February 7, 2017
The Senate will hold a sweeping debate over budget and taxes this week after lawmakers on Tuesday sped to the floor a bill raising personal income tax rates and eliminating business tax exemptions.
The Senate Tax Committee approved Senate Bill 147, with several senators voting in favor of the measure despite reservations, arguing the bill will kick-start debate. Only Sen. Marci Francisco, D-Lawrence, was a recorded no vote.
Meanwhile, the House Tax Committee held a hearing on legislation put forward by a coalition of associations that would raise significantly more revenue. A majority of lawmakers on that committee have signaled support for raising upwards of $900 million over the next two years.
The more modest Senate legislation reinstates taxes on business income from limited liability corporations and raises personal income tax rates by three-tenths of a percent in the upper bracket and four-tenths of a percent in the lower bracket. Senate GOP leaders said the chamber will debate the bill along with budget cuts at 8 a.m. Thursday — an unusually early start time for senators.
The bill would raise about $288 million next year, less than what is needed to fill the state’s budget shortfall. Estimates place the hole at more than $500 million in fiscal year 2018, which begins in July.
“It’s the beginning of a process,” said Sen. Julia Lynn, R-Olathe. “It’s tough for everybody on this committee. But our constituents expect us to take action and to take it firmly and to go forward and clear up what is currently a situation that needs to be fixed.”
Francisco questioned whether the bill raised enough money. She also wants the committee to delve into other areas that haven’t been explored.
“We need to look at other issues of tax fairness that this committee has not had a chance to fully debate,” Francisco said.
Gov. Sam Brownback, speaking after the Senate Tax Committee vote, reiterated his Monday statement assailing Senate Bill 147, which he says would raise taxes on middle-class workers. Brownback said he doesn’t favor a broad income tax increase.
“We’ll see what they come up with in the process. And I don’t see anyplace else doing that either,” Brownback said, referring to income tax increases nationwide.
At a hearing in the House Tax Committee later in the day, supporters and opponents sparred over House Bill 2237. The legislation constitutes the proposal from the coalition known as “Rise Up Kansas” that is headed by the Kansas Center for Economic Growth, which is critical of the 2012 tax policy.
The plan — coming from the Kansas Center for Economic Growth, Kansas Action for Children, Kansas Contractors Association, Kansas Organization of State Employees and Kansas-National Education Association — is more wide-ranging than the Senate proposal. It also reinstates a third tax bracket that was eliminated in 2012.
Individual Kansans making $40,000 a year or more (or married individuals making $80,000) would see their income tax rate rise to 6.45 percent. Currently, they are taxed at 4.6 percent. Before the 2012 tax cuts, those making $30,000 or more were taxed at 6.45 percent.
Tax rates for the lower two brackets would remain the same. Individuals earning up to $15,000 would be taxed at 2.7 percent; those between $15,000 and $40,000 would have a rate of 4.6 percent.
Like the Senate plan, however, it also would eliminate the LLC exemption.
The coalition has said their plan could raise more than $700 million a year. A formal fiscal analysis from the state budget office wasn’t yet available Tuesday.
“We’re now approaching our 17th round of budget cuts since 2008. Of course, we must always be reasonable and responsible stewards of taxpayer dollars,” said Duane Goossen, a former state budget director now with the Kansas Center for Economic Growth. “But at this point, it’s not realistic or responsible to solve the imbalance the state faces with more expenditure cuts.”
Dave Trabert, with the Kansas Policy Institute, urged the committee to reject the proposal.
He said the state doesn’t need to raise taxes to balance the budget. He instead asked lawmakers to make government more efficient.
“This will be a tremendous tax increase so the government can remain inefficient,” Trabert said.
The committee didn’t take action on the bill. But lawmakers on the panel have expressed interest in raising much more revenue than what their Senate counterparts have proposed.
The Associated Press reported that during a discussion Monday, a majority of committee members indicated by informal shows of hands that they want to raise between $900 million and $1.2 billion over two years, with some Democrats and GOP moderates willing to raise $1.5 billion.
“We’re getting rid of the insanity that took place in 2012,” said Rep. Tom Sawyer, D-Wichita.
Senate GOP leaders didn’t appear interested in matching the level of new revenue that representatives are discussing. Senate President Susan Wagle, R-Wichita, said that without cuts, a very significant tax increase is needed. The Senate is considering a combination of borrowing, tax increases and significant cuts, she said.
Senate Majority Leader Jim Denning, R-Overland Park, said the amount of revenue in Senate Bill 147 would be sufficient long-term.
“We see no reason to increase taxes higher than that,” Denning said.
Read more from the Topeka Capital Journal here.