Attempt to override tax veto falls 3 votes short in Senate; little consensus on what comes next

Gov. Sam Brownback vetoes a billion income tax bill that would reverse many of the tax policies he championed in 2012.

? The Kansas Senate came up three votes short in an attempt to override Gov. Sam Brownback’s veto of a bill that would have reversed many of the tax cuts he championed in 2012, but the debate over his tax policies is far from over.

Supporters of the bill needed 27 votes to override Brownback’s veto, but they received only 24.

The vote came just a few hours after the override effort passed in the House, 85-40.

Still, the votes could be seen as a big political defeat for Brownback because they showed that he and his fiscal policies have lost support from a solid majority of lawmakers in both chambers, most notably from Republican leaders of the Senate. Thursday morning, Brownback is scheduled to speak in Washington, D.C., at the Conservative Political Action Conference, or CPAC, where he will be part of a panel discussion titled “The States vs. The State: How Governors are Reclaiming America’s Promise.”

During a Republican Senate caucus meeting before the vote, Majority Leader Jim Denning, of Overland Park, said emphatically that he no longer supports Brownback’s tax policies.

“I own that thing. I regret voting for it. I do not support the governor’s tax plan,” he said.

During that same meeting, Senate President Susan Wagle, of Wichita, lashed out at the governor, saying she was “deeply troubled” by the position in which he had placed lawmakers, especially the new freshmen who make up about one-third of each chamber, and she said the plan he put forth this year does not solve the state’s fiscal problems.

“His plan borrows money to get through this year, and his plan ceases making KPERS payments and it monetizes (future) tobacco (settlement payments), all of which are very difficult to pass,” she said. “And it appears to me that he’s not working with the Republican Legislature when he doesn’t help us with the real solutions.”

The bill that Brownback vetoed would have raised individual rates for individuals earning more than $15,000 a year and married couples filing jointly with incomes above $30,000 a year. It also reinstated a third tax bracket for individuals earning more than $50,000 a year, or couples with incomes above $100,000.

Most notably, though, it would have repealed one of Brownback’s signature tax cuts that he had once claimed would be “a shot of adrenaline into the heart of the Kansas economy,” the so-called LLC exemption that eliminates state income taxes on the nonwage business income of more than 330,000 farmers and business owners.

The changes in rates and the business tax exemption both would have been retroactive to Jan. 1.

It also eliminated the so-called “march to zero” that automatically cuts tax rates starting in 2020 whenever state revenues meet certain benchmarks, and reinstates full deductibility of medical expenses.

Wagle and Denning both voted to sustain the veto because of the retroactive provisions, something Denning said would be as bad as the original 2012 tax cuts. Both said they did not oppose repealing the nonwage exemption retroactively, but they said a retroactive rate increase on wage earners would be a burden because they would have to have even higher payroll withholdings to make up for the pay periods in which they were not paying at the new higher rate.

Brownback also cited the retroactive provisions as one of the main reasons he vetoed the bill. But he also called it “irresponsible” because it would punish working-class families and individuals, something that did not sit well with many lawmakers.

“I’d suggest that’s a strong word. I’d suggest that’s an unnecessarily inflammatory word,” said Rep. Steve Johnson, R-Assaria, who chairs the House Taxation Committee, while urging the House to override the veto. Without raising taxes, he said, lawmakers were left with a “cocktail of untasty choices” to balance the budget for the next two years.

“Governor Brownback wouldn’t recognize a middle-class family if it jumped up and bit him on the rear,” Sen. Tom Holland, D-Baldwin City, said on the floor of the Senate. “This plan is of, by and for the special interests.”

Despite the widespread dissatisfaction with Brownback’s policies, there was little consensus among Senate Republicans about what to do next.

Wagle and Denning both said they want to address the $350 million shortfall in the current fiscal year’s budget before debating tax policies for future years. But the plan they put forward earlier this month sparked an outcry of protests because it called for cutting $128 million from K-12 public schools and making deep cuts in Medicaid for home- and community-based services.

The House has already passed and sent to the Senate a budget-balancing bill for this year that largely mirrors Brownback’s plan. It calls for borrowing $317 million from an idle funds investment account, delaying a payment into the state pension system and making other kinds of fund transfers to get through the year without major spending cuts. The Senate, though, has not yet acted on that plan.

Denning said the Senate will likely consider a number of other tax bills that repeal the LLC exemption and make changes in individual rates. But he conceded that without making those changes retroactively, there will still be a large shortfall for the fiscal year that begins July 1.

He also said he would prefer a tax bill more like the one Senate GOP leaders proposed earlier that called for repealing the LLC exemption retroactive to Jan. 1 and making smaller changes in individual rates that wouldn’t take effect until next year. He also pointed out that a majority of Republicans in the Senate had voted against the bill Brownback vetoed.

“As far as the governor’s tax plan and budget plan, it’s insulting to me,” he said.

Wagle said the Legislature will probably vote on a number of tax bills before the session is over, something that many lawmakers in both chambers had hoped to avoid.

“I think we could see several vetoes,” she said. “Clearly the governor wants to hold on to his small business proposal, but in his statement he said he wants a majority of Republicans voting for the plan.”

Sen. Barbara Bollier, R-Mission Hills, who supported the bill and the override, however, said she objected to the idea of working only with Republicans.

“Many of us came up to fix it, and not to be only a Republican or only a Democrat or whatever,” she said during the caucus meeting.

During a news conference earlier in the day, Brownback asserted that his brand of tax cuts and business exemptions were becoming the trend nationwide, especially in traditionally Republican states like Kansas.

“Income tax increases aren’t being considered, that I can find, in any red state, and I think there are only a couple that are possibly looking at it,” he said. “The whole trend line is away from taxes on production, and it’s onto consumption where you have a broader base in general.”

“Ohio just put in a business tax (exemption) with a $250,000 cap,” he said. And at the national level, he said, “Speaker (Paul) Ryan and President Trump both have a small business tax proposal that would cut small business taxes in half, because that’s your job-creating machine.”