After sitting on the sidelines since his veto of a tax bill in February, Gov. Sam Brownback this week re-engaged with lawmakers working on a solution to the state’s budget crisis.
He needn’t have bothered.
The Senate on Thursday rejected the “flat” tax bill that he was lobbying for by a decisive 37-3 vote.
“This is bad tax policy,” said Sen. Tom Holland of Baldwin City, the ranking Democrat on the Senate Assessment and Taxation Committee.
“We need to send a message, stick a stake through the heart of flat tax theory today, because it’s not going to work for Kansas,” Holland said.
Lawmakers are attempting to address a revenue shortfall that could total $1 billion over the next two budget years.
While little progress is being made on revenue-raising measures aimed at closing the projected gaps in the fiscal 2018 and 2019 budgets, lawmakers appeared close Thursday to agreeing on a plan to close a $293 million hole in the current year’s budget, mainly by borrowing from a state investment fund.
Senate Democrats and moderate Republicans voted against the proposed flat tax, which would have replaced the state’s current two-tiered income tax system with a single rate of 4.6 percent. They said it was unfair to low- and moderate-income taxpayers and wouldn’t generate sufficient revenue.
“At the most basic level, shifting to a flat tax would take the failures of the current system and compound them,” said Heidi Holliday, executive director of the Kansas Center for Economic Growth, a nonprofit advocacy group.
Low- and middle-income wage earners in Kansas currently pay 2.7 percent on all or most of their income. Under the flat tax proposal, their rate would have increased by 70 percent while upper-income Kansans would have seen no change.
A coalition of groups including KCEG is pushing for passage of a tax reform measure that would restore a third income tax bracket, increase the state motor fuel tax, repeal a tax exemption given to more than 330,000 business owners in 2012 and reduce the amount of sales tax charged on food purchases.
Several conservative Republicans in the Senate who supported Brownback’s 2012 income tax cuts also voted against the flat tax proposal, which would have eliminated the business tax exemption.
“I’m not going to support a tax increase until we at least look at the expenditures. I think there are places where we can cut,” said Sen. Rob Olson, a Republican from Olathe.
Lawmakers plan to adjourn the regular part of the 2017 session Friday despite not having a plan to deal with the projected deficits.
They will return May 1 to finish their work on the budget and wrap up the session.
Between now and then, officials charged with revising the state’s official revenue estimates will meet to update their projections.
Jim McLean is managing director of the Kansas News Service, a collaboration of KCUR, Kansas Public Radio and KMUW covering health, education and politics in Kansas. You can reach him on Twitter @jmcleanks. Kansas News Service stories and photos may be republished at no cost with proper attribution and a link back to kcur.org.