LJWorld.com

Proposal to repeal tax cuts sent to governor after narrowly passing Senate

Senate President Susan Wagle, R-Wichita, speaks with reporters immediately after the Senate voted 22-18 to send a tax bill to Gov. Sam Brownback that reverses some of the tax cuts he championed in 2012. Enlarge photo

February 17, 2017, 10:41 a.m. Updated: 17 February 2017, 12:40 p.m.

— The Kansas Senate on Friday narrowly passed and sent to Gov. Sam Brownback a bill that would raise about $1 billion in new income taxes by repealing many of the tax cuts he championed in 2012.

Brownback has already indicated that he will not sign the bill into law, but the margins by which it passed both chambers indicate a strong chance that lawmakers could override a veto.

The governor has 10 days from the day the bill reaches his desk to either sign or veto it. If he takes no action in that time, the bill would become law without his signature.

Brownback did not immediately respond after Friday’s vote in the Senate. His spokeswoman, Melika Willoughby, said only that he “will review the bill closely once he receives it.”

The bill passed the House, 76-48, on Thursday and squeaked through the Senate, 22-18, after more than 90 minutes of debate.

The Senate vote had stood at 20-19, one short of the majority needed for passage. Finally, though, Sen. David Haley, D-Kansas City, who had initially voted pass, changed his vote to yes. Sen. Rick Billinger, R-Goodland, later switched his vote to yes.

Passage of the bill was seen as a strong indicator of just how far the Legislature has shifted following the 2016 elections when Brownback’s policies on taxes and school funding were central issues in many campaigns.

Of the 22 yes votes, half came from freshman members who were just elected to the Senate in November. Those included 10 Republicans and one Democrat.

The bill would repeal the so-called LLC “loophole” that exempts more than 330,000 farmers and business owners from paying income taxes on their nonwage business income. It would also reinstate a third income tax bracket for individuals earning more than $50,000 a year, or married couples filing jointly who make more than $100,000 a year.

All those changes would be retroactive to Jan. 1, 2017, so tax filers would see the changes when they file returns in 2018.

Many conservatives, including Sen. Dennis Pyle, R-Hiawatha, remained committed to the 2012 tax cuts and said the state’s budget problems are the result of too much spending, not a lack of revenue.

“People don’t want to admit there is a spending problem,” Pyle said. He said that the state has raised taxes several times in the face of economic hard times: “It’s beginning to be a habit. It’s an addiction.”

But Sen. Tom Holland, D-Baldwin City, said he couldn’t understand that argument.

“I would just remind the body that since we had, basically, the election sweep in the 2012 primaries, that this Kansas Senate chamber has had a super majority of conservative senators,” he said. “They’ve had four years to get spending under control.”

Holland, the ranking Democrat on the Senate tax committee, had carried the Democrats’ alternative tax plan on the floor of the Senate Thursday. That bill, which would have raised $1.2 billion over two years with a slightly different combination of tax rates and repeal of the LLC exemption, failed on a 10-30 vote and some Democrats, including Minority Leader Anthony Hensley, had felt betrayed by that vote.

“Quite frankly, the more I thought about it, the angrier I got that that bill was set up for defeat,” Hensley said.

Senate Vice President Jeff Longbine, R-Emporia, said he also had concerns about the bill, but he argued that it was possibly the only tax bill that could pass and prevent the need for deep spending cuts in the next budget.

“Without this bill, I don’t see a path at this point for a bill that raises more revenue. So this might be our best shot,” he said.

“If this is our best shot, think about who you’re shooting at,” replied Sen. Ty Masterson, R-Andover, who opposed the bill.

Senate President Susan Wagle, R-Wichita, voted against the bill, but at the same time said she does not believe Brownback’s tax policies have worked as intended, arguing that the LLC exemption has only prompted business entities to reorganize in a way to avoid paying taxes.

“For six years, we have been incentivizing tax avoidance,” she said. “If you’re a CPA, if you’re a lawyer, if you’re a gardener, if you have any small business and you’ve been paying taxes, it’s pretty easy to go to a lawyer online and for $40 start an LLC and pay no taxes.”

Wagle said she voted against the bill because she preferred a plan that included spending cuts to balance the budget for the next two years instead of Brownback’s plan that relies on delayed payments to schools and KPERS, or selling off the state’s interest in future tobacco settlement payments. But she conceded that the majority in the Senate would not accept spending cuts, particularly to K-12 education, and so she challenged Gov. Brownback to come up with an alternative plan if he vetoes the tax bill.

“I would say if he wants to veto it, he needs to come back with a proposal that balances the budget without one-time money,” Wagle said.

Sen. Marci Francisco, D-Lawrence, initially voted “pass” on the bill, along with Haley, of Kansas City, as they waited to see whether Republicans could produce enough votes to pass the bill on their own. But she was called on to vote when the initial tally was 19-19 and changed her vote to yes. Haley then changed his vote to yes, putting the bill over the top. Then Billinger, of Goodland, changed from no to yes, giving the bill one extra vote for passage.

Francisco gave a formal explanation of her vote via Facebook, saying she had significant concerns about the bill because it raises tax rates on individuals in the second tier — individuals with incomes between $15,000 and $50,000; or married couples filing jointly with incomes between $30,000 and $100,000 — but it does not restore many of the deductions that were limited or removed in 2013.

“(Nonetheless), I vote ‘AYE’ to support this as a first step in this legislative session,” Francisco said. “I also pledge to continue to work on proposals to bring fairness to the Kansas tax structure and an appropriate amount of revenue to the state.”

Originally published at: http://www2.ljworld.com/news/2017/feb/17/senate-sends-tax-bill-governor/