TOPEKA — Kansas Secretary of State Kris Kobach is fighting Gov. Sam Brownback’s tax proposal because the plan would raise fees on businesses.
The Secretary of State’s office spoke against House Bill 2315 on Thursday. The bill contains Brownback’s tax plan, which he first put forward in January.
The House Tax Committee had a hearing Thursday on the bill, hours after the full House passed a different bill raising personal income tax rates and eliminating a tax exemption for limited liability corporations.
The legislation passed by the House is a marked departure from Brownback’s plan, and the governor has said he doesn’t support it. Likewise, lawmakers have shown little appetite to adopt the governor’s plan outright.
But Thursday’s hearing nevertheless exposed a split between two of the most prominent GOP statewide officeholders in Kansas.
Kathy Sachs, a deputy assistant secretary of state, said House Bill 2315 would increase fees on corporations, LLCs and other business structures. Kobach’s office argues the proposed fee structure would place the state at a competitive disadvantage.
“We recognize the argument that limited liability companies, limited partnerships and limited liability partnerships are currently paying lower income taxes, and as a result these same entities may be able to afford increased annual report fees (or taxes); however, this logic ignores that these proposed fees will be imposed without regard to whether a business profit or loss has occurred in a particular year,” Sachs said in written testimony.
The legislation increases the annual report filing fee from $40 to $200 for for-profit entities. The Secretary of State’s office administers the fee.
The plan would also reinstate income tax on rents and royalties but largely maintain an exemption for LLCs and other corporate structures that Brownback heralds as a boon for small businesses. The bill would freeze the bottom income tax rate at the current level of 2.7 percent.
The legislation would also raise taxes on cigarettes and liquor. Taxes on cigarettes would increase by $1 per pack, to $2.29 per pack of 20 or $2.61 per pack of 25.
Under Brownback’s budget proposal, the tax hikes would be paired with other measures, such as drawing down a long-term investment fund and securitizing annual payments to the state from tobacco companies, to balance the budget. Kansas faces a $310 million shortfall in the current fiscal year, which runs through June, and more than $500 million next year.
“My budget solves the challenges of today, has solutions for tomorrow, and avoids punishing tax increases on middle class workers, families, and job creators,” Brownback has said.
Other testimony during the hearing on the governor’s tax plan fell along familiar lines.
Health organizations endorsed the proposal because of increases in tobacco taxes. Other organizations, such as the Kansas Chamber of Commerce, opposed the bill and asked lawmakers to make government more efficient and cut costs.