A bill that increases income tax rates and ends an exemption for business owners earned a narrow victory in the state Senate on Friday.
It now heads to Gov. Sam Brownback, who opposes it.
The Senate approved the plan 22-18, one vote above the minimum required for passage. The House approved it by a broader margin, 76-48, on Thursday.
HB 2178 would roll back key parts of 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.
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Supporters said the plan would help the state regain its financial footing amid shortfalls expected next fiscal year. Opponents said the plan would harm Kansas families and businesses.
Brownback said a statement earlier in the week that the increase would “pummel the pocketbook of middle class families.”
“As with all legislation, Gov. Brownback will review the bill closely once he receives it,” said Melika Willoughby, his communications director, in a Friday e-mail.
Brownback has stopped short of saying he would veto the bill, which didn’t have a veto-proof majority in either chamber. After he receives the bill, he has 10 days to veto it, sign it or let it become law without his signature.
During Friday’s debate, Senate Vice President Jeff Longbine, R-Emporia, said the plan was not perfect but was the best option to prevent cuts to education, the state’s public employee retirement system and children’s programs.
“This bill gives us a path to protect K-12 and higher ed from further cuts,” Longbine said. “Without this bill, I don’t see a path at this point for a bill that raises more revenue. So this might be our best shot.”
Senate Ways and Means Chairwoman Carolyn McGinn, R-Sedgwick, said the state needed to address its long-time revenue problem.
“I’d like to think that we did a tax adjustment today. We adjusted the 2012 tax plan,” McGinn said after the vote. “We’ve got to get out of the negative situation on our budget.”
Sen. Lynn Rogers, D-Wichita, said the proposal would not completely solve the state’s fiscal woes.
“(But) it is really the best start that we have seen in four years,” he said. “I’m willing to support this as the best action and the best fix that we have today.”
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 many 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.
It would raise about $590 million next fiscal year and $454 million in the 2019 fiscal year, according to state figures.
Sen. John Doll, R-Garden City, voted for the proposal although he thought it did not “do near enough.”
“Right now, the tax policy is so unfair,” he said. “The right thing is to get out of this mess and do it right.”
Sen. Ty Masterson, R-Andover, called the House bill a “piece of garbage.”
“This fleeces the working poor. … This doesn’t take fortitude,” Masterson said. “This makes it easier on the government and harder on the people.
“If this is our best shot, think about who you’re shooting at,” he added.
Sen. Caryn Tyson, R-Parker, voted against the bill, but had to carry it to the floor in her role as tax committee chairwoman. She argued the state needs a tax code that provides “fairness to everyone.”
“Increasing taxes on families that are struggling, where every penny counts, we have to think long and hard before we do that,” she said.
Some Republicans said the Legislature should consider a budget bill to address what they view as the state’s spending problem before raising taxes.
“The process is backwards, guys,” said Sen. Robert Olson, R-Olathe. “We don’t even know what we need.”
Sen. Mary Pilcher-Cook, R-Shawnee, called the bill “a tax-increasing tornado that leaves no Kansan untouched in its wake.” Sen. Dennis Pyle, R-Hiawatha, compared it to a thief taking a liquor store’s cash register.
“You’re going to see some businesses leave Kansas,” Pyle said. “You’re going to see some people take off and leave.
“So if you want to get what’s in their checkbook and their accounts, you’d better grab it today.”
Some Republicans were critical of the Senate’s pace to consider the bill without sending it through a Senate committee first.
Senate President Susan Wagle, R-Wichita, said she wanted to send the bill directly to the floor because the tax committee has considered numerous proposals already.
“The House has sent over a bill that has no cuts,” Wagle said. “This is the plan for legislators who don’t want to vote for cuts. And I believe everyone should have a right to vote on that.”
Wagle voted against the bill because she preferred a plan with spending cuts.
How they voted
Here’s how south-central Kansas senators voted on Sub HB2178, which raises income tax rates and eliminates an income tax exemption for owners of certain businesses. The bill passed 22-18.
Republicans voting yes: Ed Berger, Hutchinson; Bruce Givens, El Dorado; Dan Kerschen, Garden Plain; Carolyn McGinn, Sedgwick.
Republicans voting no: Mike Petersen, Gene Suellentrop, and Susan Wagle, Wichita; Ty Masterson, Andover; Richard Wilborn, McPherson; Larry Alley, Winfield.
Democrats voting yes: Oletha Faust-Goudeau, Lynn Rogers, Wichita.