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December 17 -- The New Federalism
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HomeSpotlight Story | Bird’s Eye View | Budget & Taxes | Politics & Leadership | Governors | Hot Issues | Once Around the Statehouse Lightly
Last month Kansas Gov. Sam Brownback (R) proposed three options for closing his state’s projected $290 million budget hole: borrow against expected future proceeds from the Tobacco Master Settlement Agreement, delay making a $100 million payment into the state’s pension fund, or cut spending significantly for state agencies, universities and public schools.
But Brownback came under fire even from members of his own party for failing to include a fourth option: closing a loophole in a business tax exemption enacted in the state four years ago that allows some business owners to avoid paying any income tax on their profits. Brownback championed that exemption, saying it would spur economic growth, but the state had the seventh worst nonfarm job performance in the nation between March 2015 and 2016, according to the U.S. Bureau of Labor Statistics.
“Gov. Brownback is asking us to take our finger out of the dike and stick our heads in,” said Rep. Mark Hutton (R), following a House and Senate budget committee meeting.
Hutton said the governor was advocating for a long-term commitment to provide short-term budget relief, while closing the business tax loophole would provide a long-term fix.
“If we would fix that one problem, we wouldn’t need any of these options,” he said.
Sen. Jim Denning (R), who compared the business tax problem to a leaky faucet, said simply requiring businesses to have at least one employee to qualify for the tax exemption would generate about as much revenue as the governor’s tobacco settlement proposal.
“I think it’s about time we just fix the darned leaky faucet and get this thing behind us,” he said.
But Senate budget chairman Ty Masterson (R) said rolling back the tax exemption probably wouldn’t solve the state’s immediate budget problems because there would be a delay before it took effect.
House tax chairman Marvin Kleeb (R) said he doubted a bill to make such a change would even pass in his chamber, where Republicans hold a 97-28 majority.
“Last year we got 27 votes for a pass-through [business exemption] fix,” he said, adding, “So I think it’s very prudent to look at these other options.”
And Senate President Susan Wagle (R), who supported efforts to end the business tax exemption last session, said she opposed a tax change this year.
“The short-term fixes and one-time funding solutions the Governor has presented are not ideal; however, raising taxes is not the answer,” she said in an email. “Making ends meet will be a heavy lift for the legislature, but I am confident we can find a resolution quickly.” (WICHITA EAGLE, LEXISNEXIS STATE NET)