Before the start of this year’s legislative session, Wichita Republican Rep. Mark Hutton may have seemed an unlikely candidate to lead an effort to repeal some of the income tax cuts championed by Gov. Sam Brownback.
He is, after all, a conservative businessman who doesn’t pay taxes on his non-salary income thanks to the 2012 tax cut law.
But he doesn’t think that’s fair.
“It’s an equity issue,” Hutton said, explaining that Kansans shouldn’t be forced to pay higher sales taxes while many businesses paid nothing.
“I’ve had a lot of emails from business owners that want to be included in that part of the (budget) solution,” he said. “They don’t like the fact that people out there believe they’re getting a free break. That’s not good for their business and it’s not good for Kansas and they understand that.”
Hutton spent the last several months building support for a proposal to partially reinstate the business tax at 2.7 percent — the lowest of the state’s two income tax rates. And in recent days it appeared the proposal was destined to be a key part of the tax compromise that generates the roughly $400 million needed to balance the state budget and ends what will be the longest session in state history if it continues through the weekend.
That may still happen. But Hutton’s proposal was dealt a blow Friday when the House rejected it along with other elements of a second tax compromise agreed to by a House-Senate conference committee. The 82-27 vote came after a lengthy debate that one Republican House member compared to “a family squabble.”
Some lawmakers who voted for the compromise said the outcome wasn’t a true reflection of the support that exists in the House for reinstating the business tax. They said some supporters simply weren’t ready to cross the Kansas Chamber of Commerce, which mounted a strong lobbying campaign against the measure.
That pressure was evident when Rep. Will Carpenter, an El Dorado Republican, had to pause to regain his composure while urging colleagues to support the compromise.
“Some people have told me that I may not be here next year if I vote for this tax plan. That’s a chance I’ll take,” Carpenter said, his voice breaking with emotion.
Brownback has threatened to veto any effort to reinstate taxes on business income. He continues to argue that the tax cuts — the business cuts in particular — are starting to provide the economic stimulus he promised they would. He says personal income is up and Kansas is creating private-sector jobs at a faster clip than many other states.
But Hutton, who has done his own analysis of the tax cuts, said the governor is selectively interpreting the data.
“I know there are stories of those businesses that moved to Kansas or expanded or hired people allegedly because of the tax structure. But the math simply does not add up,” he said during Friday’s debate.
Hutton said the tax cuts are saving the wealthiest business owners in the state an average of $13,500 a year.
“That’s not even enough savings to hire one minimum-wage worker,” he said.
“My vote is going to be for a plan that I believe moves Kansas forward. And if he (Gov. Sam Brownback) wants to exercise his veto right, then that’s his prerogative to do so. But it’s not going to change my mind.”- Rep. Mark Hutton, a Republican from Wichita
Others argued that it wasn’t fair to change the rules on businesses halfway through the tax year. And they objected to a provision in the compromise that would have frozen individual income tax rates through 2018 instead of continuing to reduce them as the 2012 law requires.
“Folks, that’s not a march to zero. That’s not even a crawl to zero,” said Rep. John Rubin, a Shawnee Republican, referring to Brownback’s plan to eliminate state income taxes over time – the “glide path to zero” campaign.
Democrats gave Hutton credit for taking on the governor and many in his party on the business tax issue. Rep. Tom Sawyer of Wichita, the top Democrat on the House Taxation Committee, said Hutton had “really educated the committee” on taxes.
“He’s done a great job with this issue,” Sawyer said.
But in the end, all 28 House Democrats voted against the compromise because it would have raised the statewide sales tax from the current 6.15 percent to 6.45 percent.
“We (already) have the highest sales tax in the region,” Sawyer said.
Many still expect some version of Hutton’s business tax proposal to be included in whatever tax package finally passes. And he gave no indication that he’s ready to give up the fight despite the governor’s veto threat.
“I don’t see my job as to worry about what he (Brownback) wants to do,” Hutton said. “My vote is going to be for a plan that I believe moves Kansas forward. And if he wants to exercise his veto right, then that’s his prerogative to do so. But it’s not going to change my mind.”