Kansas weighs tax hikes as options for fixing budget

Kansas lawmakers are busily working behind the scenes on options for raising taxes if they run into trouble filling a $600 million hole in the state budget.

House leaders are crafting a smorgasbord of proposals calling for a sales tax increase, a gas tax increase, a tax on wind and solar energy production, a tax on electronic cigarettes and a tax on “passive income,” which could include earnings from rent or royalties paid for oil and gas exploration. They are also looking at imposing a surcharge on income taxes.

In some cases, those taxes – such as a gas tax or sales tax increase – might be short-term solutions to the state’s budget problems and eventually lapse, legislators said.

Legislative leaders characterized the proposals as a fallback option in the event the Legislature hits a snag balancing the budget, which was left with a massive hole following income tax cuts passed in previous years at the urging of Republican Gov. Sam Brownback.

“It is premature to even talk about these because we need to go through and see where we stand on spending,” said Rep. Marvin Kleeb, R-Overland Park, chair of the House tax committee.

Yet, Kleeb said that the tax proposals might allow the Legislature to dodge spending cuts in core taxpayer services such as education, public safety and health care for the less affluent.

“If we have every efficiency in the budget that we possibly can and we still need to provide core services, we’re going to meet those needs,” Kleeb said Friday. “This has got to be a deliberative, well-thought out process of what could be a solution if we need a tax enhancement.”

The proposals are still conceptual in nature, although a 5-cent increase in the state’s gas tax was suggested. They were introduced as bills in broad terms in the House tax committee late Thursday afternoon. They are still being drafted and researched.

Debate over the budget is a fragile one for lawmakers and could easily change because of falling revenues or lawmakers who might not be willing to go along with spending cuts.

Brownback’s budget proposal, for instance, was upended Thursday when a panel of lawmakers refused to divert $280 million from the highway department into state operations. The action, if it stands, would mean cuts elsewhere or require more revenue.

“If that happened to stick, we would need to know what our options might be,” Kleeb said of the action refusing to transfer the money from highways into other programs.

The tax proposals are a new twist for Republican House Speaker Ray Merrick of Johnson County. He has said the state has a spending problem, not a revenue problem.

The introduction of the tax proposals doesn’t mean that Merrick has changed his mind, the speaker’s spokeswoman said.

“At some point, you do have to make sure you have all the options at the ready,” Rachel Whitten said. “I’m not saying there’s going to be a tax increase. I’m not saying that’s even viable right now. I’m saying it’s an option.”

Brownback is already proposing more than $100 million in tax increases on cigarettes and alcohol to help balance the budget.

It is unclear how much support there is for the governor’s plan, but critics have pointed out that it potentially could put Kansas-side businesses at a disadvantage against Missouri-side businesses.

The tax proposals allow the conservative-controlled Legislature to preserve Brownback’s signature income tax cuts by raising taxes elsewhere at the expense of middle-class families, said Rep. Jim Ward, D-Wichita.

“All of that stuff is an effort to protect the cornerstone of the economic experiment, which is reducing and eliminating the income tax,” Ward said. “We are no longer having a conversation about whether to raise taxes. It is now whose taxes and how much?”

Rep. Mark Hutton, R-Wichita, sits on the tax committee. He said the proposals were intended to “open up the discussion on all sorts of levels.”

“We’re interested in exploring all the areas of revenue that this state gets and if there are any opportunities or discussion we might have to adjust them,” Hutton said.

Does that mean tax increases are needed?

“We’ll have to see,” he said.

This story was originally published February 13, 2015 at 7:26 PM with the headline "Kansas weighs tax hikes as options for fixing budget."