Kansas House committee signs off on tax increases, repealing LLC exemption

Tax increases of a slightly different flavor are on the move in the Kansas House.

A bill approved 13-9 by the House tax committee Thursday afternoon would renew a third income tax bracket and repeal an exemption for roughly 330,000 business owners.

It could, at some point, come to the House floor for a vote.

But it wasn’t clear Thursday afternoon when, or if, that would happen.

Rep. Erin Davis, an Olathe Republican, said she supported ending the tax cut for the business owners. But this bill, she said, goes too far.

“We have so many new people,” Davis said of the large freshman class of lawmakers in the House. “It’s hard to say how this would go over. I would say it would have a difficult time passing.”

The bill is different from the legislation that Senate leaders nearly brought to a floor debate earlier in the day.

That legislation would have also ended the LLC tax exemption for business owners, while also raising two income tax rates.

But the bill the House tax panel approved would keep the lowest income rate in place, raise the second rate to 5.25 percent and add a third rate of 5.45 percent.

Single filers who make more than $50,000 and joint filers making more than $100,000 would fall into the highest bracket.

Gov. Sam Brownback’s 2012 tax cuts threw out a third bracket with a rate of 6.45 percent.

“No one wants to raise taxes,” said Rep. Kathy Wolfe Moore, a Kansas City, Kan., Democrat. “But because of the Brownback tax plan we are where we are, and I think what I’ve heard consistently and clearly from the public is they want this fixed.”

Rep. Tom Sawyer, a Wichita Democrat who amended the bill, estimated the legislation would bring the state roughly $600 million in the first year and around $475 million the year after.

“Anything can happen from here on out,” Sawyer said of the bill’s path moving forward. “At least we did our jobs.”

The state is facing shortfalls of roughly $1 billion through the end of fiscal year 2019.

“We’ve got a huge budget hole to fill,” Sawyer said. “At least there’s a revenue piece now, and we can work on cutting expenses on the other side, as well.”

Rep. Steven Johnson, the chairman of the House tax committee, said he appreciated the committee developing a solution.

“It’s not entirely what I want,” said Johnson, an Assaria Republican. “I don’t know that it’s entirely what anyone wants. But I think it is a direction that we wish to go and will continue working on.”

This story was originally published February 9, 2017 at 7:26 PM with the headline "Kansas House committee signs off on tax increases, repealing LLC exemption."