A special Senate committee voting on party lines Thursday passed a bill crafted by Republican lawmakers and corporate lobbyists to deliver an estimated $191 million in state income tax relief to businesses and individuals.
Senate President Susan Wagle, who formed the committee and appointed herself chairwoman, delivered GOP votes necessary to advance Senate Bill 22, which was aggressively championed by the Kansas Chamber. The bill would change state law to pass along revenue flowing to the state due to an overhaul of federal tax code. It would direct $54 million to individual taxpayers and $137 million to businesses during the next fiscal year.
The Council on State Taxation estimated rejection of such a bill would result in an 11 percent increase in the state's corporate income tax base, while the National Federation of Independent Business equated inaction on the bill to finding a wallet on the street and keeping the cash.
"Our question to you is will you improperly and unethically take that money? Or, will you return the wallet to its rightful owner?" said NFIB state director Dan Murray.
The full Senate is expected to take up the bill next week, but it would also need to pass the House before moving to Gov. Laura Kelly. The GOP holds large majorities in both chambers, but the new Democratic governor had urged the Legislature not to make sweeping changes to tax law.
Democratic Sen. Tom Holland, of Baldwin City, voted against the tax legislation after sharing skepticism about accuracy of state government projections of the revenue windfall.
"I might as well shake my Magic 8 Ball and ask what the cost is going to be, because a lot of this we just don't know," Holland said. "This, to me, is going back to Brownback if we go down this path."
He was referencing inaccurate estimates associated with the 2012 state income tax reform bill signed by Gov. Sam Brownback that lowered individual income tax rates and shielded owners of 330,000 businesses from state income tax liability. Republicans and Democrats contend the value of the business tax break was understated by $200 million annually. In 2017, much of Brownback's tax program was repealed following years of revenue shortfalls.
Holland said budget projections indicated the state would have a deficit of $98 million in three years if the tax bill was implemented, but would be in the black by $323 million at that point without the Senate bill.
For three days, the Senate committee heard executives at Bombardier, Seaboard, Spirit AeroSystems and others companies express consternation about the possibility of Kansas law standing in the way of those businesses taking advantage of lower federal taxation. The executives appeared to have spooked GOP senators.
Sen. Dan Goddard, of Parsons, was among Republicans supporting the bill and said he was worried about sending a toxic message if the Legislature kept the $191 million the first year.
"If we don't do anything and vote no, what kind of environment are we establishing in the state of Kansas for companies looking to relocate or start operations?" Goddard said.
"We're going to lose a bunch of jobs," said Sen. Julia Lynn, R-Olathe. "That's my issue, pure and simple. We'll have a bunch of people unemployed."
Sen. Vic Miller, a Topeka Democrat opposed to the bill, said none of the executives who spoke to the Senate committee vowed to move production plants or management offices to another state based on fate of the pending tax bill. He was disappointed Wagle's committee did nothing more for individual taxpayers than enable people to claim the standard federal deduction despite itemizing deductions on a state return.
"If we're looking at real tax relief, I'm more concerned we focus more on everyday citizens who pay the highest sales tax on food in the entire country. They don't have the option of just moving somewhere else to pay lower taxes," Miller said.