TOPEKA — The House is nearing a second attempt to overhaul the state’s tax system — this time with a 5 percent flat tax proposal that drew little enthusiasm in hearings and debate.
Skeptics of the bill — such as Atchison Republican John Eplee and Wichita Democrat Tom Sawyer — tried Wednesday to dissuade their tax committee colleagues from the idea. Their concerns ranged from effects on families with little disposable income to the state’s gaping budget shortfall.
“A lot of us that are here ran on fair and balanced tax policy — or trying to restore that,” Eplee said. “I’m not sure that this really gets us any closer to that.”
Sawyer said the plan would hike tax liability by 34 percent for a family earning $50,000. By comparison, a tax plan that Gov. Sam Brownback vetoed last month would have hiked taxes on that same family by 2 percent, he said.
“You’re getting all the money on the lower end,” he argued to the panel. “To me, it’s not a good thing about this bill.”
The bill passed by a vote of 14 to 7 and would next need to pass the 125-member House before proceeding to the Senate.
Kristey Williams, R-Augusta, said she saw a few positives in the proposal. Though she indicated she hadn’t heard from constituents in her district regarding the idea of a flat tax, she expressed certainty that they want Kansas’ LLC loophole repealed.
“That is a necessary component for me,” Williams said, and added that the bill also would lower sales taxes on food.
“So I do not feel that taking a look at a flat tax, that that’s a bad thing to do,” she said. “We haven’t yet had a look at it this year.”
Rep. Dan Hawkins, R-Wichita, said he isn’t entirely satisfied with the bill, but cautioned his colleagues, “I do think that we can all find something that we don’t like about every single tax plan.”
“We have to get something to the floor,” he argued.
Factoring in a standard deduction and low-income exclusion, the bill effectively means people who earn more than $14,750 would pay 5 percent on everything they earn above $9,750. It would generate an estimated $850 million over the next two fiscal years.
The state is facing a budget shortfall of about $1 billion for fiscal 2018 and 2019, and the Legislature is wrestling with how to align spending and revenue through budget cuts, tax increases or a combination.
The matter is further complicated by a recent Kansas Supreme Court ruling that found the state’s current K-12 funding system unconstitutional. A House committee is mulling injection of $75 million extra into schools next year, though some lawmakers and advocacy groups have suggested the Legislature will need to add much more than that to satisfy the court.
The House and Senate made their first attempt to reform current tax policy earlier this session with a bill that would have brought in nearly $600 million in 2018 alone, but achieved that in part by applying changes retroactively, which met resistance.
The bill would have eliminated signature Brownback policies from 2012, including an income tax exemption for owners of at least 330,000 businesses — better known as the LLC loophole. It included three tax brackets, with hikes for individuals earning more than $15,000 and steeper increases for those earning more than $50,000.
On Wednesday, members of the House tax panel considered making the flat tax bill retroactive to boost the amount it could raise — in which case, it would raise more per year than the February proposal that Brownback vetoed. The motion failed.
Rep. Tom Burroughs, D-Kansas City, offered a sarcastic “congratulations” to those Republicans who advanced Brownback’s agenda in recent years and continue to do so.
“I think they’ve really set a great stage for a national display of what it takes to kill the economy in Kansas,” he said.
Another Democrat, Rep. Louis Ruiz, of Kansas City, suggested House Speaker Ron Ryckman, R-Olathe, had instructed Republicans to get the flat tax bill to the floor. Speaking after the meeting, a spokesman for Ryckman declined to comment.
Rep. Steven Johnson, R-Assaria, chairman of the tax committee, said the speaker asked him to have the committee consider the bill.
Rep. Ken Rahjes, R-Agra, said Ryckman didn’t direct Republicans to get it to the floor.
“There was no pressure,” Rahjes said. “He just said, ‘This is something that looks like may move us forward.’ ”