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TAXES AND BUNDLING

I have said in previous newsletters that I believe bundling of bills to be one of the worst practices of the Kansas legislature and I have fought to stop it on many occasions. Bundling forces legislators to consider multiple bills and ideas in one conference committee report with no ability to amend or divide the final bill. It means that legislators are forced to either vote against some things they support or for things they do not support. This year’s major tax bill was an example of that.

HB 2228 started out as a bill to exempt, from property tax, recreational vehicles owned by currently active military personnel, property purchased through a land bank, and federally owned property. By the time the Senate changed it and it was referred out of the tax conference committee it was a very extensive income tax bill, which did many things, some if which I supported, and some I did not.

One of the things I supported was a component that would remove a restriction under current law preventing Kansas individual income taxpayers from itemizing deductions unless they also itemized deductions for federal income tax purposes. Since the federal standard deduction effectively doubled, Kansas taxpayers would have to decide if that was enough to offset not filing an itemized Kansas form. I believed they should be able to file the standard federal form and an itemized state form.

The tax bill also included a section that allowed Cowley County to participate in the “Rural Opportunity Zone” program but only on a limited basis. It did not make Cowley County eligible for business incentives and educational incentives, but it did allow persons, who move into the county from out-of-state, to be exempt from income tax for a period of time. I supported a bill introduced by Representative Anita Judd-Jenkins (Arkansas City) that would have given the county full opportunity zone status but that was not what was included in the conference committee report and we could not amend the report. Even though I supported these two measures and they were not costly to the State, I was forced to vote against the conference committee bill because of a number of other measures that would have cost the State a significant amount of revenue.

The bill would not have taxed deferred foreign income. Until this year, federal law allowed corporations to shelter profits in offshore accounts to avoid taxes. Now these businesses must claim that income for tax purposes. Kansas would only tax 1.74% of that new money even though the corporate rate is about 7%. This bill would have continued the tax free status on that money. The bill would also have provided a state and local sales tax exemption for all sales of gold and silver coins and palladium, platinum, gold and silver bullion. In addition, the bill would have given tax exemptions for business from income liability created at the state level when the federal government significantly cut corporate and business income tax rates nationally.

The Revenue Department estimated that the tax bill would cost around $180 million in lost State revenue, but many economists and members of the Revenue Estimating Group believe the number would be more than $200 million. Many of us knew we could not convince the Kansas Supreme Court that we were trying to adequately fund public schools if we were eliminating that much money from our budgets.

Last year, more than 2/3 of my colleagues in the Kansas Legislature and I voted to end the failed Brownback tax experiment. For the first time this year, we have a structurally balanced budget, we provided significant levels of funding for Kansas public schools, our bond rating has increased twice, we are putting more money into highway projects, we have given long overdue raises to corrections workers and court employees, we have directed more money to programs to improve the coordination of mental health services in schools, and we are funding programs for seniors and veterans. We are making some improvements but still have more improvements to make. To vote for this year’s overall tax bill would have put us in the red within one year and we would be back to the problems that existed during the Brownback era.

The tax bill passed in the Senate on a narrow 21-19 vote. It failed in the House 59-59. It is important to note that the bill needed 63 votes in the House to pass, not just one to break the tie. This was a bi-partisan rejection of an ill-conceived return to the Brownback era. I believe if ideas are good ones they should be voted upon individually and not rolled into large multi-issue bills that become political tools for one side or the other. That is why I will continue to fight the practice of bundling as I have in the past.

 

 

 

K-12 EDUCATION BUDGET DEBATE

The most difficult task this year was to create another public education funding formula. As the ranking minority member of the K-12 Budget Committee, which was responsible for the House version of the formula, I was frustrated that we did not start working on a bill at the beginning of the session. Republican Leadership in the House and Senate was waiting for a study they commissioned, which they believed would tell us we did not need to increase funding for public schools. After almost three months of waiting, the study was presented and indicated that if we were to meet the State Board of Education’s goal of 95% graduation, it would take about $2 billion over a number of years. While we needed to spend more, that amount was out of the question unless it was spread over many years.

At this point, the committee got to work. We removed the parts of the 2017 bill that were ruled unconstitutional by the Supreme Court on equity grounds. (I advocated removing those items last year but was voted down) We then added about $523 million in new spending for the next five years. That brought the total amount of new money, since Brownback’s unconstitutional block grant, to about $800 million over six years. After five years, the increases would be based on the consumer price index to help schools keep up with inflation.

Finally, after much political wrangling, the bill was passed and sent to the Governor. What made the issue so difficult was that a group of legislators, that call themselves the “Truth Caucus”, did not want to even try to adequately fund public schools. Another group thought that the amount in the bill was way too small. While I am not sure the amount will meet the Supreme Courts ruling, I voted with seven other Democrats to support the plan and it passed with our help. I believed it was better to make a good faith effort to try to solve the problem, than to divide up sides and play chicken with our children’s educations.

The new funding formula is now being discussed in hearings before the Kansas Supreme Court. We will know what their decision will be by the end of June, if not sooner.