Kansas cities and counties could tax nonresident workers with voter approval

Cities and counties could ask their voters to approve a tax of up to 1% on nonresidents’ local earnings. The tax would cover pay for work or services performed within the taxing city or county by people who live outside it. A majority of people voting on the question would have to approve the tax. Repealing the tax or changing its rate would also require voter approval. A petition signed by at least 10% of local voters would require officials to put that question to a vote. Continuation votes would occur every 10 years after the tax was first imposed.

Cities and counties would use at least half the earnings-tax revenue to reduce the property-tax revenue their budgets otherwise need. Cities would dedicate the revenue to infrastructure. Counties would dedicate it to general county purposes. These rules would apply only if local voters approved the earnings tax.

Cities and counties could allow deductions and exemptions, including tax reductions for spouses and dependents. Local officials could set a formula for calculating taxable earnings when someone works both inside and outside their city or county. Contributions to deferred-pay or benefit plans would be excluded if Kansas does not tax them when contributed. People exempt under the state income-tax section cited in the proposal would also be exempt from this tax. Tax paid to another city would count toward earnings tax owed to a worker’s home city. The same rule would apply separately to counties.

Kansas state and local governments would withhold the tax from employee pay. Cities and counties could require other local employers to collect it. Employers statewide would have to provide employee lists and addresses upon a qualifying written request, covering employees living outside the requesting city or county. Public employers could keep 3% of collections when the tax rate is below 1%, or 1.5% when it is 1%. Other required collectors could keep 1.5%, unless local officials reduced or removed that fee. Employers already withholding and sending the tax would be exempt from employee-list requests. Lists could be used only to collect the tax. While the confidentiality rule remained in force, disclosure would require a proper court order. Employee lists could be requested no more than once a year. Their confidentiality protection would expire on July 1, 2030, unless lawmakers reviewed and continued it before that date.