House cancels tax debate after Democrats voice disapproval of bill

Reps. Tom Sawyer, D-Wichita, and Melissa Rooker, R-Fairway, confer about the latest plans for a tax package as the House called off plans Wednesday to debate a bill to roll back many of the tax cuts that Gov. Sam Brownback championed in 2012.

? Republican leaders in the Kansas House twice on Wednesday abruptly called off plans to debate a new tax bill aimed at closing the state’s looming budget shortfall by rolling back many of the income tax cuts that Gov. Sam Brownback championed in 2012.

The first delay occurred early afternoon Wednesday when House leaders said they needed more time to determine precisely how the bill, which would have raised nearly $1.1 billion in new revenues over two years, would have affected the budget outlook.

But the final decision to cancel the debate entirely came later in the afternoon after a large number of Democrats said they would not support the bill.

“That was the Democrats’ best bill,” House Speaker Pro Tem Scott Schwab of Olathe said afterward. “The numbers only go down from here.”

Reps. Tom Sawyer, D-Wichita, and Melissa Rooker, R-Fairway, confer about the latest plans for a tax package as the House called off plans Wednesday to debate a bill to roll back many of the tax cuts that Gov. Sam Brownback championed in 2012.

Rep. Tom Sawyer, D-Wichita, the ranking Democrat on the House Taxation Committee, agreed that it was a risky move for Democrats. But he said the Democratic caucus was sharply divided over the bill, with many fearing it would not raise enough to balance the budget, pay for a school funding increase and fund other items that are high on the Democrats’ priority list.

“On the Democratic side, we’d like to see a 2-percent pay raise for state employees. You couldn’t do that with that bill,” Sawyer said. “We’d also like to see more beds at Osawatomie (State Hospital), which you couldn’t do with that bill.”

According to the Legislature’s nonpartisan Research Department, the bill would have generated an estimated $514 million in new revenue in the upcoming fiscal year, and $547 million in the following fiscal year.

With that, the state could afford to fully fund its contributions into the state pension system next year and fully fund a proposed $150 million increase in K-12 education funding, leaving the state with a positive ending balance of about $145 million. But to do that, the Legislature also would have to accept Brownback’s plan to sweep about $290 million out of the state highway fund.

For the following year, however, the proposed school finance plan calls for adding $300 million above current spending levels, and the tax bill would not have provided enough money for that, even with another sweep of money out of the highway fund.

The tax bill called for raising income tax rates across the board and adding a third tax bracket for upper-income wage earners. It also would have repealed one of Brownback’s signature tax cuts, the complete exemption for certain kinds of non-wage business income, which allows more than 330,000 farmers and business owners to pay no state income taxes at all on their business income.

Republican leaders said they fully expected Brownback would veto the bill if it reached his desk, which means it would need a super-majority of votes in both chambers — 84 votes in the House and 27 in the Senate ­– to override a veto, something that would be impossible without full support from the Democratic caucus.

Democrats and Republicans have also been sharply divided over which issues to vote on first.

Democrats have insisted on saving the tax debate for last, after lawmakers commit to a school funding plan and a two-year budget for the rest of state government.

“We need to know exactly what we need,” said Rep. Tom Sawyer, of Wichita, the ranking Democrat on the House Taxation Committee. “We need to know exactly how much to put into schools. We need to know how much it takes to balance the budget. The problem with trying to do it early is, we don’t really know what the numbers are.”

Republicans leaders in both chambers, however, have said they want to work on taxes first, and then write a budget and school finance plan based on the money available.

“When we build our budget, some things are always put off until we know what our revenue numbers are going to be,” House Speaker Ron Ryckman, R-Olathe, said. “This would complete that part of the data we’re looking for. There’s still discussion that if this type of package doesn’t raise enough for schools, money could be put inside the school package as well. That option is still available as well.”

Democrats, however, fear that schedule will either limit the size of the school funding plan or freeze out the possibility for things like state employee pay raises.

By killing the latest tax bill on Wednesday, Democrats may find themselves with even less bargaining power. That’s because the Senate tax committee is said to be working on a bill that would only eliminate the business income exemption while leaving all other income tax brackets and rates as they are. That bill could be sent to the full Senate as early as Thursday morning.

Many lawmakers in both parties campaigned in 2016 on a promise that they would vote to repeal the business exemption, which polls have shown most Kansans believe is fundamentally unfair. A bill to repeal only that exemption would allow those lawmakers to fulfill their promise without also having to vote for an unpopular across-the-board tax hike, but it would also raise only about $230 million a year, far less than what the state needs to balance its budget and pay for a school funding increase.

“I was kind of wondering when that was going to happen, because politically it’s hard to vote against that,” Sawyer said.

Wednesday marked the second day in a row that lawmakers abruptly called off scheduled tax debates. On Tuesday, the Senate canceled its plan to debate a smaller income tax package after leaders determined it did not have enough votes to pass.

There were also suggestions throughout the day Wednesday that new negotiations had begun between legislative leaders and Gov. Brownback on a possible compromise tax bill that he would accept. But it was difficult to tell how serious those negotiations were, or what items might be on the bargaining table.

“Yes, those conversations are also going along, and then of course we’re looking at a 21 and 63 number at that point,” Ryckman said, referring to the simple majorities needed to pass a bill in the Senate and House respectively.