Kansas House rejects tax cuts for corporations and individuals; 2018 legislative session ends

photo by: Peter Hancock

Rep. Jim Karleskint, left, R-Tonganoxie, looks at a tote board showing votes on a controversial tax bill while Rep. Joe Patton, R-Topeka, works the phone during an extended roll call vote on the bill Friday, May 4, 2018. The bill failed on a tied, 59-59 vote, and the 2018 legislative session came to an end a few minutes later.

? The 2018 legislative session in Kansas officially ended Friday after the House rejected a tax bill that would have offered income tax breaks to individuals and multinational corporations.

The Senate, which narrowly approved the bill on a 21-19 vote Thursday night, had already adjourned by around 5:30 p.m. Friday when the bill failed in the House on a 59-59 vote. It needed at least 63 ‘yes’ votes to pass.

Kansas state Rep. John Whitmer, right, R-Wichita, makes a point in a discussion of tax-cutting proposals during a meeting of fellow House Republicans, Friday, May 4, 2018, at the Statehouse in Topeka. Watching to Whitmer's right is Rep. Doug Blex, R-Independence. (AP Photo/John Hanna)

“It wasn’t for a lack of discussion, debate,” House Speaker Ron Ryckman Jr., R-Olathe, told reporters after the House adjourned. “A lot of uncertainty was going on, but we gave our best effort to give the money back to the Kansas taxpayers, the money that we didn’t anticipate receiving.”

The core of the bill was aimed at preventing the state from receiving an unintended windfall as a result of a recent federal tax overhaul that President Donald Trump and the Republican-controlled Congress pushed through in December.

Estimates of the size of that windfall, however, varied widely. Revenue forecasters in April put the figure at roughly $105 million for the upcoming fiscal year that begins July 1.

For individuals, the bill would have allowed taxpayers to itemize deductions on the state tax returns, even if they are no longer able to on their federal returns due to the new, higher standard deduction for federal taxes.

For large, multinational corporations that pay Kansas taxes, though, it would have provided a complete exemption for one year on any foreign assets that are repatriated back to the United States, something the new federal law incentivizes.

Rep. Tom Sawyer, D-Wichita, an accountant by profession and the ranking Democrat on the House Taxation Committee, said that moving assets offshore to avoid paying U.S. taxes is something global corporations have been able to do since the Reagan-era tax reforms in 1986.

“Effectively, these multinational corporations have been using a legal tax dodge to not pay taxes,” he said during debate on the bill.

Kansas state Rep. Melissa Rooker, R-Fairway, discusses her opposition to tax-cutting legislation during a meeting of fellow House Republicans, Friday, May 4, 2018, at the Statehouse in Topeka. Rooker and other lawmakers worried that tax cuts would cause future budget problems. (AP Photo/John Hanna)

Democrats in both the House and Senate argued that the proposal was reminiscent of the 2012 tax cuts that then-Gov. Sam Brownback championed, which completely exempted certain categories of business income from any state income tax liability.

“Listening to this debate has nearly been surreal,” Sen. Laura Kelly, D-Topeka, said. “There’s a part of me that can’t believe we’re talking about this right now.”

She noted that many new members of the Legislature, including Democrats and moderate Republicans, were elected in 2016 specifically on the promise that they would reverse the Brownback tax cuts, put the state back on sound financial footing and adequately fund public schools.

In a House Democratic caucus meeting Friday morning, Minority Leader Jim Ward, of Wichita, suggested that if the bill passed, moderate Republicans who voted for it would be challenged over that issue in the 2018 elections.

Both Kelly and Ward are competing for the Democratic nomination for governor this year, along with former Rep. Josh Svaty and former Wichita Mayor Carl Brewer.

Conservatives, however, rejected the argument that the bill was a tax cut at all.

“This is just stopping a tax increase is what it is. It’s not a tax cut in the sense that the senators keep referring to,” Sen. Caryn Tyson, R-Parker, chair of the Senate tax committee, said during debate on the Senate floor Thursday.

Tyson is also vying for the GOP nomination in the 2nd District congressional race.

Friday’s adjournment officially brought the 2018 session to a close, but several lawmakers have said they remain nervous that they could be called back into a special session this summer if the Kansas Supreme Court rejects the school finance plan approved earlier in the session.

The Supreme Court is scheduled to hear oral arguments in that case May 22. The court has said it will issue its decision by June 30, the final day of the current fiscal year.

— This story was updated to correct the Senate vote total.