The vice president of the Kansas Senate introduced a bill Tuesday that would put some business owners back on income tax rolls.
Senate Vice President Jeff King, R-Independence, offered the bill during a meeting of the Senate Assessment and Taxation Committee. The bill would differentiate between wage and non-wage income for the owners of limited liability companies, who currently enjoy a zero income tax rate.
The bill, which does not yet have a number, is co-sponsored by Republican Sens. Jim Denning and Greg Smith of Overland Park.
King said it was an issue of tax fairness and necessary given the state of the Kansas budget. The state missed tax revenue estimates by more than $50 million last month.
“Wage income should be taxed whether the person earning it has an LLC or is someone’s employee,” King said. “It’s time to make sure every person who earns a wage pays the same low income tax rate.”
The bill is identical to a proposal floated during last year’s tax debate, King said. The proposal would tax 70 percent of the income earned by an LLC partner as wages and leave 30 percent tax free as non-wages.
Smith said the intention had not been to exempt LLC owners’ income completely, but only their non-wage income.
“There’s no way we can have a tax plan that effectively lets a certain number of people slide in terms of wage income,” Smith said.
Gov. Sam Brownback threatened to veto any attempts to roll back the tax break for LLC owners last year and said last week that he would oppose any efforts to increase taxes on small businesses.
“As the Governor has previously said, he will not support or call for a tax increase on small business in Kansas,” Brownback spokeswoman Eileen Hawley said in a statement Tuesday.
Senate Minority Leader Anthony Hensley, D-Topeka, a critic of the income tax exemption, saw the bill as a political move at a time when the governor is unpopular.
“These three senators are enablers of Sam Brownback’s tax policies. They have supported him lockstep. And now that they’re in an election year, they’re doing a flip-flop. … They’re running away from Brownback,” Hensley said. “It’s obvious and it’s really an insult to the voters in their district to pretend that they care about tax fairness.”