The Senate may resurrect a tax package Gov. Sam Brownback vetoed earlier – but with changes to lure enough votes to override his veto.
Lawmakers return to work next week.
Senate Republican leadership is developing a plan that resembles House Bill 2178, which passed the Legislature in February but was quickly rejected by the governor.
It would have increased personal income tax rates and added a third tax bracket. It also would have eliminated an exemption for certain business income that critics say has contributed to the state’s budget problems.
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But the tax changes were retroactive to the beginning of the year. Some lawmakers viewed that provision as unfair, including Senate Majority Leader Jim Denning, R-Overland Park.
The new version would take a different approach. Personal income wouldn’t be taxed at the new rates retroactively. Exactly what the bill would call for isn’t clear.
The original bill would have raised more than $1 billion over two years. The new plan will raise less money; the amount is not known.
Kansas expects to face a budget shortfall of about $900 million over the next two years.
New plan in the works
Denning said Wednesday that he is developing a plan that would use the same rates as HB 2178 but would address his concerns about retroactivity.
Under HB 2178, married people filing jointly with income between $30,001 and $100,000 would have been taxed at 5.25 percent, up from 4.6 percent. The top rate, for income above $100,000, would have been taxed at 5.45 percent. The tax rate for the bottom bracket would remain 2.7 percent.
Senate Vice President Jeff Longbine, R-Emporia, said he believes a plan similar to HB 2178 will receive strong consideration. But he said a plan with two tax brackets may also be an option.
Sen. Dan Kerschen, R-Garden Plain and the vice chairman of the Senate Tax Committee, said senators have been working on a plan during the legislative break. He said he spoke with Denning and others in recent days.
Senators are headed toward a plan with low, medium and upper tax rates, he said.
“We voted to pass something like that already. This will probably be something similar,” Kerschen said.
Senate Minority Leader Anthony Hensley, D-Topeka, said Democrats will have to see what’s in the bill but that he was concerned whether one without the retroactive provision would generate enough revenue. He noted other tax bills in the past have been retroactive.
He also wondered whether rank-and-file Republicans would support it.
“Whatever they put together, I would be somewhat skeptical as to whether they can even sell their own caucus on it,” Hensley said.
Quick resolution wanted
Senators need to resolve the tax debate quickly to move on to school finance. Lawmakers are under a June 30 deadline set by the state Supreme Court to develop a new school finance formula.
The court ruled in March that state spending on schools is inadequate. The justices said the current block grant system shortchanges at least 25 percent of students.
“I personally would love to get tax out of the way next week so we can continue to work on school finance and get that finished up,” Longbine said.
The pace of work when lawmakers return partly depends on Brownback. If the Senate passes a tax bill early next week and the House follows, the governor has up to 10 calendar days to either sign or veto the measure. If he takes no action, it becomes law.
When the Legislature passed HB 2178, Brownback vetoed it almost immediately. He said he opposed the tax increases in the bill.
Asked about a veto override on a future tax plan, Brownback said he has been in regular negotiations on taxes and school funding and that budget talks were ongoing.
“We’ll stay, continue to negotiate with the parties,” Brownback said.
“I’ve put forward several options on taxes; we’ll see what people are willing, what they want to do,” Brownback said.
In April, Brownback endorsed a plan that would have set a single income tax rate. The Senate debated the legislation but overwhelmingly rejected it.
“I think the flat tax is finished,” Kerschen said.
Lawmakers are looking to avoid a repeat of the 2015 session, the longest in the state’s history. The Legislature gridlocked for weeks over the outlines of a tax plan to balance the budget before eventually voting to raise the sales tax rate, increase cigarette taxes and make other changes.
“You’ve got to be prepared for everything. But there is a route where this doesn’t need to be a long, difficult session,” Brownback said, alluding to the flat tax.
“But you’ve got hard topics.”
Contributing: Hunter Woodall of The Kansas City Star