We didn’t see a lot of asterisks on those campaign handouts last year in which candidates — and a lot of successful legislative candidates — promised to repeal the 2012 tax law which exempted “non-wage income” from most notably limited liability companies.
If there ever was a bull’s-eye on the T-shirts of a group of at least 330,000 Kansans who own those LLCs, it was last election. The pitch was to eliminate the LLC exemption which was sold back in ’12 as a way to make the Kansas economy flourish — which didn’t happen.
So, the campaign trail solution was to reimpose taxes on those LLCs and fix everything. That was the slogan.
While we didn’t see an asterisk, or even a footnote on those campaign flyers, most of the successful campaigners for House and Senate seats didn’t mention that just the LLC “fix” doesn’t really fix the whole problem.
Anyone remember a flyer that read: “I’ll represent my constituents by raising your income taxes, oh, and of course, getting those LLCs to pay up, too … ”
Well, lawmakers are now stuck with both ending that LLC income tax vacation while also pulling more money from regular paycheck-earning Kansans’ pockets. That $1 billion or so in decreased income tax receipts the past four years? Well more than half of it was caused by lower income tax rates on wage earners, or the W-2 crowd, as they have become known in the Statehouse.
Lawmakers the past week have been trying to assemble a new tax bill that will raise enough money to operate the state — to finance public education, welfare, health care, public safety and all of that stuff. But it is the additional tax on individuals that is the political problem.
Which, not surprisingly, makes that simple, widely promised and sought by voters move to tax the non-wage income of LLC owners almost dangerous to the rest of the tax bill.
It’s the one tax that nearly everyone except the hard-core Republican right and Gov. Sam Brownback is in favor of. Which means canny conservatives might just float out a simple “tax the LLCs” to the House or Senate and watch nearly everyone vote for it. It’s about that simple. Now, both chambers have passed bills that include that LLC provision, but not as one simple bill containing only the LLC provision that we all saw candidates talk about last November.
That one simple bill gives legislators a vote that they promised, with no damage to the rest of their voters. It’s a bull’s-eye, and the one that remains popular with what some polls report are as many as 80 percent of Kansans.
Nope, doesn’t fix everything, but it’s the campaign promise that is simply made and delivered on.
And after that campaign-promised vote is made, interest tends to fall off on raising taxes on everyone else who pointed at the LLCs but never much considered their own bank accounts are going to shrink due to higher taxes.
It’s going to be interesting to watch the leadership of the House and Senate and what it can do to prevent a single-issue LLC bill to get to the floor for debate. It’s tough for lawmakers who realize rates on all other taxpayers are going to have to rise to vote against that single-issue LLC bill that doesn’t eliminate the problem, but is widely popular.
Tactics are the game now, how to assemble a bill that actually will raise enough money to give Kansans services they want and need and not just meet those narrow campaign promises.
We’ll see how that works out.
Syndicated by Hawver News Co.
of Topeka, Martin Hawver is publisher of Hawver’s Capitol Report.