The legislator leading a faction of Kansas House members pushing to reinstate taxes on business owners exempted by the 2012 tax cut law has given up the battle.
Rep. Mark Hutton, a conservative Republican businessman from Wichita, said Wednesday that a veto threat from Gov. Sam Brownback and other considerations meant that continuing the fight would make it more likely that lawmakers would go home without balancing the budget, forcing Brownback to make across-the-board spending cuts to erase a projected deficit of roughly $400 million.
“We’ve kind of hit a tipping point where if we keep pursing this we’re going to hurt the people of Kansas, the very people that we were working hard to get some equity to and some parity for on the tax policy,” Hutton said.
Even though Hutton is one of the more than 330,000 business owners who benefited from the tax exemptions approved in 2012, he doesn’t think the policy is fair.
“It’s an equity issue,” Hutton said last week as negotiations on the tax package were beginning. “I don’t believe we can ask the people of Kansas to step up and pay higher sales taxes while we continue to allow some businesses to pay nothing.”
Still, Hutton said, several days of intense negotiations but little progress convinced him that continuing the fight would have been counterproductive.
“There has been over the last two days — actually almost three days — incredibly intense negotiations with a lot of different people and groups,” he said. “And unfortunately some of those didn’t pan out very well. But the process allowed us to come back and say, ‘This is the best we can do right now.”
The latest tax proposal, which some believe could break the stalemate and end the longest legislative session in Kansas history, restores taxes on a kind of business income called “guaranteed payments.” But a simple accounting change will allow many of those subject to the tax to avoid it.
The proposal would generate an estimated $408 million mainly by increasing the statewide sales tax to 6.55 percent from the current 6.15 percent, further limiting income tax deductions and raising the cigarette tax by 50 cents a pack, taking it from 79 cents to $1.29.
Hutton said he will support it.
“I can hold my nose and a couple of other things and support this bill,” he said, adding that he will encourage the approximately 25 House members who were working with him to do the same.
“We’re working really hard to bring everybody on board,” he said. “We’re telling them this is the right thing for Kansas right now. It’s hard to take a loss, it really is. But right now this is more about taking care of the people of Kansas than it is about this issue.”
Hutton said he still expected the vote, which could take place Wednesday night, to be close.
“It’s not going to be easy,” he said. “Oddly enough, some of the people we were battling against on the business exemption issue hate this bill for other reasons. And whether or not everyone can hold their nose enough to press the green button remains to be seen.”
Hutton, who has challenged Brownback’s contention that the 2012 tax cuts have stimulated job growth and the economy, said he intends to continue his campaign to reinstate the business tax over the summer and fall and in the 2016 legislative session.
Jim McLean is executive editor of KHI News Service in Topeka, a partner in the Heartland Health Monitor team.
