Senate Vice President Jeff King has a proposal to put Kansas business owners back on income tax rolls based on Republican-crafted legislation from the U.S. House.
King’s plan would tax about 70 percent of the income for a partner in an LLC and leave another 30 percent untaxed if they were active participants in the business, such as an attorney serving as a partner in a law firm.
His proposal is meant to distinguish between wage and nonwage income.
“Back in the ’50s we actually had a wage and nonwage breakdown in the federal code that was 70-30, so there’s some precedent for it,” King, R-Independence, said.
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Passive investors in a business who are not active participants would still have 100 percent of their income exempt.
In the face of a $400 million budget shortfall, GOP lawmakers have been split on whether to revisit the 2012 tax policy as part of a fix. King said his legislation is modeled on tax reform legislation that was crafted by former U.S. Dave Camp, R-Mich., who chaired the U.S. House’s Ways and Means Committee.
The Legislature eliminated income tax for the owners of limited liability corporations in 2012 – King and others say that bill was intended to exempt only nonwage income but wound up exempting wage income as well because Kansas law doesn’t make a clear distinction.
“What this would do is ensure that we’re exempting nonwage business income, so I would maintain that this just does what we said we were going to do in 2012,” King said.