Gov. Sam Brownback will veto a tax bill that would have raised more than $1 billion for cash-strapped Kansas over two years by rolling back his signature policies.
Brownback announced his decision Tuesday night at the annual dinner of the Kansas Chamber of Commerce, one of the interest groups that has most aggressively lobbied to maintain the tax cuts Brownback ushered into law in 2012.
Brownback panned the bill as “a big, retroactive income tax increase” and announced his plans to veto it, prompting hoots, applause and whistles from the crowd of business owners and Republican Party stalwarts that had gathered at the Kansas Expocentre for the dinner.
Brownback will veto the bill Wednesday in his ceremonial office, the place where he normally signs important legislation.
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Brownback’s announcement came less than three hours after his office officially received HB 2178, which would have increased income tax rates and eliminated a tax exemption for business owners.
His veto sets up a potential battle with lawmakers and raises doubts about how Kansas will fill its long-term budget gap, which stands at more than $1 billion through June 2019.
“The path forward is not clear,” said Rep. Steven Johnson, an Assaria Republican who chairs the House Taxation Committee.
Brownback promised to work with legislative leadership to come up with a different plan to fix the state’s budget gap.
“I do ask the people in the room to help us sustain this veto,” Brownback said. “This is bad policy for Kansas. This will hurt growth in this state. Growth is what we need. We need to grow.”
Johnson’s committee held a quick meeting late Tuesday to talk about other tax plans the panel could consider later this week in anticipation of a veto.
“I don’t have a vote count to say that I know that it’ll happen in the House,” Johnson said. “I think that I lose some of the willingness to take a hard vote on taxes again and again when someone is confident it doesn’t go anywhere across the hall.”
Some lawmakers are ready for a fight.
“We should continue to send him the bill that the people of Kansas voted for in the last election,” said House Minority Leader Jim Ward, a Wichita Democrat.
Lawmakers could attempt to override the governor’s veto, which requires a two-thirds majority in each chamber, but Ward said “it may be better strategically to just send it to him again, again and again.”
There’s no limit on the number of times the Legislature can send Brownback the bill, said Ward, who compared it to a parent refusing to let a child leave the dinner table until he has finished his vegetables.
Brownback ushered in tax cuts during his first term with the promise that they would spur job growth, but many analysts have blamed those cuts for the state’s budget woes in recent years, and the policies have faced backlash.
Moderate Republicans and Democrats gained seats in the most recent election campaigning on the promise to end Brownback’s tax experiment.
The bill would have rolled back Brownback’s signature policy, a tax law that allows the owners of limited liability companies and other businesses to pay zero state tax on their business income. It would have also set up a third tax bracket for high income Kansans, similar to the system in place before Brownback took office.
Under the legislation, married couples earning more than $100,000 would see their state income tax rate jump from 4.6 percent to 5.45 percent.
Couples earning between $30,001 and $100,000 would see their income tax rate rise from 4.6 percent to 5.25 percent, while couples making $30,000 or less would see their current tax rate of 2.7 percent unchanged.
Scott Drenkard, director of state projects at the Washington, D.C.-based Tax Foundation, said that the legislation would have given the state a sustainable tax system.
Drenkard, who came to Kansas to testify before the Legislature earlier this session, said that the state’s “previous attempts at fixing this problem have been temporary short-term solutions and every indication is the problem is a systemic one that cannot be patched over.”
Brownback is scheduled to fly to Washington, D.C., for the Conservative Political Action Conference on Wednesday and is scheduled to stay there through Monday for a conference of the National Governors Association and meetings at the White House.
“That’s not a good message,” said Bob Beatty, a political scientist at Washburn University in Topeka. Beatty said that Brownback’s absence could increase the chances of an override.
An override would require 84 votes in the House and 27 in the Senate. Lawmakers fell short of both those totals when they passed the bill last week.
“The House looks like they have override numbers. The Senate, it’s close,” Beatty said.
Rep. Melissa Rooker, a Fairway Republican, said that she would love to see lawmakers attempt an override.
“We did what the governor challenged us to do. We sent a tax plan to his desk. It’s balanced, it’s fair…it restores solvency to the state,” she said.
Another option is to negotiate with the governor on a compromise plan. Rooker said that the governor doesn’t appear willing to do that at this point.
Brownback’s own plan for fixing the budget shortfall would primarily rely on sources of one-time money to get the state through 2019, but he has previously indicated that he may be open to a tax plan that taxes a business owner’s income above a certain threshold, while exempting the rest.
Sen. Mary Pilcher-Cook, a Shawnee Republican who opposed the tax bill, said she would be glad to see the governor veto “this huge tax increase” before the governor’s decision was officially announced.
“Now we can get down to some serious business and look at cutting spending and really meeting the needs of the state,” she said.
But the bill’s supporters say Brownback’s decision reflects a disconnect with the majority of Kansans.
“He is out of touch with the people of Kansas,” said Rep. Stephanie Clayton, a Republican from Overland Park. “The Republicans who voted in favor of this are very much in touch with the people of Kansas and their votes reflect that.”