A refundable EITC was first considered by the Kansas legislature during the state legislature’s 1997 session. A 10 percent refundable state EITC was included in an education bill passed by the state House of Representatives, but was taken out during conference committee.

Following the 1997 session, several factors led to increased support for an EITC. In September 1997, a coalition of human service advocates released a study entitled Kansas Families: Poverty Despite Work.¹ The report, which received substantial news coverage, showed that the vast majority of poor children in Kansas had working parents. The report included a state EITC as one of its major policy recommendations.

The study’s release coincided with the final deliberations of a bipartisan interim legislative committee to make recommendations on tax policy. Faced with a substantial budget surplus and mounting political desire to cut taxes, the committee considered a number of possible tax cuts. At the urging of committee member Bruce Larkin, a Democratic House member, the committee included an EITC in its final recommendations. The recommendations cited, among other reasons, Kansas’ relatively heavy income tax burden on working poor families.

With the encouragement of the interim legislative committee and human services providers, Republican Governor Bill Graves included the EITC among a package of tax cuts in his 1998 budget submission and singled out the credit for praise in his State of the State address. In the State Senate, the Republican leadership ignored the governor’s proposal and issued a tax package that included no assistance for working poor families. But the EITC was included in the tax bill crafted in the House of Representatives, also controlled by Republicans. “Kansas has numerous taxpayers who are below the poverty level who still must pay Kansas income taxes,” Representative Phill Kline, the chairman of the Taxation Committee, wrote to the House Republican Caucus. “This is poor policy and the EITC corrects this problem.” For a number of weeks, a House-Senate conference committee deadlocked over the tax bill, with the refundable EITC among the sticking points.

Supporters of the credit, including the Kansas Catholic Conference (which assigned a person to work full-time on the issue), United Community Services of Johnson County, Kansans Respond, and Kansas Action for Children, stressed the importance of making the credit refundable in order to ensure that benefits reached a large number of poor children. The fact that Kansas levies a sales tax on food — a tax that is particularly burdensome on low-income families — helped underscore the point that a refundable credit would offset other taxes paid by the poor. In addition, the governor’s office distributed to legislators research showing that the EITC actually induces single mothers to work and therefore may reduce welfare spending.

One issue that arose during debate over the tax bill was the extent to which ineligible families claim the EITC. In response, advocates presented analysis explaining that many EITC errors reflect honest mistakes and highlighted new federal initiatives that hold promise for reducing EITC errors.²

The House-Senate deadlock was broken in April, when a higher-than-anticipated revenue estimate persuaded legislative leaders that the state could afford the major tax provisions in both the House and Senate bills. The governor submitted another tax plan that included a refundable EITC, and this time both houses passed it without changes.

¹The report was based on the information in The Poverty Despite Work Handbook, Center on Budget and Policy Priorities, April 1997. An updated version of this handbook was published in early 2001.

²Two publications from the Center on Budget and Policy Priorities contain further discussion of EITC error rates: The Earned Income Tax Credit and Error Rates, February 25, 1998, and State Earned Income Tax Credits and Error Rates, February 18, 1998.