TOPEKA – Top Republicans don’t expect the GOP-dominated Kansas Senate to pass a budget-balancing plan to increase taxes before scuttling out of the Statehouse on Thursday for a long holiday weekend.
Senators were taking up a bill to increase the state’s sales, cigarette and gasoline taxes to help fill a projected $406 million deficit for the fiscal year beginning July 1. The sales tax would rise to 6.5 percent from 6.15 percent, though the rate on food would drop to 6 percent.
The measure also would suspend an income tax exemption for more than 330,000 business owners and farmers for two years, replacing it with a less lucrative tax credit against businesses’ payrolls. The proposal backtracks on one of Republican Gov. Sam Brownback’s key economic policies, enacted in 2012.
Backtracking on that policy is a key issue, and the move is opposed by influential business groups, including the Kansas Chamber of Commerce and the National Federation of Independent Business. If lawmakers don’t reverse course, they'll have to rely more heavily on other taxes to raise new revenues.
Senate President Susan Wagle, Majority Leader Terry Bruce and tax committee Chairman Les Donovan emerged from an hour-long, Thursday morning meeting with GOP senators believing that even if the bill is rewritten, nothing would pass.
Yet the debate was going forward.
“We may come out of this with a flavor of what measures are more palatable than others,” said Wagle, a Wichita Republican.
The state’s budget problems arose after lawmakers heeded Brownback’s call in 2012 and 2013 to cut personal income taxes as an economic stimulus.
Legislators met Thursday for the 95th day of their annual session, five more than their leaders traditionally schedule, at a total cost of $43,000 a day.
GOP leaders planned an extended Memorial Day holiday for both chambers, starting Friday. They expected to withhold the $218 in daily salary and expense payments each lawmaker receives.
Neither chamber has passed a tax plan, and at the end GOP senators’ meeting Thursday, Bruce, from Nickerson, said, “I’m just not getting a sense that there is going to be healthy tax debate overall.”
Donovan, from Wichita, added: “It’s a feeling I’ve had for many months here.”
The Senate’s debate came a day after Brownback said he prefers not to draw “very clear lines” for GOP lawmakers on his 2012 policy.
The state Department of Revenue estimates that the exemption is worth about $220 million a year, or about 22 percent of the total income tax cuts for the next fiscal year. Lawmakers also have cut personal income tax rates, reducing the top one by 29 percent.
The Senate plan would raise $82 million during the next fiscal year by replacing the business profits exemption with an income tax credit equal to 1 percent of a business’ total payroll for this year and 2 percent for 2016.
The House Taxation Committee is considering a proposal to raise $23 million during the next fiscal year by imposing a personal income tax on some profits.