TOPEKA — Kansas legislators Monday jump-started a debate over ending an income tax break championed by Republican Gov. Sam Brownback, moving on the first day of their annual session to tackle the state’s severe and ongoing budget woes.
The House Taxation Committee decided less than three hours after lawmakers convened to draft a bill repealing a personal income tax exemption that benefits more than 330,000 farmers and business owners. Brownback has championed the break as a pro-growth policy, but it’s contributed to the state’s budget problems.
Kansas faces a projected $342 million shortfall in its current budget and gaps in funding for existing programs that total nearly $1.1 billion through June 2019. Lawmakers don’t think they can raise new revenues quickly enough to bolster the current budget but also want a longer-term fiscal fix.
The House committee’s first-day meeting demonstrated legislators’ determination to get started quickly. The first few weeks of the annual, 90-day session often proceed at a languorous pace.
Several House committee members said they want lawmakers to pass a bill this month to repeal the income tax exemption, so the state can make the change retroactive to Jan. 1 and start collecting new revenues earlier. Ending the tax break has bipartisan support and was a staple of successful legislative campaigns last year.
“There are a lot of people out there expecting this to happen, so it’s not like it will be a total surprise to them,” said Rep. Tom Sawyer, a Wichita Democrat.
The targeted tax break is an exemption for profits reported by farmers and owners of limited liability corporations and other businesses on their personal income tax returns and not subject to corporate income taxes. It also covers rents and royalties. Legislators believe repealing it would raise $260 million a year.
Critics of the tax break argue that it’s not fair for doctors, lawyers, dentists and other professionals to avoid personal income taxes when their employees still pay them on their wages.
Brownback advocated the exemption as part of a larger package of income tax cuts in 2012 and 2013 meant to stimulate the economy, though even some GOP voters concluded the effort was a bust. He’s still defending the exemption, and the powerful Kansas Chamber of Commerce is opposing its repeal.
Lobbyist Eric Stafford said the chamber believes that legislators should look at cutting spending first.
And Rep. Ken Corbet, a Topeka Republican, said: “There may be a lot of people here that want to throw business under the bus, but a lot of small-business people are the engines of this state.”
As for the shortfall in the current budget, lawmakers could cut spending or try onetime accounting moves, such as liquidating a state investment fund or delaying contributions to public employees’ pensions.
House Majority Leader Don Hineman, a Dighton Republican, said he expects Brownback to avoid proposing significant spending cuts.
But Senate President Susan Wagle, a Wichita Republican, said her chamber is ready to cut spending to avoid accounting moves. She and other legislators argue that such maneuvers push the current budget’s problems into the fiscal year beginning July 1, making the next year’s problems worse.
“Kansans must balance their budgets and live within their means. They rightfully expect the same of their elected officials,” Wagle said during a session-opening speech. “We’re ready to find permanent solutions to these challenges.”
Brownback declined during a brief interview Monday to provide details of his plans, saying he’ll release his budget proposals Wednesday. He’s scheduled to give the annual State of the State address Tuesday to a joint session of the Legislature.
“I’m excited about having them back,” Brownback said of lawmakers. “Now you can get into the serious work of addressing the issues.”