The Kansas House of Representatives on Tuesday soundly defeated the latest tax plan to come before it, leaving no clear path to end the contentious legislative session that is already well into overtime.
By a 71-42 vote, the House rejected a conference committee compromise on the tax bill, House Substitute for Senate Bill No. 84.
The bill would have set the sales tax rate at 6 percent – lower than the current 6.3 percent but higher than the 5.7 percent that will automatically take effect July 1, when an emergency sales tax increase passed in the depth of the recession three years ago expires.
The bill would have reduced base income tax rates but would also have trimmed tax deductions, including the standard deduction used by many taxpayers.
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Opponents of the tax bill argued that it merely planned to shift the tax burden from one set of taxpayers to another and would result in an overall tax increase of $856.8 million.
Supporters argued that bringing the sales tax rate down from its current level constitutes a tax cut, even if it is higher than the Legislature promised when it passed the emergency increase. They also argued that increased economic activity from cutting income tax rates would generate additional revenue, allowing the state to ultimately eliminate income taxes altogether.
Rep. Scott Schwab, R-Olathe and vice chairman of the tax committee, said he wasn’t “superexcited” about the tax plan, but he still saw it as an overall cut.
“I’m not going to go home and say I raised taxes when rates go down,” he said.
But Rep. Jim Ward, D-Wichita, warned Republicans that extending even part of the emergency sales tax or cutting deductions would be a political nightmare for them, as it was when the first President Bush went back on his famed promise of: “Read my lips: no new taxes.”
“Don’t buy it,” Ward said. “You don’t have near as much (campaign) money as the last guy who said it.”
During the floor debate, House Tax Committee Chairman Richard Carlson, R-St. Marys, appealed directly to his Republican colleagues, who dominate the Legislature, to muster the 63 votes needed to pass a tax plan.
“The majority party in the House today, with 92 members, needs to govern,” he said. “We need to govern responsibly. We need a tax plan that is responsible to the people of the state of Kansas that will grow the private sector … and takes us on the path to zero income tax to be one of the most outstanding growth states in the nation.”
Ward and Rep. Nile Dillmore, D-Wichita, both lauded Carlson for shouldering responsibility for the tax plan on behalf of the Republicans, who vastly outnumber the 33 Democrats in the House.
“It was generous, if not statesmanlike, to say we’ve got 92 (members) and we own this, the Republican Party owns this,” Dillmore said.
Dillmore also lamented that, so far, there has been no discussion about modifying the part of last year’s tax plan that zeroed out state income taxes for owners of limited liability companies, farms, sole proprietor businesses and corporations organized under Subchapter S of the federal tax code.
“There’s been no discussion … about the 191,000 elite taxpayers who pay no income tax stepping up to do their share,” Dillmore said.
Tuesday’s vote marked the second time since Friday that the House has voted down a compromise tax bill.
Senate Majority Leader Terry Bruce, R-Hutchinson, said he thinks it will now be the Senate’s turn to submit a plan.
“We’re going to work with our House confreres to try to draft an agreement that can garner sufficient votes,” he said. “I think it’s our turn to present an offer to the House, and so we’ll start talking to (Legislative) Research about doing that.”
Senate President Susan Wagle, R-Wichita, said the two chambers must reach agreement on a new tax plan because without one, the Legislature won’t be able to balance the budget.
“Until we know where the House is at on the two biggest issues we face, we can’t resolve our differences and adjourn the Legislature,” she said.
Tuesday was Day 95 of a session that was initially expected to run 80 days.