TOPEKA — Vocal participants in a biting Kansas Senate debate on a bill granting a prompt $21 million tax break to business owners did so with weighty political and policy issues in mind.
Sen. Caryn Tyson, the Parker Republican who led the charge for passage of Senate Bill 303, is among candidates for the Second District congressional seat to be vacated by U.S. Rep. Lynn Jenkins, R-Kan. It was overwhelmingly approved by the Senate in a vote indicating the bill had the traction to be passed at any juncture in the session by the GOP-dominated Legislature and signed into law by Republican Gov. Jeff Colyer, who is engaged in a difficult campaign for governor.
Quick movement on the tax deduction for investment in machinery and equipment available since 2012 to corporations, but not owners of other business organizations, would offer Tyson a compelling talking point on the campaign trail. Her audience would be owners of more than 330,000 limited liability companies, sole proprietorships and other businesses who enjoyed a full exemption from state income tax until the revenue-strapped 2017 Legislature repealed that law.
“The sooner we can pass this bill, the quicker businesses will understand what is available to them,” Tyson said. “Small business would be on the same playing field with large corporations.”
On the other hand, Sen. Barbara Bollier, who also voted for the bill, expressed dismay Senate leadership permitted a measure depleting the state treasury onto the Senate floor so early in the 2018 session. Bollier argued targeted tax relief should await update of state revenue estimates in April and passage of a bill resolving the Kansas Supreme Court’s mandate to fix the state’s unconstitutional school financing system.
“I support local business, but it is not the right time to be cutting taxes,” the Mission Hills Republican said. “We do not yet know what our revenues will be, what will be required to settle the Gannon school funding case and what our budget needs to be for 2019.”
She said a better investment option for the Senate would be a bill expanding Medicaid eligibility to allow 150,000 Kansans to gain health insurance. In 2017, a majority of the Kansas Legislature voted for expansion but the bill was vetoed by then-Gov. Sam Brownback. If approved in Kansas, the state’s share in the first year would be a projected $25 million with the federal government responsible for 90 percent of the cost.
“If we are truly listening to our small businesses, we must bring forward and pass Medicaid expansion,” she said.
Under current law, Kansas corporations and financial institutions can claim an expensing deduction for investment in machinery and equipment placed into service in Kansas. The Senate bill would enable owners of LLCs to claim that deduction retroactive to the 2017 tax year. The first-year price tag is $21 million, but once dust settles the state would sacrifice approximately $10 million annually to that group of business owners.
The Senate adopted the Tyson bill last week on a vote of 31-8. It was forwarded to the House with backing from Tyson; Leavenworth Sen. Steve Fitzgerald, who is running against Tyson in the August congressional primary in the 2nd District; Topeka Sen. Laura Kelly, who is seeking the Democratic nomination for governor; and Topeka Sen. Vicki Schmidt, a Republican campaigning for state insurance commissioner.
Bollier attempted to postpone action of the bill by suggesting it be returned to the Senate Assessment and Taxation Committee, which is chaired by Tyson. That motion was defeated, but Tyson wasn’t eager to talk about necessity of prompt Senate action on tax-reduction bill.
“Do you have an opinion on whether this bill is urgent for today or could wait?” Bollier said.
“I do have an opinion,” Tyson answered.
“Would you care to share that opinion?” Bollier asked.
“I don’t think it’s relevant for the bill today,” Tyson said.
Sen. Tom Holland, a Baldwin City Democrat who was the Democratic nominee for governor in 2010, said he supported tax fairness and made the motion in the tax committee to endorse eventual passage of Senate Bill 303.
However, he said, this bill ought to be idled until later in the session.
“Our first priority should be school finance,” Holland said. “Small businesses not only want tax fairness, they want their children and the children of their employees and the children of their customers to attend fully funded schools.”
Sen. Julia Lynn, an Olathe Republican and chair of the Senate Commerce Committee, voted for the tax-cut bill. She also said more ought to be done by lawmakers to improve tracking and accountability for $6 billion in annual tax exemptions and credits woven into Kansas law.
“Kansas is one of five states in the nation with no regularly scheduled oversight and evaluation,” she said. “There is currently no policy in place directing the Legislature regarding eligibility parameters.”