Facing a more than $400 million budget hole, the Kansas Senate Assessment and Taxation Committee agreed Tuesday to send a package of nine assorted tax increases to the full Senate for consideration. It’s an effort to break the logjam over taxes and budget that has kept lawmakers in Topeka past their 90th-day deadline for adjournment.
The plan would freeze income tax rates, rather than continuing to phase them down to zero over time. It also would increase the sales tax on a pack of cigarettes by 50 cents, lower than Gov. Sam Brownback’s original proposal of $1.50 per pack.
Public health advocates have supported the larger increase, saying it would keep about 50,000 Kansans from starting or continuing to smoke and reduce the $1.12 billion that it costs to treat tobacco-related illnesses in the state. However, they say a 50-cent increase isn’t enough to produce those health benefits.
The proposal would raise the state sales tax rate from 6.15 percent to 6.5 percent, with food taxed at 6 percent. In addition, it would do away with a provision that made some farm and business income exempt from taxation. The repeal would be retroactive to the current year. Instead, there would be a tax credit applied to payrolls.
Other proposed changes include a 5-cent-per-gallon increase in motor fuel taxes, an amnesty to encourage payment of delinquent taxes and reducing the level of itemized deductions allowed on state income tax returns.
All told, the changes would generate an estimated $496 million in new revenue for the next fiscal year, and leave the state with an ending balance of a little less than $90 million.
Committee chairman Les Donovan said this is a proposal he can live with, because it’s time for compromise.
“We were hired here to do something,” he said. “We need to learn the art of compromise. It’s not a dirty word. Let’s try to get together, and work as a committee.”
Donovan’s frustration with the intransigence of the various factions in the Legislature was evident.
“We shouldn’t be paid if we’re not getting anything done,” he said.
The 2015 session was scheduled to end Saturday. Donovan has proposed shutting off legislative pay by Friday, as an incentive for lawmakers to agree on a budget. The idea received the support of seven senators on the 11-member panel, although a bill to enforce that pay halt has not been drafted.
Donovan reiterated his view that the $400 million budget hole is not an indication that exempting certain business income from taxation — a change the Legislature approved in 2012 — as a way to induce growth is ineffective.
“The problem with revenue in the state is not caused — dramatically not caused — by the business pass-through deduction,” he said. “It’s caused by the lowering of all the rates for every single taxpayer in the state of Kansas. That is much more impactful than the business cuts.”
Senate Minority Leader Anthony Hensley voted against the compromise tax package, saying it relies too heavily on regressive taxes, like sales and fuel taxes.
“This mess was caused by the Republican majority in the Legislature, and Governor Sam Brownback,” he said. “And until they can own up and take the responsibility for that, we’re going to continue to see these unfair kind of solutions that negatively impact on the working-class people of Kansas, and on low-income people who live on fixed incomes.”
Hensley said that argument holds true for the cigarette and tobacco taxes, which also fall most heavily on people with low or fixed incomes. Hensley is not swayed by the argument that higher taxes on tobacco products will result in fewer people using those products.
“We’re talking about tax policy when we look at those kinds of issues, and the health factors involved, I think, aren’t as big a priority,” he said.
Hensley would prefer to address the state’s budget deficit through repeal of the 2012 income tax cuts. Balancing the budget by further cutting spending would require a 6 percent across-the-board reduction, which he said would harm public schools, higher education and other programs.