TOPEKA — The House loudly rejected a plan Friday to fill the state's budget hole by raising hundreds of millions of dollars in new revenue — leaving the Legislature no closer to passing a balanced budget.
A 90-minute debate brought into the open raw divisions within the House Republican caucus as members agonized over the prospect of raising taxes. Ultimately, lawmakers sent a signal they do not want to balance the budget solely with greater taxes on consumption.
"It would appear today the body has spoken that a consumption-only tax program is probably not going to occur, certainly under this scenario, anyway," said Rep. Marvin Kleeb, the chairman of the House Tax Committee.
The plan voted down would have raised approximately $362 million, with another $40 million to $60 million raised through yet to be approved fees on managed care organizations. It would have increased the state's sales tax to 6.85 percent — the rate on food sales would be 5.9 percent. The state's current sales tax rate is 6.15 percent.
In addition, the bill would have eliminated $97 million in deductions and exemptions while including receipt of $30 million from a proposed tax amnesty program that would be launched later this year.
The bill failed on a voice vote. The "no" votes echoed much louder in the chamber than "yes" votes. No attempt was made to call for a recorded roll call vote that would have put lawmakers on record either voting in favor or against a tax increase.
Friday's no vote means neither chamber has approved a tax plan to fill the state's budget shortfall. Lawmakers need to find nearly $400 million in either spending cuts or new revenue next year.
In a statement after the vote, House Speaker Ray Merrick, R-Stilwell, said the process was working. Finding a proposal that reaches the needed 63 votes to pass takes time, deliberation and consensus-building, he said.
House Minority Leader Rep. Tom Burroughs, D-Kansas City, called the plan's tax increases regressive and indiscriminate. The legislation, he said, would have subsidized Gov. Sam Brownback's failed economic experiment.
No lawmakers — either Republican or Democratic — offered amendments to repeal the 2012 personal income tax rate reductions.
Brownback has called on the state to move toward consumption taxes to fund government. Approached about Friday's vote, the governor's spokeswoman offered only a general statement.
"The governor will continue to work with the Legislature to craft policy that supports economic growth and balances the budget," spokeswoman Eileen Hawley said.
The House Tax Committee had only sent the legislation to the floor earlier this week after days wrestling with a number of proposals that were discarded. With Friday's floor vote, the committee will return Monday to try to come up with a solution more amenable to the full House.
Kleeb said some lawmakers believed the proposed sales tax increase was too much.
"I've had a number of members state to me they feel 6.85 is too high as a sales tax rate, particularly for the border counties, and I think you saw some of that thinking today," Kleeb said.
Some Republicans, including Senate President Susan Wagle, have called for changes to the state's tax exemptions on business income. The number of LLC filers taking advantage of the exemption has far outstripped the number anticipated when the exemption was put in place in 2012.
During its deliberations in the past few days, the House Tax Committee rejected plans that included eliminating the exemption for LLCs. And on Friday, the House joined the committee in turning down an amendment that would have ended the exemptions.
"To me, the 900-pound gorilla in the room seems to be our division on this one issue," said Rep. Marc Rhoades, R-Newton.
Rep. Jim Ward, D-Wichita, asked lawmakers whether they would begin to address what he called the largest tax loophole in Kansas history.
"Right now as you sit in these chairs, 333,771 people and businesses who use services and demand quality from our state are paying no state income tax to help fix the problem," Ward said.
But Kleeb indicated the no vote on stripping the LLC exemption does not necessarily mean lawmakers do not want to see it ultimately approved. Rather, the purpose of Friday's debate was to take an up or down vote on a clean consumption-only tax package.
The House also turned down an amendment from Rep. John Rubin, R-Shawnee, to sunset the sales tax increase in mid-2017. Rubin said there is still some room on the margins to reduce spending, but there is not enough spending that can be cut to close the budget gap.
Rubin's amendment faced opposition from Rep. Dennis Hedke, R-Wichita, who said a sunset of the sales tax increase works against the concept of a "fair tax" and efforts to eliminate the income tax.