The big news last week was that the Kansas Legislature, both the House and the Senate, sent a tax reform bill to the Governor's desk. The next step is for the Governor to sign it, to veto it, or to not sign it and let it become law anyway. This is one step towards righting the ship in Kansas: remaining are closing this year's revenue gap (roughly $340 million) and passing a good school finance plan.
The tax bill, Sub HB 2178, rolls back many of the provisions of Brownback's 2012 tax changes, although the tax rates do not go all the way back up to where they were before. The bill restores three tax brackets, as Kansas had for two decades before Brownback, and tax rates rise on the two higher brackets, but remain unchanged on the lowest bracket. The bill also eliminates the LLC exemption that has received so much news coverage. And it eliminates the "March to Zero" provision that would have required tax rates to go down anytime Kansas met its budget goals. The Legislature's own research staff estimates the bill could increase revenues by $600 million the first year, and $500 million successive years. (see: Supplemental Note)
How voting went
The voting was interesting. The House voted to send it to final action (part of a two-step voting process) by a wide margin, 83-39. The next day, on final action (the second step) it passed easily, but by a smaller margin, 76-48. There was almost no debate. MainStream estimates there are just shy of 70 moderates and Democrats in the House, so this bill was supported by several beyond the usual suspects. That's good news.
In the Kansas Senate, the bill did encounter a lot of debate, but also passed if only 22-18. Much of the debate was opposing, declaring that war was being waged on the working class in Kansas. This despite the bill not raising taxes on anyone making $30,000 or less (married filing jointly), and raising taxes on the second tier to only 5.25%, lower than the 6.25% it was set before Brownback. Of course, there is a new top bracket that starts at $100,000 and has an even higher rate of 5.45%, though still a full point below pre-Brownback rates.
This is important to recognize. This is a reinstatement of taxes that had been suspended under Governor Brownback's leadership. Kansans will pay more. But the three brackets make a significant difference. Sen. Masterson (R-Andover) bemoaned the fate of a hypothetical single-parent waitress he met. In Andover, the server salary averages $18,800, and she would pay $25 more each year. But someone making enough to fall into the new upper bracket (over $100,000 for a married couple filing jointly), say $110,000 a year, would pay $540 more under the bill sent to Governor Brownback. The burden is clearly being carried by the highest bracket.
Expect push back
If this bill does pass, expect to see political postcards about the "biggest tax increase in Kansas history!" But remember what we've been cutting to get here. By 2015, Kansas had used all of its rainy day fund reserves. By 2016, so much money had been borrowed from the highway department that new construction has been curtailed and Kansas roads are scheduled for maintenance once every 48 years. The state retirement system has been borrowed against and repayments have been delayed. In order to avoid making these hard decisions, Brownback and his allies suggested further cuts to education, continuing to defund highways, and continued borrowing without repayment. Kansas cannot afford Brownback's tax cuts.
In order to recover, the state must retire the foolish, irresponsible tax cuts Brownback proposed and his allies supported. There are still fourteen legislators in the Kansas Senate who voted for these tax cuts. Of those fourteen Senators, four recognize the trouble we are in and voted for this tax increase. In the House, there are only ten Representatives left who voted for Brownback's folly. Of those ten, only one voted to raise taxes this year. That leaves nineteen legislators who still hold fast to the folly of these tax cuts, insisting that all will be well if we just keep cutting and borrowing, increasing our debt and lowering our credit rating, delaying payments and mortgaging our children's future.
When the postcards come, we will remind Kansans who stood up to make the hard choices that had to be made.
Next?
School finance. Bills to get us through this fiscal year. A possible ruling on public education funding adequacy from the Supreme Court. Reducing the nation's highest sales tax on food. And many more. Stay with us.
We will continue to track these and other bills on our KS Legislative Tracker.
Remember to do more than vote: listen, learn, engage, and speak out.
