The Kansas House's three-hour debate on tax policy Thursday demonstrated enough support to pass legislation allowing businesses and wealthy individuals to avoid $187 million in state income taxes and for provisions to slice a chunk off the state's food sales tax and impose a new tax on internet transactions through out-of-state retailers.
The bill advanced to final action on a vote of 80-42, which was far more than the minimum 63 required for adoption but less than the 84 needed to override a potential veto by Gov. Laura Kelly. The Democratic governor said she would prefer not to substantively revise the state tax code until the budget was stabilized.
"It will clearly be a tax increase if we don't pass it," said House Speaker Ron Ryckman, an Olathe Republican.
The Senate previously approved a bill in response to reform in federal tax law, which delivered "windfall" revenue to the state treasury in Kansas. The Senate didn't include the House's food sales tax reduction of 1 percentage point, which would cost the state $43.5 million annually, nor the internet sales tax capable of initially generating $21.7 million for the state.
House and Senate Republicans argued the core Senate Bill 22 was necessary because it would be unfair to deny multinational corporations the full force of federal tax breaks on foreign income.
In addition, GOP legislators said it would be inappropriate for individual Kansans to lose the right to itemize deductions on state income taxes by taking advantage of a new, elevated standard deduction for federal income tax purposes. Under current Kansas law, individuals must take parallel action on deductions on state and federal forms.
However, Democrats said the state shouldn't reward big companies that hid income overseas and ought to use windfall revenue to cut more from the state's 6.5 percent sales tax on food.
Rep. Jim Ward, D-Wichita, said the legislation was fiscally irresponsible and a return to the tax policy "experiment" launched in 2012 by then-Gov. Sam Brownback. He signed a bill, mostly repealed in 2017, eliminating the state income tax on 330,000 business owners and dropped individual income tax rates. The state suffered through years of budget woes, prompting increases in the state sales tax and raising the income taxes.
"This bill provides a $140 million tax break to the richest 1 percent of multinational corporations while the food sales tax remains the highest in the country," Ward said.
Rep. Blaine Finch, R-Olathe, said the pending House bill was inaccurately compared to the 2012 decision by Brownback and state legislators to slash income taxes. He said Senate Bill 22, excluding the food and internet provisions, was a response to alteration of federal law.
"This is a concerted effort by members of this Legislature to protect Kansans from changes that they didn't ask for or anticipate," he said.
Representatives adopted an amendment by Rep. Ken Corbet, R-Topeka, to match the state's definition of "food" for purposes of sales tax with the description in federal law guiding the Supplemental Nutrition Assistance Program.
SNAP recipients can't use the benefit to get alcohol, toilet paper, soap, medicine or cosmetics. SNAP benefits can be devoted to purchases of candy, which became an issue at the Capitol because of location of a Mars candy plant south of Topeka.
"If it's good enough for the SNAP program, it's good enough for Kansas," Corbet said.
The House also rejected North Newton Rep. Tim Hodge's amendment to delete the corporate tax breaks, retain the option to itemize on state income taxes and cut the state's food sales tax in half. The state's habit of showering corporations and billionaires with tax breaks should end, he said. His amendment failed on a vote of 39-82.
"It seems like we are snapping our fingers for the ... giant, multinational, global corporations. They always get their wallets fattened. But when it comes to a simple 3.25-cent sales tax reduction on food, we can't snap our fingers for them? Is that how we're going to play today?" Hodge said.