By Peter Hancock
December 7, 2016
A coalition of state lobby groups on Wednesday launched the first salvo in an upcoming debate in the Kansas Legislature over tax policy, calling for raising taxes by just over $1 billion in order to balance the budget, increase funding for public schools and restore funding for the state highway program.
“Rise Up, Kansas,” a coalition made up of children’s advocates, highway contractors, organized labor and a public policy think tank, called for reversing many of the income tax cuts that Republican Gov. Sam Brownback championed in 2012 and 2013, and for raising motor fuel taxes by 11 cents a gallon to restore funding that has been swept out of the state highway program.
The income taxes would raise an estimated $820 million a year for the state general fund starting in July, while the motor fuel tax would raise another $197 million a year for highways and other transportation projects.
“The last years can only be described as a senseless era of crisis,” Duane Goossen, a former state budget director who is now a senior fellow at the Kansas Center for Economic Growth, said at a Statehouse rally. “We made a dangerous gamble on a tax plan without any evidence that it would work, and we lost.”
The proposed tax plan was the work of Goossen’s organization, Kansas Action for Children, the Kansas National Education Association, the Kansas Organization of State Employees and the Kansas Contractors Association.
It calls for closing the so-called LLC loophole that exempts more than 330,000 farmers and business owners from state income taxes altogether, and for partially reversing other parts of Brownback’s 2012 tax plan.
That includes ending the so-called “march to zero” that automatically lowers income tax rates whenever state revenues grow beyond a set limit, and reinstating a third income tax bracket for people earning $40,000 a year or more.
Under that plan, the group said, no one would pay a higher income tax rate than they paid in 2012, before the tax cuts took effect.
But some people would, in fact, face a higher tax bill because the plan does not call for restoring any of the itemized deductions for child care costs, mortgage interest and other expenses that lawmakers reduced as part of a 2013 deal to lessen the impact of the 2012 cuts.
It would also reduce the state sales tax on food by 1.5 percent, saving the average household an estimated $100 a year. But it would also leave in place the 6.5 percent rate on other taxable items that lawmakers approved in 2015 to close a budget gap that year.
In addition, the plan calls for raising motor fuel taxes by 11 cents a gallon. The group said that would raise about $197 million a year, which they said is needed to restore funding that the Brownback administration has swept out of the highway program in the face of budget shortfalls in recent years.
Even if the “Rise Up, Kansas” plan were approved, however, it would do nothing to solve the immediate, $350 million revenue shortfall the state faces for the rest of this fiscal year. But if the group’s estimates hold true, it would close the looming $582 million shortfall that budget officials say lies ahead in the next fiscal year that begins July 1.
Those projections, however, do not take into account any additional money that the Kansas Supreme Court may order in the pending school finance lawsuit. The court heard oral arguments in that case in September, and a ruling could be handed down at any time.
Goossen said members of the coalition think it’s important for lawmakers to focus on a long-term solution for the state’s continuing budget shortfalls before they try to tackle the immediate shortfall in the current fiscal year.
“It is very, very important to have a long-term plan that fixes our balance problems and fiscal situation before doing any kind of short-term fix,” Goossen said. “The long-term plan has to be in place first.”
Lawmakers will convene Jan. 9 for the start of the 2017 session, and it remains unclear what kind of reception tax plans like the one proposed by “Rise Up, Kansas” will receive.
Conservative Republicans who dominated the Legislature in 2012 and 2013 when the Brownback tax plans were enacted suffered heavy losses in the 2016 elections, as Democrats and moderate Republicans made significant gains.
Newly elected House Speaker Ron Ryckman Jr., of Olathe, and Senate President Susan Wagle, of Wichita, have both said they are not taking any options off the table as lawmakers try to craft tax and budget packages to close the looming budget gaps.
Meanwhile Brownback’s office quickly panned the coalition’s plan, especially its call for raising motor fuel taxes.
“Liberal special interest groups have long called for ‘wealthy’ small business owners to pay their ‘fair share,’” Brownback’s spokeswoman Melika Willoughby said in a statement. “But today, the true victims of their tax and spend proposals were revealed. They are the receptionists, nurses, police officers, and others members of the middle class, working hard every day to put gas in the tank and money in their pockets to provide for themselves and their families.”
Kansas currently taxes regular gasoline and ethanol-blended gasoline at 24 cents per gallon, and diesel fuel at 26 cents per gallon. That makes Kansas’ gasoline rate about 3.5 cents higher than the national average while its rate for diesel fuel is nearly 4 cents below the national average, according to the American Petroleum Institute.
Those state excise taxes are charged on top of the federal excise tax of 18.3 cents per gallon for gasoline and 24.4 cents for diesel.