Kansas Gov. Sam Brownback will veto a bill that sought to raise income taxes and roll back his signature tax policies.
Brownback called the plan a “big, retroactive income tax increase.”
“I won’t sign it, and I will veto this bill,” he said to applause at the annual dinner of the Kansas Chamber of Commerce, one of the groups that has lobbied to maintain the tax cuts ushered into law in 2012.
“This is bad policy for Kansas,” he said. “This will hurt growth in this state. Growth is what we need.”
The veto sets up a battle with lawmakers and raises doubts about how Kansas will fill its long-term budget gap, which stands at more than $1 billion through June 2019.
“The path forward is not clear,” said Rep. Steven Johnson, R-Assaria, who chairs the House Taxation Committee.
Brownback said he would work with legislative leadership to come up with a different plan “to fix our budget.”
“I put forward one, (but) we’ll make further adjustments and we’ll work with the leadership of the House and the Senate to do that,” he said.
Brownback’s plan for fixing the budget shortfall would primarily rely on sources of one-time money to get the state through 2019. He has indicated he may be open to a tax plan that taxes a business owner’s income above a certain threshold, while exempting the rest.
The bill passed by the Legislature with less than veto-proof margins would raise income taxes, create a third tax bracket and eliminate a tax exemption for owners of certain businesses, including LLCs. The vote was 76-48 in the House and 22-18 in the Senate; an override would require 84 House votes and 27 Senate votes.
Johnson’s committee held a quick meeting late Tuesday to talk about other tax plans the panel could consider later this week, in expectation of a veto.
“I don’t have a vote count to say that I know that it’ll happen in the House,” Johnson said. “I think that I lose some of the willingness to take a hard vote on taxes again and again when someone is confident it doesn’t go anywhere across the hall.”
Other lawmakers are ready for a fight.
“We should continue to send him the bill that the people of Kansas voted for in the last election,” said House Minority Leader Jim Ward, D-Wichita.
Brownback ushered in tax cuts during his first term with the promise that it would spur job growth, but the policies have faced backlash as the state struggled with shortfalls. Moderate Republicans and Democrats gained seats in the most recent election campaigning on the promise to end Brownback’s tax experiment.
Lawmakers could attempt to override the governor’s veto, which requires a two-thirds majority in each chamber, but Ward said “it may be better strategically to just send it to him again, again and again.”
There’s no limit on the number of times the Legislature can send Brownback the bill, said Ward, who compared it to a parent refusing to let a child leave the dinner table until he has finished his vegetables.
Brownback’s office received the bill, the substitute for HB 2178, on Tuesday afternoon. That started a 10-day period for the governor to sign or veto the bill or let it become law without his signature.
The plan added a third bracket and increased 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 also eliminated the exemption that allows the owners of limited liability companies and other businesses to pay zero state tax on their business income.
Scott Drenkard, director of state projects at the Washington, D.C.-based Tax Foundation, said the legislation would have given the state a sustainable tax system.
Drenkard, who came to Kansas to testify before the Legislature earlier this session, said the state’s “previous attempts at fixing this problem have been temporary short-term solutions, and every indication is the problem is a systemic one that cannot be patched over.”
In a statement, Brownback called it the tax increase “punitive” for working families. “The legislature failed to fulfill my request that they find savings and efficiencies before asking the people of Kansas for more taxes,” he said.
Americans for Prosperity-Kansas, a strong supporter of the governor’s tax policy, applauded the move.
“Instead of asking Kansans to pay more, they must focus their efforts on cutting wasteful government spending,” state director Jeff Glendening said of lawmakers in a statement. He said it would “be a crucial mistake if the legislature voted to override this veto.”
Sen. Lynn Rogers, D-Wichita, said he hoped the Legislature “has the political will to do what’s right.”
“They (my constituents) want a fair tax system,” he said.
Freshman Rep. Susan Humphries, R-Wichita, voted against the bill.
“I feel the working people of Kansas don’t deserve a tax increase,” she said.