Editorial: Revive, revise tax legislation

Lawmakers’ most promising effort to address the state’s budget crisis shouldn’t be given up on.

The Senate’s overwhelming rejection of the tax plan Gov. Sam Brownback said he would support leaves the Legislature with one realistic option in dealing with the state’s budget deficit: reviving and revising the bill that was defeated by the narrowest of margins earlier in the session.

On Thursday, the Senate voted 37-3 to reject the flat tax bill Brownback said he would sign. The bill would have replaced the state’s current two-tiered tax system with a single “flat” tax rate of 4.6 percent on all taxable income. That would have meant a large tax increase on middle-income earners, who pay only 2.7 percent on the first $15,000 for individuals, or $30,000 for married couples filing jointly.

The flat-tax rejection underscored how far out of favor Brownback has fallen with the Legislature. As part of the flat tax plan, Brownback said he would accept the elimination of the so-called LLC Loophole, the measure approved in 2012 that exempts more than 330,000 farmers and business owners from paying taxes on business income. If that was meant to be an olive branch from the governor, senators essentially snapped it in two in their 37-3 vote.

So, with time running out and a nearly $1 billion budget deficit and court-ordered school funding increase looming, legislators will have to go it alone and produce a veto-proof tax plan. And that brings legislators back to where they were on Feb. 23, when a plan came just three votes short in the Senate of overriding a Brownback veto. That tax plan had the kind of bipartisan support that will be critical to success, garnering votes from 109 of the state’s 165 legislators.

That bill would have repealed the small business exemption, and it would have reinstated a third tax bracket for upper-income earners to generate roughly $1 billion in new revenue over the next two years. Many in the House, and some in the Senate, believe when legislators return from a three-week break on May 1, they should revive the bill and make the changes necessary to maintain House support while swaying the three more votes in the Senate.

One of the critical issues is when the new tax increases kick in. Making the tax hikes retroactive to 2017 was a nonstarter for some. Finding a compromise on that issue alone could get the bill over the hump.

When the Senate was unable to override the governor’s veto in February, legislators were quick to say there was still plenty of time and that other plans were waiting in the wings. Six weeks later, the idea bank is empty and there’s precious little time left. The best strategy remaining is to take another run at the plan that almost worked the first time and make sure it does the second.