December 13, 2016
Last week a liberal group called the Kansas Center for Economic Growth proposed a series of tax increases designed the close the state’s massive structural budget deficit.
The outlines of the plan are simple. The group would 1) raise the state gas tax by 11 cents a gallon, 2) eliminate the dreaded “LLC exemption” that allows some business owners to escape state taxes on their income, and 3) raise the state’s top income tax bracket from 4.6 percent to 6.45 percent.
In exchange, the plan cuts the Kansas sales tax on grocery store food. It’s now 6.5 percent, among the highest in the nation; the Center for Economic Growth would cut it to 5 percent (still much higher, for those keeping score, than Missouri’s food sales tax, which is 1.225 percent).
No one thinks the plan will survive intact. The group says the proposal would bring in more than $800 million a year; anyone who thinks the state Legislature would easily pass such an increase wasn’t paying attention in 2015, when lawmakers argued bitterly for months before approving a more modest tax hike.
And then there’s the governor, who would veto anything approaching that kind of increase.
Still, the Center for Economic Growth’s opening bid was valuable. It sets a baseline for other plans that may surface next year — phasing in an income tax hike over several years, for example, might now seem more reasonable than boosting it all at once.
More importantly, the group’s blueprint shows just how complicated and intricate next year’s budget and spending debate will be in Kansas.
Take the gas tax. Raising the state tax by 11 cents a gallon has much to recommend it: with gas prices near historic lows, a fuel tax increase is much less painful than it would have been just a couple of years ago.
But a higher gas tax would clobber farmers, who use a lot of fuel. And it would come at the worst possible time, with farm income at its lowest level in years.
The state’s oil producers, also facing severe problems, would also resist any tax that would mean less gasoline consumption.
A higher gas tax, on the other hand, might mean less in Johnson County, where incomes are higher and fuel costs typically lower. Johnson Countians would be much more worried about higher income taxes, which would sting thousands of suburban families.
Maybe not. Johnson Countians might accept tax increases if they believed the money would be spent on schools, which is still the county’s top priority. And farmers in western Kansas might buy higher gas taxes if they were convinced the money would keep their property taxes low, or keep the local high school open.
The key to true tax reform next year will be to link revenue changes with other important state policies: the school finance formula, transportation, college costs, mental health, rural health care, the state’s prisons. Nothing can be settled, it turns out, until everything is settled.
That means proposals like the one from the Center for Economic Growth are just the start. Solving the Kansas budget crisis won’t be a matter of just raising taxes. It will come from compromise, and a clear understanding of all the options on the table.
It will also require patience from voters, who may be expecting more than legislators can quickly deliver. Most lawmakers I’ve talked with agree: the 2017 Kansas session will stretch well into the spring, and perhaps the summer, before a solution is found.
Read more from the Kansas City Star here.