TOPEKA – A Kansas legislative committee on Tuesday advanced a new plan for balancing the state budget by increasing sales and cigarette taxes and reversing a break for business owners and farmers championed by Republican Gov. Sam Brownback.
The House Taxation Committee voted 8-6 to forward a bill to the full chamber for debate, without recommending whether members should pass it. The measure would raise about $400 million during the fiscal year beginning July 1, and the House could debate it later this week.
The measure also would raise the sales tax to 6.45 percent from 6.15 percent, although it would drop the rate on food to 5.9 percent. The state’s cigarette tax would increase 46 cents a pack, to $1.25 from 79 cents.
The bill would raise $101 million during the next fiscal year – about a quarter of the total amount – by ending a tax break enacted in 2012 at Brownback’s urging as an economic stimulus. The endangered policy exempted the profits of 281,000 business owners and 53,000 farmers from income taxes.
Brownback and the GOP-dominated Legislature must close a projected $406 million budget shortfall for the next fiscal year that arose after legislators slashed personal income taxes in 2012 and 2013.
“That begins with addressing in, I believe, a very modest way, asking the small businesses in our state to step up,” state Rep. Mark Hutton, a Wichita Republican who outlined the new plan, said during the committee’s meeting.
Brownback pushed for the past income tax cuts, and he’s touted the exemption for business owners and farmers as a pro-growth “small business accelerator.” Groups influential with the GOP are lobbying to preserve the policy, including the Kansas Chamber of Commerce and the National Federation of Independent Business.
The Senate planned Wednesday to debate its own plan to increase sales, tobacco and gasoline taxes. Its measure also would suspend the exemption for business owners and farmers for two years and replace it with a less lucrative income tax credit against their payrolls.
Senate Majority Leader Terry Bruce said it will be difficult to get any proposal modifying the tax break through his chamber because members don’t want to increase taxes for small businesses.
“They’re the backbone of the Kansas economy,” said Bruce, a Nickerson Republican.
Wednesday was the 97th day of the Legislature’s annual session, which is seven more days than its leaders normally schedule. It has cost more than $40,000 a day to run the session after the 90th day. Legislative researchers say only nine sessions in the past 40 years have lasted longer, with the record of 107 days set in 2002.
“We are at a point where we need to get things done,” House Taxation Committee Chairman Marvin Kleeb, an Overland Park Republican, said after its meeting Tuesday.
Republican legislators who’ve advocated increasing the sales tax to close the budget gap face criticism that the move would hurt poor and middle-class families more than wealthy ones.
Each chamber’s plan would drop the sales tax rate on groceries to address the issue. Under the Senate plan, the sales tax would rise to 6.5 percent on most items but drop to 6 percent on food, versus 5.9 percent on food in the House plan.
“That’s nice, but it’s very small,” said Rep. Tom Sawyer, of Wichita, the ranking Democrat on the House committee. “Working families are still going to spend a lot more money on sales tax.”