TOPEKA — Vote counting in the House amid bipartisan skepticism about prospects of passing a tax deal Wednesday delayed action on legislation boosting state revenue at least $500 million annually by escalating individual income tax rates and ending an income tax exemption for business owners.
But House Majority Leader Don Hineman, R-Dighton, told a meeting of House Republicans the vote would go ahead despite imprecise information about whether it would pass.
“We are not certain where the votes are,” he said. “We’ll find out shortly.”
House members walked from the Old Supreme Courtroom to the floor of the House, but in those few minutes the decision had been reversed.
“The situation is rather fluid at the moment,” Hineman said on the House floor. “There will not be a tax debate this afternoon.”
Factional and partisan demands on tax, budget and education funding complicated House and Senate negotiations executed with an eye to what Gov. Sam Brownback might sign into law. Brownback was successful in raising the state sales tax in 2015, but has fought higher income tax rates to fix budget problems. Democrats and moderate GOP legislators want more money for schools and to adopt a budget that no longer depends on stop-gap transfers from highway and pension funds. Conservative Republicans hunger for budget cuts above all else.
“It’s a teeter-totter,” said Jeff Longbine, an Emporia Republican and the Senate’s vice president. “You’ve got people who think it doesn’t raise enough. You’ve got people who think it raises too much. At some point, we need to come to the realization that nobody gets exactly what they want.”
The latest tax-hike bill endorsed by three House and three Senate negotiators — Senate Bill 30 — would add $515 million in revenue to the bottom line in the fiscal year starting July 1. That figure would rise to approximately $550 million in the subsequent fiscal year.
“We’re pretty close to what it might look like at this point, but how do we make sure this is the day that folks are willing to cast that vote that everyone is not looking forward to?” said Assaria Rep. Steven Johnson, leader of the House’s tax negotiating group.
At least 63 of 125 representatives and 21 of 40 senators must approve of the bill to get it to the governor’s desk. In February, Brownback vetoed the last tax reform bill sent to him. If the Legislature were to overturn a veto by Brownback with the necessary two-thirds majorities, the number of “yes” votes would need to climb to 84 in the House and 27 in the Senate.
The pending compromise was to have been put to a vote after lunch Wednesday in the House, but action was put on hold while leadership assessed depth of support.
“We’re trying to find out what it is this entire elected body wants to do,” said House Speaker Ron Ryckman, an Olathe Republican struggling to accommodate clashing interests. “Our goal from the beginning is to provide accurate information so people can make data-informed decisions. If that means taking another three or four hours to come up with that data, we’ll take it.”
Ryckman said legislative leaders had involved Brownback in talks on tax reform capable of generating $900 million in new revenue to balance the next two fiscal year budgets. He said “our assumption” was Brownback would veto the bill sitting on the House’s debate calendar.
The budget-and-tax debate has been rendered complex by an obligation to invest hundreds of millions of dollars in extra funding into K-12 public school districts to satisfy a ruling by the Kansas Supreme Court that the state’s system of financing education was unconstitutional.
“I’m willing to sit down and talk to anybody to resolve the tax issue and school finance,” said Senate Minority Leader Anthony Hensley, D-Topeka. “People need to sit down and hash it out. Get the numbers right.”
Under provisions of Senate Bill 30, the income tax exemption delivered by Brownback and GOP legislators in 2012 to owners of more than 330,000 limited liability corporations, sole proprietorships and S-corporations would be repealed. A law on the books that triggers automatic reductions in state income tax rates — the governor’s so-called “march to zero” plan to eventually get rid of state income tax — would be spiked.
The state would operate under a three-tier income tax rate structure with rates for the 2017 tax year at 3 percent, 5.25 percent and 5.6 percent. Kansas currently has two rates — 2.7 percent and 4.6 percent. In tax year 2012, those rates were 3.5 percent, 6.25 percent and 6.45 percent.
Rep. Sean Tarwater, R-Stilwell, said he preferred the Senate measure its support for a solution before the House weighed in. His view reflected a prevailing belief in the Capitol that passing tax legislation in the Senate will be more challenging than in the House.
“I stuck my neck out on the line the first time, and I got killed for it. The Senate blew it up. Whatever we vote on needs to come through the Senate so we know it’s going to stick and then we can consider it,” Tarwater said.
Tarwater was referring to House Bill 2178, the three-bracket tax bill that passed both chambers earlier this session but was vetoed by the governor. The House mustered support to override the veto, but the Senate fell a few votes short.
Rep. Dave Baker, R-Council Grove, expressed concern the top-earning tax bracket would pay 5.6 percent under Senate Bill 30, compared to 6.45 percent in 2012, before tax cuts signed by Brownback. In addition, he said, business owners like himself enjoyed the LLC exemption for several years while low-income individuals continued to pay income tax and absorbed the higher state sales tax rate of 6.5 percent.
“The little people have been paying taxes all along,” he said. “I’m not sure I can go back and present this as being the best solution.”