Gov. Sam Brownback swatted down a Republican-led Senate tax plan Monday that would raise personal income tax rates and fundamentally end his 2012 tax cut for roughly 330,000 business owners in the state.
The proposed increases would bring the state roughly $288 million in the first year and $372 million in the second, according to the legislation’s fiscal note.
Senate President “Susan Wagle’s tax plan needlessly harms the real people that serve as the lifeblood of Kansas,” Brownback said in a statement about the Senate bill. “It punishes the middle class — teachers, police officers and nurses — working hard to provide for their families and serve their communities. It punishes job-creators, the backbone of our Kansas economy.”
Brownback’s office released the statement Monday afternoon toward the end of a hearing on the bill.
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Senate Majority Leader Jim Denning, an Overland Park Republican, was caught off guard by the governor’s statement.
“It’s a surprise because the governor tasked the Legislature to come up with a solution to structurally balance the budget, including tax policy,” Denning said. “The message to me was he was going to stay on the sidelines until we did our work.”
The governor’s criticism of the tax plan wasn’t the only critique legislators received. Lobbyists, individual Kansans and organizations asked the committee to leave the tax policy alone.
Drew Quinn, a commercial real estate broker from Overland Park, said the legislation was a radical change that would hurt the state’s standing with businesses and make Kansas look unstable.
He compared ending the tax exemption for limited liability companies to “private-sector job killing.”
“If you undo what you’ve just done, you look like a joke to the rest of the country,” Quinn said.
Barbara Paulus, a retiree from Bonner Springs, asked lawmakers not to raise her taxes.
“To tax something is to discourage it,” Paulus said.
A slim crowd testified in support of the bill, including a lobbyist with the Kansas Association of School Boards.
Bernie Koch, with the Kansas Economic Progress Council, said the legislation was a good start.
“We think it needs to go further,” Koch said.
The legislation, Senate Bill 147, would close the nicknamed “LLC exemption” retroactive to the start of 2017 and raise the two individual income tax rates.
The bottom rate would move from 2.6 percent to 3 percent, according to the bill, and the higher would go from 4.6 percent to 4.9 percent.
Brownback has maintained his support for the tax cuts, especially the LLC exemption.
But support from lawmakers for the cut has eroded, with members of both parties calling for an end to the 2012 move.
The state is facing a roughly $320 million shortfall in 2017.
An even larger shortfall of $582.6 million is projected for the 2018 fiscal year that starts in July.
While the proposed tax increases would help mend the budget shortfall, it would not cover the entire budget gap.
That makes budget cuts, or other tax increases, still possible as the legislative session enters its second month.
Sen. Dan Goddard, a Republican from Parsons, said he’d recently received a message from one of his constituents asking him to raise their taxes.
“That’s a story that I hear time and time again from my constituents,” he said. “I think that people have a very strong feeling that we’re in serious financial trouble.”