TOPEKA — The Senate approved and the House promptly rejected Tuesday night a bill escalating Kansas tax revenue by $1.2 billion during the next two years to wipe out a deep revenue shortfall and leave cash in the treasury to expand aid to public school districts.
Members of the Senate voted 26-14 to endorse Senate Bill 30, which was put together by House and Senate negotiators. The House scrambled to orchestrate a quick vote that initially showed the bill going down 62-59, but certain defeat led more than 20 representatives to flip their votes to “no.” Final tally: 85-37.
The bill featured a new upper income tax bracket targeting the most wealthy Kansans, which Gov. Sam Brownback previously vowed he would veto.
House Majority Leader Don Hineman, R-Dighton, said the objective of late-night wrangling was to get the bill through the legislative process and on Brownback’s desk as quickly as possible. If the governor were to veto the bill, Hineman said, that would allow the Legislature a chance to respond Friday.
“The clock is ticking,” Hineman said. “The public expects us to do our work.”
In February, Brownback vetoed a bill including a three-bracket income tax and repeal of the so-called LLC loophole for business owners.
The tax bill adopted by the Senate and deflected by the House would eliminate the 2012 state income tax exemption for farmers, lawyers and owners of 330,000 businesses that was a key feature of Brownback’s pro-growth policy agenda. It would step away from the existing two-bracket system through addition of the third bracket and by raising the personal income tax rates.
“There’s something for everybody to hate in this tax bill,” said Sen. Tom Holland, D-Baldwin City. “There are no instant winners here. It will be the largest tax increase in Kansas history. We are going to ask the citizens of Kansas to step up here big time to right the fiscal ship.”
Loss of income tax revenue and slumping oil and agriculture markets left the state with an anticipated shortfall of nearly $900 million through July 2019. The Kansas Supreme Court also is pressing lawmakers to add hundreds of millions of dollars annually in state aid to K-12 school districts.
“I will support this bill very reluctantly. We need to get Kansas back on a somewhat structurally balanced budget,” said Senate Majority Leader Jim Denning, R-Overland Park.
Sen. Ty Masterson, an Andover Republican, said polling showed Kansans preferred to close the deficit with a combination of spending reductions and tax increases. In the fourth year of the tax plan passed by the Senate, he said, the state again would be facing a deficit if the economy didn’t surge.
“Be honest with the people. This isn’t a have-to. I will be casting a heck no vote,” Masterson said.
The House voted last week to defeat a nearly identical bill. That previous House vote occurred on the five-year anniversary of Brownback signing a bill in 2012 that invested the state in supply-side economic theory.
Under the bill passed by the Senate, the state’s would have a lower income tax bracket of 3.1 percent, a middle bracket of 5.25 percent and a new upper bracket of 5.7 percent. The existing two-tier system taxes income at 2.7 percent and 4.6 percent.
The tax exemption for business owners would be repealed along with a law obligating future revenue increases be applied to reducing personal income tax rates. The bill also would extend for three years the STAR bond economic development program, but include a temporary ban on creation of new STAR bond districts.
Rep. Vic Miller, D-Topeka, attempted to delay House action on the tax legislation until today but was overruled on a vote of 67-51.
“People do not believe good laws are made after midnight,” Miller said. “We should not be voting on a tax increase of $600 million a year at this time.”