits, Finch said.
“We want to make people more self-sufficient, not make them worse off,” he said.
Below are the possible implications for various types of public assistance. Calculations would be more complicated, however, because the amount a household receives from one benefit program would affect what they would be eligible for from others.
- Cash assistance: Most households wouldn’t receive cash assistance at the minimum level of income. A household’s other income can’t be greater than the benefit it would eligible for, and only families with seven or more people would receive a $7,540 annual cash benefit. Looking solely at cash assistance, most households would come out ahead at the minimum income.
- Food stamps: Most households still would eligible for food stamps at the minimum income, though the amount they receive could be reduced. Whether the extra earned income would outweigh any lost food benefits would vary by family.
- Medicaid: Children in the household still could be covered by KanCare or the Children’s Health Insurance Program at the minimum income level. Childless Kansas adults aren’t covered at any income level and wouldn’t see any change. Parents would earn too much to be covered. The situation is more complicated for people with disabilities, because multiple programs, some with premiums and some without, cover services for them.
- Supplemental Security Income: Most households wouldn’t qualify at the minimum income. Some would be better off, but those who receive the maximum benefit of $8,796 would have less income at the bill’s minimum level.
- Earned income tax credit: Any household, with or without children, would qualify for the earned income tax credit at the minimum income level in the bill. Because the credit is only available to people with income from working, an unemployed person would receive more by getting a job. The maximum credit is $503 for a childless household and rises to $6,242 in a household with three or more children.
- Low-income energy assistance: Households earning the minimum income still could qualify, though they might receive a smaller benefit. Amounts vary based on family size, income and type of heating used.
- Housing assistance: Vouchers are available for families whose incomes don’t exceed 50 percent of the median income in their area, so most still would be eligible at $7,540. They would have to pay more toward their rent, however, because the U.S. Department for Housing and Urban Development requires families receiving vouchers to put 30 percent of their income toward their housing costs.
Megan Hart is a reporter for KHI News Service in Topeka, a partner in the Heartland Health Monitor team. You can reach her on Twitter @meganhartMC