Kansas House passes income tax increase

A plan to increase income taxes passed the state House on Thursday and heads to the Senate on Friday in an unusually rapid chain of events that could leave lawmakers in a showdown with the governor.

HB 2178 would roll back key parts of Gov. Sam Brownback’s 2012 income tax cuts, raising rates for many taxpayers, restoring a third tax bracket and ending a tax exemption for roughly 330,000 business owners.

It passed 76-48, with bipartisan support. South-central Kansas lawmakers, though, voted along party lines, with most Democrats for it and most Republicans opposed.

Lawmakers said they hope the plan, which is projected to raise more than $1 billion over two years, will help the state fix its budget woes. The state faces projected budget shortfalls of more than $750 million over the next two years.

“This bill begins the process of fiscal responsibility,” said Rep. Tom Sawyer, D-Wichita, who amended the bill to add the third income tax bracket. “We’re trying to solve the problem that Gov. Brownback created. It gives us a good first step.”

“Hopefully, it gets a fair shot in the Senate,” he added.

Senate President Susan Wagle, R-Wichita, said her chamber would debate and vote on the bill Friday, forgoing the typical hearings, debate and vote by a committee. She said it is likely to have enough support to pass.

“That bill has momentum,” she said.

‘We are ... obligated’

Senate passage would set up an unusual confrontation between the Republican-controlled Legislature and the Republican governor.

Brownback said Wednesday that he would not sign the bill, but he has not said he would veto it. A governor can let a bill become law without signing it.

He had encouraged small-business owners to ask their representatives to vote against the bill.

“This is just not the way to go. I don’t support this,” he said Wednesday.

Brownback said the bill would hurt middle-class families and small businesses. Instead, he has proposed raising taxes on cigarettes and liquor and boosting annual filing fees for for-profit businesses, along with a series of one-time financial maneuvers, such as internal government borrowing.

The bill eliminates the exemption on non-wage income for pass-through businesses, a key part of Brownback’s tax changes. The exemption was a target for Democrats and some Republicans during the 2016 campaign.

The plan adds a third bracket and increases rates for the middle bracket. For married people filing jointly, income between $30,001 and $100,000 would be taxed at 5.25 percent, up from 4.6 percent. The top rate, for income above $100,000, would be taxed at 5.45 percent. The tax rate for the bottom bracket would remain 2.7 percent.

House Majority Leader Rep. Don Hineman, R-Dighton, said the plan corrects the “excesses” of the 2012 tax cuts.

“The plan went too far, too fast. It created an inequitable tax system and destabilized state revenues,” Hineman said. “We are … obligated to responsibly fund the government and to provide those services that the people of Kansas need and expect.”

We ‘should be ashamed’

A parade of Republican lawmakers explained their opposition to the bill after the vote.

“My constituents cannot afford this kind of a tax increase,” said Rep. Blake Carpenter, R-Derby. “Today, I’m disappointed in our Republican caucus for voting on things we do not stand for.”

“It takes money and security from hard-working families and small businesses across this state,” said Rep. Trevor Jacobs, R-Fort Scott.

Rep. John Whitmer, R-Wichita, blasted the plan in a Republican caucus meeting as raising taxes on the “working poor and the middle class.”

“It’s been a banner week for the Kansas House,” Whitmer said. “It’s certainly something that, in my opinion, we should be ashamed of.”

“It is not disciplined. It is not fiscally conservative. It is not responsible,” Whitmer said.

‘We saw the implosion’

Appropriations Committee Chairman Rep. Troy Waymaster, R-Bunker Hill, said lawmakers considered cuts to education last week, but cited the Senate abandoning a budget fix last week after pressure from educators.

“We saw the implosion that occurred when there was the task of trying to cut K-12 education,” said Waymaster, who voted no on the House bill.

That Senate Republican plan from last week received no support on a voice vote Thursday after Senate Minority Leader Anthony Hensley, D-Topeka, tried to bring it back to the floor.

The Senate also shot down a more aggressive Democratic plan Thursday that would have restored a top tax bracket of 6.45 percent and raised $1.2 billion over two years. Senators rejected it 30-10.

Meanwhile, many lawmakers could embrace Brownback’s proposal for $317 million in internal borrowing to get the state through June without cutting education funding. The House gave a bill containing the plan first-round approval Thursday and expected to pass it in a final vote Friday.

Contributing: Associated Press

This story was originally published February 16, 2017 at 12:00 PM with the headline "Kansas House passes income tax increase."