If Gov. Sam Brownback has his way, he may be able to overhaul the tax system in Kansas one more time.
And according to Republican Senate leaders, he’s willing to say goodbye to his prized LLC business tax exemption to get a bill to his desk that would make the new changes he’d like to see.
The Republican governor said in a statement Wednesday that he’d support legislation similar to a Senate bill that would impose a flat income tax rate of 4.6 percent on Kansans. That bill would also end the business tax exemption Brownback has long defended.
That flat tax rate, championed by some conservative Republicans, firmly injected Brownback back into the state Legislature’s tax debate as he appears ready to make some concessions as the state faces projected budget shortfalls of more than $1 billion through June 2019.
That doesn’t mean the flat tax will be an easy sell to lawmakers.
Wealthier Kansans already have their incomes taxed at 4.6 percent, while most individual filers who make less than $15,000 currently pay a tax rate of 2.7 percent.
“It’s a tax increase,” Sen. Caryn Tyson, a Republican from Parker who leads the tax committee, said about the flat tax bill. “But it’s about fairness.”
But the prospects of the flat tax passing may be dim as the Kansas Senate prepares to debate the bill Thursday.
“I think it hits middle-income Kansans the hardest,” Sen. Vicki Schmidt, a moderate Republican from Topeka, said about why she would not support the bill.
“It’s a tax increase,” said Sen. Dennis Pyle, a conservative Hiawatha Republican. “When are we going to address spending around this place?”
Several other moderate Republicans have said they won’t support a flat tax. Senate Democrats have already said they oppose the Brownback-supported measure, and some conservative Republicans have said they won’t support a tax increase in general.
“I don’t know that we can get 21 (votes) on it,” Sen. Julia Lynn, an Olathe Republican who supports the flat tax, said about the bill’s chances of passing.
Until late Tuesday, it looked like the Legislature may head home for the month without debating a new tax plan.
Back in February, Brownback vetoed a tax bill passed with bipartisan support that would have raised more than $1 billion over two years.
The Legislature had for the most part stalled out on moving forward with new tax plans ever since.
Brownback had been steadfast so far in opposing income tax increases and had continued to defend the LLC exemption as a benefit to Kansas.
That seemed to change this week.
Brownback met with Republican legislative leaders for around two hours Tuesday night and talked about taxes.
And Wednesday morning, Republican Senate leaders told their Republican colleagues that the governor might present a new tax plan later that afternoon.
That announcement was met with confusion and dismay from the divided Republican caucus and panned by Senate Democrats.
“To me, the governor’s lost any credibility he might have had before with tax,” said Sen. Tom Holland, a Baldwin City Democrat.
But by the time Senate Republicans met again in the afternoon, Brownback had decided instead to endorse the flat tax proposal and 4.6 percent rate being considered by the Senate.
“My goal has always been to make Kansas the best state in America to raise a family and grow a business,” Brownback said in a statement. “A flat tax accomplishes this goal by making taxes fair for everyone and encouraging economic growth.”
Senate Majority Leader Jim Denning said the governor had told him he would not veto two types of tax plans: the Senate’s flat tax proposal or a two-tiered tax policy as long as it has increases on consumption taxes on cigarettes and liquor.
Sen. Barbara Bollier, a moderate Republican from Mission Hills, said the roughly $652 million in increased revenue from the flat tax bill would not be enough to solve the state’s financial issues.
Asked whether moderate Republicans would support the flat tax bill, Bollier said no and added, “Could I laugh any harder?”
Lynn, who supports the flat tax bill, said that because lawmakers restored deductions, “the bill that you’re going to see tomorrow is going to be revenue neutral. ... Meaning, we’re not going to hurt anybody.”
But after days like Wednesday, Lynn said she feels like the Legislature will still be working well into June if it can’t find a compromise soon.
“Probably nothing big is going to happen tomorrow,” Lynn said. “There’s not going to be any big sigh of relief that all this is over.”