TOPEKA — Let’s try this again.
Days after a budget and tax deal fell apart in the Senate, the chamber’s tax committee met Monday to begin work anew. But the first option senators considered — Gov. Sam Brownback’s tax proposal — received a less-than-enthusiastic response.
“Absolutely not,” Sen. Julia Lynn, R-Olathe, said when asked if she was more open to Brownback’s proposal after problems with the Senate deal last week.
The proposal, Senate Bill 175, would reinstate income tax on rents and royalties, but largely maintain an exemption for limited liability companies and other corporate structures 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 also would 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.
Revenue Secretary Sam Williams said the bill was crafted “to get from point A to point B with the least amount of damage” to current policy.
Officials with the Kansas Department of Revenue estimate the bill would raise $191 million next fiscal year. Kansas faces a budget shortfall of more than $500 million that year.
Potential tax increases on alcohol and tobacco have raised concerns among lawmakers near Kansas’ border areas, especially in metro Kansas City. Higher taxes might push shoppers into Missouri, they fear.
“I think those of us, especially in this particular hearing that live on the border, we have to be extremely careful about how we move forward,” Lynn said.
The proposal that imploded in the Senate would have raised income tax rates and reinstated taxes on limited liability companies without increasing tobacco and liquor taxes. Senate GOP leaders called off a planned Thursday debate after realizing Republican votes for the measure were dropping off.
Democrats want a third tax bracket. Kansas had a third, high bracket before the passage of the 2012 tax policy.
The Senate Tax Committee has scheduled a hearing Tuesday on the Democrats’ plan. Sen. Marci Francisco, D-Lawrence, said raising tobacco and liquor taxes wouldn’t generate enough revenue to fill the budget shortfall and would target specific businesses.
“I’m a little more sympathetic with regards to the taxes on tobacco than I would be on alcohol,” Francisco said.
Her comments came after a hearing where representatives from health and medical associations urged lawmakers to increase tobacco taxes as a way to improve public health. They said increases will lower rates of smoking and tobacco use.
Restaurant owners spoke against increasing liquor taxes. They argued the change would place them at a disadvantage to spots just across the border.
Senate President Susan Wagle, R-Wichita, and other Senate Republican leaders have slammed Brownback’s budget and tax proposals as failing to get the state budget to structural balance. Senate Republicans appear unlikely to adopt large portions of the governor’s plan, but they could take elements, such as drawing from a long-term investment fund maintained by the state.
Meanwhile, in the House, lawmakers are awaiting a possible debate on a tax bill advanced to the floor last week. The plan approved by the House Tax Committee would reinstate a three-bracket system and repeal the exemption for LLCs.
The committee chairman, Rep. Steven Johnson, R-Assaria, said the panel will look at sales taxes, the governor’s tax proposal and other issues while awaiting a debate on the House floor.
“This gives us a chance to catch up on some other issues,” Johnson said.