(Syndicated to Kansas newspapers March 14, 2016)
This may be the week of tax fights, when both the folks who carefully hang up their cashmere sport coats and those who toss their wool or maybe even polyester-blend jackets square off.
On the polyester side, we have those who just can’t believe that some 330,000 Kansans aren’t paying any state income tax on the profits from their Limited Liability Corporations and such. On the cashmere side, we have Kansans who have a zero-dollar tax bill and wonder why the jean jacket crowd won’t consume more groceries and send their clothes to the dry cleaners to increase the state’s take from sales taxes—paying the consumption taxes that Gov. Sam Brownback wants to use to balance the budget.
But the real issue comes down to just which legislators want to return to the Statehouse and the free drinks and meals that lawmakers enjoy after this fall’s elections.
Let’s see how this tracks.
In the Senate, there’s a bill that would make those LLC owners, who now take “non-wage” income from their businesses tax-free, pay taxes on 70% of that income, the other 30% non-taxable. Oh, and that Senate bill would, if passed, take effect back on Jan. 1.
In the House, there’s a bill that puts the non-wage income back on the books for tax calculation and would use that new tax money to reduce the sales tax on groceries, so the help can afford to eat and feed their children.
That’s a pretty high-level view of the proposals. It’s worthwhile to remember that Brownback is on the side of the cashmere crowd and that his veto of a tax bill requires not just 63 but 84 House votes to override that veto and put the bill into law. In the Senate, it takes not just the majority 21 votes but 27 to override him.
You can count on Democrats in each chamber to either vote for taxes or take the stance that this is a fight among Republicans and they don’t want to miss lunch to participate in it.
There is, of course, this looming budget deficit, with the probability that severe cuts or financial hijinks are going to be needed to balance the budget, which means that services and programs are going to be chopped. But that’s not likely to make much difference to the cashmere class. For the denim crowd, it might mean dipping into your kid’s college fund to pay the water bill.
So it comes down—as in every election year—to where the votes are.
There are moderate Republicans who want the tax-exempt class to start writing tax checks like everyone else and there are conservative Republicans who see the revenue shortfall as a chance to shrink government and push the financing of social programs and education down to the local property taxpayers. Oh, it’s the second group which historically has been the most reliable primary election voting bloc and in most legislative districts in Kansas if you win the GOP primary you’d have to serve kale at your next fund-raiser to lose the general election.
But those Republicans who want to end the tax break? Their numbers appear to be growing, but we won’t know for sure where the party splits at the primary election. Oh, and don’t forget that the no-tax crowd is probably going to be hip deep in campaign contributions from conservative groups who can flood voters with cute pictures of conservatives with puppies and grandchildren.
The alternative to taxing that now-exempt income? So far, it’s been borrowing, either from the highway fund or making cuts to specific state agencies. But a new ploy being considered is borrowing against future tobacco industry payments of about $60 million a year for enough money to balance the budget, at least for the remaining two years of Brownback’s final term in office. Sounds a little like a payday loan, but with Audis and Mercedes parked in front of the gas station-turned lending institution.
Looks like a real fight ahead…