The legislature already took one good hard swing at tax reform back in February. That tax package from the House was vetoed in one of the most dramatic scenes of the year. Another dramatic scene played out last Thursday in the Senate.

A New Approach

The Senate Assessment and Taxation Committee sent a new approach to the Senate floor last Thursday. It was a “Flat tax” under which every Kansan, regardless of how much money they earned, would pay income tax at the same 4.6% rate. In an effort to soften the blow this approach would have on low-income taxpayers who currently pay at a rate of 2.7%, the Senate bill also raised the standard deduction and lowered sales tax on food.

Proponents of this approach said it was a broad, fair, simple way for the state to gather revenue. In an added twist of plot, the Governor weighed in publicly in favor of the Flat tax. Opponents decried this step away from progressive and toward regressive taxation; which is just a not very fancy way of saying they think it is fair for people to pay a higher tax as they earn more money.

A Clear Message

The debate on the floor of the Senate was intense and impassioned. Frustrations ran high, not least because lawmakers knew this was their last full day and they still hadn’t completed the single biggest job they were sent here to do. Sensing that the Flat tax was taking on water and might soon sink, its champions proposed to row it back to committee for more work. This is when it got interesting. Opponents, and it turns out there were many, wanted to send a clear message that the Flat tax was unacceptable. They had no intention of allowing the bill to scurry back to the protective confines of its committee. They wanted the thing bludgeoned publicly.

Now, under standard legislative procedure, after a bill is debated on the floor, a first vote is taken in which the Senate formally recommends the bill be passed. Then, usually the next day, the bill comes up again for “Final Action,” whereupon lawmakers vote once and for all to pass the bill and send it over to the House. This two-step process may strike the casual onlooker as archaic but it generally prevents bad ideas from slipping through by accident. In all but the most extraordinary of circumstances, bills which are recommended for Final Action on that first vote pass the second vote the next day.

These Were Extraordinary Circumstances

The motion was made to pass the Flat tax on to Final Action. Some veteran senators rose to clarify for the benefit of any less experienced parliamentarians that a “yes” vote at this stage only meant debate was over; it did not mean the voting senator actually liked the bill. With that, the Flat tax rather easily passed its first hurdle; 32 of the 40 senators recommended it for Final Action. This was the bill’s last happy moment.

In a quick procedural maneuver, opponents of the Flat tax declared a legislative “emergency” and insisted the bill receive its second and final vote right then and there instead of waiting until the next day. By the time is was over, only three senators had voted in favor of the Flat tax. The remaining 37 sent their message loud and clear that whatever the tax package which passes in May looks like, it will contain tax brackets imposing different rates for different income levels.

Tellingly, in his endorsement of the Flat tax bill, the Governor did not object openly to those provisions of the bill which would have repealed the LLC Exemption. Some view this as a subtle hint that he may have resigned himself to the fact that this facet of his 2012 tax reform plan will be going away.

And Then It Was Over

By Friday afternoon, lawmakers had departed Topeka and must have been wondering in their car rides home how they would explain all that had happened to their constituents. They will return on May 1 for the Veto Session.

In theory, the Veto Session is an opportunity for the legislature to wrap up any unfinished business and address any bills the governor may have vetoed during their April absence. In fact, this legislature still needs to:

  • Finalize a school funding formula which can pass constitutional muster
  • Pass a budget for the two-year period which begins July 1, 2017; and
  • Figure out some way to raise enough revenue or cut enough expenses so the budget balances.

The thoughtful reader will have discerned that these are not mere details. They are the sum and substance of the 2017 session and, as of the adjournment of the regular session, they remain largely undefined. To be fair, lawmakers will not return to a blank slate. A great deal of committee work has been done on the new school funding formula and budget committees in both chambers have developed plans which are as complete as they can be until the bill for schools and the amount of new tax revenue they can expect are known.

Economic Development

As has been previously reported, efforts to diminish the important jobs incentive programs called PEAK and HPIP have apparently been successfully resisted for this year. The bills which would have done that have not advanced.

Last Thursday, though, the Senate passed a bill which may yet have the effect of hampering the efforts of economic developers. The bill reauthorizes a statewide 20-mill property tax levy to help pay for schools. The Topeka Chamber considers public schools to be important allies in the effort to develop a strong future workforce. Importantly, a proviso added during the process says Industrial Revenue Bonds and economic development tax exemptions granted after the bill takes effect don’t get to abate this 20 mills. The Chamber will be considering this piece of legislation carefully to determine the degree to which it might hinder our community’s ability to negotiate property tax abatements with potential or expanding employers. The bill must still be taken up in the House.

Entertainment Districts

The House has passed the bill which gives cities the right to designate certain areas where adults could stroll down the sidewalk with a beer or wine in their hands. Senate leaders favor the legislation and are looking for the right procedural vehicle to pass it into law after they return in May.