TOPEKA — Tax negotiations between the House and Senate stalled again Thursday as lawmakers hunted for a package that wouldn’t provoke a veto from Gov. Sam Brownback, or else would win enough votes to override his veto.
After two attempts at crafting solutions this week ground to a halt without lawmakers taking votes, further negotiations were called off in the morning and the Senate tax committee floated the idea of sending two additional tax bills to the floor.
One of the two would repeal a controversial, high-profile tax exemption enjoyed in recent years by owners of approximately 330,000 businesses. The other could be a single-bracket 4.4 percent income tax, with those earning less than $6,300 not paying tax.
Sen. Marci Francisco, D-Lawrence, raised concerns it wouldn’t solve Kansas’ budget woes. The state currently has an upper tax bracket of 4.6 percent.
“If we’re now at 4.6, this takes that down,” she said.
Kansas is facing a projected deficit of approximately $900 million for fiscal years 2018 and 2019.
Sen. Larry Alley, R-Winfield, said the 4.4 percent isn’t necessarily a problem.
“I think there’s other options going on — and who says we’re going to spend that much money?” he said. “We don’t know.”
He also argued the bill could serve as a template and lawmakers could tweak the 4.4 percent rate once they know how much money the state needs.
Meanwhile, the idea of sending a bill to the floor that eliminates the business tax exemption without broader income tax hikes drew immediate concern from Democrats.
“If we take that part out of the overall tax plan, we take all of our leverage out,” said Sen. Laura Kelly, D-Topeka.
Kelly said closing what is often referred to as the LLC loophole is the “politically palatable” part of the tax hikes, but it isn’t the bulk of the money the state needs to raise.
“The real money in the tax cuts was not in that provision, it was in the reduction of the brackets,” she said, referring to income tax rates.
Asked whether a separate business exemption bill could be problematic, tax chairwoman Sen. Caryn Tyson, R-Parker, said this is a matter for Senate leadership to decide. If the committee passes such a bill, Senate leadership can decide whether to put it to a floor vote.
Tyson said eliminating the business exemption would be about “fairness, paying the same as other people.”
The panel didn’t approve any bills Thursday but could do so in coming days. Members might receive fiscal impact estimates related to the 4.4 percent single-bracket proposal today.
Francisco shared Kelly’s concern regarding a separate bill on the tax exemption for business owners. She suggested the Legislature can’t close the state’s budget shortfall without tax hikes that go beyond eliminating tax breaks for those 330,000 businesses.
“If people could do it by cutting spending, why didn’t they do that in the last four years?” Francisco asked. “We cut spending, but we didn’t cut spending as much as we borrowed and transferred. There’s no more money to borrow. There’s no more money to transfer. They’d like us to make cuts that a very conservative Legislature could not bring themselves to make over four years.”
The discussion in the Senate Tax Committee is just one route a tax deal could take. Negotiators from the House and Senate have been involved this week in talks on other proposals, but so far haven’t put those to a vote in either chamber.
House Speaker Ron Ryckman, Olathe, said Thursday a fresh round of negotiations between the House and Senate that had been scheduled for 10 a.m. was called off because “people are still talking to each other and trying to figure out what we can get the biggest coalition for.”
Asked whether the House would prefer the Senate to bring forward and vote on a solution first, he said, “that’s what we were originally thinking.”
“But we also know we can’t rely on waiting for them,” Ryckman added. “So we’re both working and trying to figure out something we can do.”
Meanwhile, Senate Majority Leader Jim Denning, Overland Park, said legislative leaders haven’t ruled out either finding a plan the governor won’t veto or cobbling together a deal with potential for a veto-proof two-thirds majority.
Denning said Brownback has indicated he would block a three-bracket income tax plan — he already did so earlier this session. Democrats and moderate Republicans favor such a plan. Kansas had one before Brownback’s signature 2012 tax cuts.
However, the governor has signaled he would let a two-bracket bill stand, Denning said, even if the top tax rate exceeds 4.9 percent.
“If we have consensus that the body wants a three-tier, then we need to get 84 and 27,” he said, referring to the number of votes needed in the House and Senate, respectively, to withstand a veto. “If we have consensus that the money matters and not the tier, then we need 21 and 63.”
Twenty-one and 63 are simple majorities in the two chambers.