Raising taxes would exacerbate economic challenges in rural Kansas, Gov. Sam Brownback said Monday.
“We’re in a rural recession, and I think it would be very harmful if you’re looking at raising a lot of taxes on people in the middle of a rural recession,” Brownback said.
However, Brownback would not rule out the possibility of a tax increase.
Many legislative candidates and some lawmakers say they want to roll back an income tax exemption for business owners and farmers that allows them to pay zero state tax on business income.
“I think what we need to do in the first week of the session is repeal that exemption for business owners,” said Rep. Tom Sawyer of Wichita, the ranking Democrat on the House Tax Committee. “It’s really clear from voters they want it done. It’s unfair, and the state needs the revenue. That ought to happen very quickly, I don’t care what the governor says.
“It’s amazing because he’s the one that keeps telling us that everything’s amazing, the sun is shining, and all of a sudden we’re in a recession,” Sawyer added.
The state faces a more than $60 million budget hole for the fiscal year that ends in June.
Democrats and moderate Republicans have been running on a platform of increasing school funding, which probably would require the state to do more than roll back the tax exemption. Sawyer acknowledged that but said rolling back the exemption is the first step.
Sen. Carolyn McGinn, R-Sedgwick, a farmer, said lawmakers “need to just make sure our revenue streams are fair to all people.” She added that many farmers she knows don’t want the income tax break.
“The farmers that I talk to, they want good roads so they can take their product to town. … I don’t know of anybody who asks to not pay income tax, because we like the infrastructure to get our product in the field and to take it out,” McGinn said.
Brownback cited sales tax receipts as showing the rural part of the state is facing a recession.
“Sales tax receipts are very strong in Kansas City, and they’re very strong in Wichita,” he said. “Then you get right outside of Wichita, and they tank. We’ve got a rural recession with low agriculture and low oil prices. That isn’t going to change off of Kansas tax policy, that piece of it, because it’s based on a global marketplace.”
State sales tax receipts increased by 8.5 percent in Sedgwick County in the most recent fiscal year, fueled in part by the Legislature’s decision to increase the state sales tax from 6.15 to 6.5 percent. Johnson County, the state’s most populous, had an increase of 8.3 percent.
However, many rural counties saw a drop in sales tax revenue despite the increased rate. Comanche County, for example, saw sales tax receipts decrease by 30.2 percent. Harper, Barber and Kiowa counties also experienced double-digit declines.