Topeka The Senate tax committee on Tuesday agreed to advance two bills to the full Senate that would raise income taxes in Kansas, including one that was written by Senate Democrats.
At the same time, though, the committee voted not to advance Gov. Sam Brownback's proposal to raise taxes on cigarettes, liquor and some other items.
Tuesday's committee action means the full Senate could debate either one or both tax bills later this week. Senate Republican leaders have said they will not consider any legislation on the floor of the Senate until the chamber agrees on how to close this year's $350 million budget shortfall and address the state's long-term structural imbalance.
Tuesday's action came after the Assessment and Taxation Committee heard testimony on the Democrats' tax plan, which repeals, retroactive to Jan. 1, the so-called LLC loophole that exempts nonwage business income from state income taxes, one of the hallmarks of the tax cuts Brownback championed in 2012.
Starting next year, it also would reinstate a third tax bracket, levying 6.45 percent in tax on income above $35,000 for individuals or $70,000 for married couples filing jointly. And it would repeal the so-called "march to zero" provision of current law that automatically lowers tax rates starting in 2020 whenever state revenues meet certain benchmarks.
"It's time to admit that the tax cuts of 2012 have not worked. It is time to restore balance to our taxation system," said Chuck Schmidt, of Independence, a retired school superintendent who ran unsuccessfully for the Legislature in 2016.
Schmidt was one of several people who testified in favor of the bill. Other supporters included the Kansas Association of School Boards and Kansas Interfaith Action, whose lobbyists argued that more revenue would be needed in future years to invest in education and other essential services.
Duane Goossen, a former state budget director who is now a senior fellow for the policy think tank Kansas Center for Economic Growth, noted that the state is now approaching its 17th round of budget cuts since the start of the Great Recession in 2008, and there is little else the state can do to trim expenses.
Even after all those cuts, including the most recent cuts to higher education and Medicaid, Goossen said regular revenue flowing into the state is about $800 million a year less than its regular recurring expenses.
Goossen said the bill "puts our budget back into structural balance and produces sufficient revenue to truly end the irresponsible, and frankly exhausting cycle of borrowing money, cutting programs, delaying bills and shifting the tax burden onto those who can least afford it."
According to budget analysts, however, the bill would raise only about $700 million in the fiscal year that begins July 1 and about $520 million a year after that, far less than the $800 million that Goossen said the state needs to achieve structural balance.
But Dave Trabert, president of the conservative think tank Kansas Policy Institute, argued against the bill, saying the state could balance its budget, both this year and for the next two years, without raising taxes.
"It does require use of some one-time money, and it certainly requires making government operate a little bit more efficiently, but it can be done," he said.
The Kansas Chamber and the state chapter of the National Federation of Independent Business also submitted written testimony opposing the bill.
The committee made one amendment to the bill that would affect University of Kansas employees by taxing the money that all members of the Regents retirement system put into their accounts. Those contributions are currently treated as pre-tax deductions from employees' paychecks.
An initial vote to advance the bill to the full Senate with a favorable recommendation failed on an unrecorded vote. But in a somewhat unusual move, Republicans agreed to advance the bill without a recommendation.
The panel also voted to advance, without recommendation, a revised version of the Senate Republican leadership plan that was pulled from the debate calendar last week.
That plan would repeal the LLC exemption and raise individual income tax rates. The change that was added would, like the Democrats' bill, repeal the "march to zero" provision in current law.
Budget analysts estimate passage of that bill would increase revenues by $268 million in the next fiscal year and around $350-$360 million each year after that.
Senate President Susan Wagle, R-Wichita, said she did not know how soon the bills would be debated by the full Senate, but she said she is planning to debate bills Thursday and Friday of this week.