The Kansas Legislature sent Gov. Laura Kelly a bill Thursday massaged to help multinational corporations and individuals avoid paying state income taxes, lower the state's sales tax on food and impose a sales tax on out-of-state businesses making internet transactions.
The core of the bill emerged in response to changes in federal tax law that would — without adjustment of Kansas tax statutes — deliver a revenue "windfall" to the state treasury. Businesses would be hit with $137 million in state income taxes and individual taxpayers would pay an extra $50 million to the state if the Legislature and Gov. Laura Kelly don't consent to modifications of state law.
In addition to windfall provisions previously approved by the Senate, the House sweetened the bill to include the 1 percentage point, or $43 million, reduction in sales tax on food starting Oct. 1. The House also decided to insert a sales tax on internet businesses starting in October to generate about $21 million annually.
"I think this is a fair bill," said Senate President Susan Wagle, R-Wichita. "A vote against this bill is a vote for a tax increase."
The Senate voted 24-16 to concur with the House's tweak to Senate Bill 22. The measure emerged from the House on a vote of 76-43 in early March.
Senate Democrats registered objections to provisions linked to the federal windfall and the decision to include modest shrinkage of the unpopular 6.5 percent sales tax on food in a bid to pressure the Democratic governor to sign it. In addition, Democrats said slashing state revenue was an irresponsible flashback to 2012, when then-Gov. Sam Brownback signed a massive tax cut bill that cratered the budget.
"They understand what is going on," Democratic Sen. Vic Miller said in reference to the voting public. "When the governor vetoes it, it will be crystal clear."
Sen. Tom Holland, D-Baldwin City, said debate on the bill triggered in his mind lyrics from a Grateful Dead tune: "What a long, strange trip it's been." He said the tax bill would strip the state of cash desperately needed to fund key state government priorities shared by a bipartisan contingent of lawmakers.
He said the public wasn't demanding tax relief for multinational companies that concealed profits overseas nor for individuals who want to take an elevated standard deduction on federal taxes and itemize deductions on state taxes.
"I don't know about what you've been hearing from your constituents, but I haven't seen the pitchforks and torches outside my residence," Holland said.
Sen. Richard Hilderbrand, R-Baxter Springs, said Senate leadership should have provided members an opportunity to strip the House's sales tax provisions out of the bill. He voted for the "Catch-22" measure to avoid imposing a tax hike on businesses and individuals because of the windfall.
The Senate also approved Senate Bill 142 to serve as a blueprint for complying with the Kansas Supreme Court's order to enhance state aid to K-12 public education in a manner designed to address inflationary costs.
The bill forwarded to the House contained increases of $90 million annually in the next four fiscal years, but it didn't match the latest demand of Schools for Fair Funding, an organization representing plaintiff districts in the case before the Supreme Court. The House is working on a different school finance bill.
Senators also endorsed Senate Bill 150 to prevent landlords from evicting or refusing to lease to individuals for having been or being in imminent danger of being a victim of domestic violence, sexual assault, human trafficking or stalking. Under the bill, tenants wouldn't be liable for rent if they vacated the premises to flee danger and the landlord was notified.