Lawmakers discussing ‘tax on a tax’ to pay for schools

A surcharge on personal income taxes to raise money to fund schools is among the ideas Kansas lawmakers have been discussing privately.

A surcharge would effectively operate as a tax on a tax, with taxpayers paying an additional amount on top of their total income tax bill. Lawmakers described the idea as one among several potential options as they seek to coalesce around a plan that can solve the state’s budget shortfall and pay for increased spending for education.

“The tax committee chairman has broached that idea, so there’s been some casual discussion of it. I have no gauge for how serious people might be about that idea,” House Majority Leader Don Hineman, R-Dighton, said.

According to lawmakers who spoke to The Eagle about the idea, the surcharge would be a percentage of an individual’s total tax bill. The percentage itself would potentially be tied to how much income tax revenue the state expected to collect in a given year.

If the amount expected to be collected fell, the percentage would likely increase to ensure the state could fund promised education spending levels called for in a school finance formula.

“By making it a tax on a tax, you then dedicate those dollars to the (Kansas State Department of Education) so that they go directly and there’s no question about where those dollars went,” said Rep. Steven Johnson, R-Assaria, the House Tax Committee chairman.

Rep. Tom Sawyer, D-Wichita, the ranking minority member of the committee, said the percentage would be whatever would be required to fund schools. The school finance formula under development in the House K-12 Budget Committee calls for a $750 million ramp-up in education spending over five years.

But the tax increase proposals that have been considered by lawmakers would not by themselves raise enough money to pay for the formula. The most aggressive plans that have surfaced so far would generate a little more than $1 billion over two years.

Kansas faces a budget shortfall of about $900 million over the next two years.

The Legislature passed a bill in March that would have raised $1 billion over two years by increasing personal income tax rates, reinstating a third tax bracket and once again taxing certain kinds of business income. Gov. Sam Brownback vetoed that plan, and the Legislature did not override his veto.

The surcharge that is being discussed is not the first surcharge idea to be floated this session. Senate Majority Leader Jim Denning, R-Overland Park, supports a surcharge on utility bills to generate funds for education.

Denning’s plan would charge residential customers an additional $3 a month each on electric, gas and water for an increase of $9 a month. He estimates that would help raise $150 million a year.

Commercial customers would pay an additional $10 a month on each bill

Lawmakers who are developing the school finance plan have heard from an attorney advising the Legislature that they should demonstrate they can make good on promises of additional funding for education. A surcharge would offer a dedicated revenue source for schools – one sign of commitment to funding.

“It’s possible,” Sawyer said. “There’s a lot of possibilities.”

The Kansas Supreme Court ruled earlier this year that the state’s current finance formula inadequately funds education. The justices cited academic underperformance by a quarter of Kansas students.

The court set a June 30 deadline for lawmakers to put a new system in place.

This story was originally published May 9, 2017 at 2:38 PM with the headline "Lawmakers discussing ‘tax on a tax’ to pay for schools."