Tax policy has been the leading agenda for both chambers of the Kansas Legislature last week.
House Substitute for Senate Bill 29 has many different tax components. The most contentious item is the business income exemption temporary repeal. This bill would repeal for tax years 2015 through 2017 a provision that was enacted by the 2012 Legislature exempting certain non-wage business income from the individual income tax rate. The bill stipulates that all such income would become taxable at the lowest income tax rate, currently 2.7 percent. The exemption would be reinstated at the beginning of the 2018 tax year. Also, the loss add-back requirement implemented by the 2012 Legislature relative to certain losses would be repealed for tax years 2015, 2016, and 2017, however would be restored for the 2018 tax year.
Also with House Substitute for Senate Bill 29, there would be a freezing of the current income tax rates at the 2015 tax rate of 2.7 percent and 4.6 percent. The rate reductions would be suspended until the 2018 tax year and then would be reduced according to existing statute.
The sales tax rate also would be adjusted in this tax proposal. Currently, the sales tax rate is 6.15 percent and this proposal would adjust the sales tax rate to 6.45 percent, with the rate reducing back to 6.15 percent on July 1, 2018. There would be a reduction on the sales tax rate on food and that rate would be 5.9 percent and would not be subject to the sunset provision of the regular sales tax rate.
There are also provisions of eliminating the sunset provision for the rural opportunity zones, additional sales tax provisions for Bourbon, Douglas, and Thomas counties, and clarifying property tax levying for fire districts over 15 mills.
On Saturday, the 100th day of the 2015 session, Gov. Sam Brownback held a news conference detailing his latest tax proposal. The governor focused on income taxes and consumption taxes. His tax plan would eliminate income taxes for 388,000 low-income Kansans, which would be a reduction in tax revenues of approximately $18.9 million in fiscal year 2016. His proposal would freeze the current income tax rates through the tax year of 2017 and starting in 2018 those income tax rates would see a reduction. He also introduced in his tax plan of treating guaranteed payments for limited liability corporations as wage income. Consumption tax increases from the governorís plan would be a sales tax increase to 6.65 percent and increasing the taxes on cigarettes by 50 cents. He also suggested simplifying the tax code by eliminating various deductions. The governorís plan would generate enough revenue to have a positive ending balance in 2016 of approximately $81 million. Each chamber is now reviewing the governorís plan.
On Friday, we debated the conference committee report on House Bill 2223, which addresses changes to the liquor laws in the state of Kansas. The bill would allow drinking establishments to sell and serve alcoholic liquor infused with spices, herbs, fruits, vegetables, candy, or other substances.
The bill would ban the sale and service of powdered alcohol, would allow public venues, clubs and drinking establishments to offer automated wine devices, and allows alcoholic beverage distributor licensees to provide samples of spirits, wines, and beer, allows any person engaged in business as a Kansas vineyard with more than 100 vines to apply for an annual vineyard permit.
The bill would also allow cities to pass ordinances allowing liquor retailers, microbreweries, micro distilleries, and farm wineries to locate within 200 feet of any public or parochial school, college, or church in a commercial district.
The two largest changes to the existing liquor laws are the allowance of the consumption of alcohol on unlicensed premises and at the Capitol. The first would allow alcohol to be consumed at businesses that do not sell alcohol; this is also referred to as the BYOB provision. This has been an issue throughout the state where art businesses are having painting parties and allow individuals to bring their own alcoholic beverage, namely wine. Current law states that the business needs a liquor license, even in cases where patrons bring their own alcohol. The other is allowing alcohol at the Kansas State Capitol, only for official state functions that are nonpartisan in nature, and would require the prior approval by the Legislative Coordinating Council.
The conference committee report for House Bill 2223 passed the House, 89-31.
There has been a group of legislators in the House, including myself, that has been meeting to deliberate about tax legislation that will address the revenue shortfall that we are experiencing and, at the same time, restructure the tax policy for Kansas by adding long-term revenue stabilization. We have been meeting multiple times a day to discuss proposals and strategies. Our intent is to pass tax policy that will be greatly beneficial to the people of Kansas and create a stable revenue environment.
Rep. Troy Waymaster, R-Bunker Hill, represents the 109th House District.