Topeka Republican leaders in the Kansas Senate are planning to move quickly next week on a tax bill that would repeal the so-called LLC exemption and raise individual income tax rates.
Tax committee chairwoman Caryn Tyson, R-Parker, announced on the Senate floor Friday that she plans to hold an all-day hearing on the bill Monday, possibly extending into Tuesday, and then vote on the bill as early as Tuesday afternoon.
Senate Bill 147 would repeal the exemption for income derived from pass-through business entities, retroactive to Jan. 1, and would raise individual income tax rates by three-tenths of a percent starting in 2018.
The bill was just introduced Thursday afternoon, and the Department of Revenue had not yet published a fiscal impact statement Friday. A spokeswoman for the department said fiscal notes can only be released by the Legislative Research Department, and as of 5 p.m. Friday, none had been posted on the Legislature’s website.
Sen. Jim Denning, R-Overland Park, gave rough estimates Thursday morning that repealing the LLC exemption would generate about $230 million a year, and that each one-tenth of a percent increase in the individual rates would raise about $68 million. But others suggested later in the day that the fiscal impact may be much less than that.
The bill is being dubbed the “Senate leadership bill,” and as such it represents a major change of policy for many in the Republican caucus.
Gov. Sam Brownback, who has said previously that he opposes any reversal of the tax cuts he championed in 2012, did not respond to questions about it following a news conference in his office where he announced a higher-education initiative involving Cowley County Community College and Fort Hays State University.
Democratic leaders in the Legislature gave Senate Republicans credit for starting the tax debate early in the session, but they said they believe the proposal falls short of solving what they called the state’s “structural imbalance.”
“We are open to any conversation and compliment the Senate Republicans for starting that conversation,” House Democratic leader Jim Ward of Wichita said. “Here’s the test: Does it fix the structural problem we’ve been dealing with for five years, and second of all, does it provide a methodology for us to invest in public schools?”
He noted that the Kansas Supreme Court is expected to rule soon in a long-running school finance lawsuit in which plaintiffs are seeking upwards of $550 million a year in additional funding.
Ward and Senate Minority Leader Anthony Hensley of Topeka said they believe the state needs about $900 million to $1 billion over the next two years, not counting any additional school funding the Supreme Court may order.
Some Democrats are pushing to reinstate a third tax bracket for upper-income individuals.
“Why did Willie Sutton rob banks? Because that’s where the money is,” Ward said.