Archive for Wednesday, April 26, 2017

Legislators expect extened session with ‘significant tax increase’ on horizon

April 26, 2017

With a “significant tax increase” on the agenda, Kansas legislators should be prepared for a long stay when they return to Topeka in May, Sen. Tom Holland told a town hall meeting Saturday in Tonganoxie.

At a forum at the Tonganoxie Veterans of Foreign Wars Post, Holland, D-Baldwin City, and Rep. Jim Karleskint, R-Tonganoxie, said much remained on the Legislature’s plate for the 2017 session, including a new school finance formula, the state’s 2018 fiscal budget and the need to craft a tax policy needed to close a $800 million revenue gap for 2018. Holland said he thought there would be quick consensus on the first two items, but that finding agreement on taxes would be difficult.

“Make no mistake, there will have to be a significant tax increase passed to get us back on sound footing,” he said. “We are about $800 million out of kilter. We’re $800 million short on the revenue side. That’s the challenge. I think we’re going to get there. I think it’s going to be a long session... My guess is we’ll be there the entire month of May.”

The debate would center on the nature of the tax increase, Holland said. Gov. Sam Brownback and his allies are advocating consumption taxes, such as the sales tax increase passed in 2015, he said.

Holland said, however, that the goal should be to return the state to structurally sound fiscal policy and end the consistent revenue shortfalls that have plagued the state since the 2012 tax cuts that Brownback championed, which collapsed the state’s income tax brackets from three to two and significantly lowered the top tax rates.

“You have others — and I’ll put myself in that category — who basically believe the 2012 tax cuts have been an unmitigated disaster and instead of shifting that tax burden off onto others, you could basically go back and repeal those tax cuts,” he said. “My personal feeling is we could just do a repeal and have the same three tax brackets, same rates and the same means to itemize deductions we had back then, because we’re going to need every penny.”

A school funding formula that Karleskint said was finding favor in the House provided another reason for the Legislature to address the state’s revenue shortfall. That plan would add $150 million to state spending each year for the next five years to increase state aid to districts by $200 per student, he said. The plan would also add another $12 million a year for special education during that period.

The formula was crafted in response to the Kansas Supreme Court’s ruling last month that found that the Legislature wasn’t adequately funding education as constitutionally required. Karleskint said the plan would end the cycle of school districts suing the state over school finance and has support from districts involved in the recent successful litigation.

The Legislature should consider the cost of a new school finance plan in the years to come when considering a new tax plan, Holland said.

“The out-year costs of this is my big fear,” he said. “When you talk about a new school finance plan that’s going to cost an additional $150 million a year, I’m afraid we’ll be looking at the same thing in a few years. That’s why I think we need to look at a significant tax plan that can address those out years.”

Karleskint and Holland said although they agree the state’s sales tax rate needed to be rolled back, especially in regard to sales taxes on food, that wouldn’t happen this year because of the Legislature’s focus on closing the revenue gap.

In response to a question on another tax policy issue, Holland said there would be no action on the property tax lid this legislative session. That legislation, which becomes effective for the 2018 budgets that city and county governing bodies will approve this summer, limits mill levy increases to the rate inflation as measured by the consumer price index.

“That’s going nowhere,” he said. “Local governments are squealing about it, and I’m not saying they don’t have legitimate concerns, but that’s going nowhere.”

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