Tax bill negotiated in conference stumbles

A tax bill stumbled Tuesday after Senate Republican leaders said it did not have enough support.

The measure was negotiated earlier by House-Senate Tax Conference Committee and teed up for possible action but during a Senate GOP caucus meeting it became apparent the proposal was in trouble.

Still, further talks were expected to continue as legislators search for ways to close a mammoth revenue gap and also increase school funding to address a Kansas Supreme Court order.

The proposed measure, contained in HB 2067, would raise an estimated $850 million to $900 million over two years – enough to cover budgets for current state programs under development in the House and Senate, but not enough to provide a significant increase in school funding.

The veto session started off slow Monday, but a new tax plan was in the works starting early in the day.

The conference committee began with Rep. Steven Johnson, R-Assaria, and chair of the House Tax Committee  offering a conceptual change to HB 2067 by removing the current language and inserting roughly the same tax plan from HB 2178, which was vetoed by the governor in February.

The key difference in the new proposal was an attempt by Johnson to answer concerns about the retroactivity of personal income tax plan by making 2017 a step year and having the rates increase by half of their final amount.

The House moves income tax rates from the current two bracket system to three brackets of 15/30K, 50/100k, and above for single/married filing jointly. The rates would remain 2.7 percent on the lowest bracket, 4.9 percent in 2017 than 5.25 percent in 2018 for the middle bracket and 5.0 percent in 2017 and 5.45 percent in 2018 for the upper bracket.

In addition, the LLC pass-through exemption would be repealed beginning July 1, 2017, medical expense deductions would be raised to 100 percent in 2018 and the glide path to zero plan would be eliminated. Additional small changes were made as well.

After taking 30 minutes to discuss, the Senate conferees came back and accepted the House position on the bill. Chairwoman Tyson, who was a no vote on HB 2178 in February, stated that “they are willing to sign the conference committee report to allow discussion by the body on the plan.”

Later, however, the plan was shot down in the Senate Republican caucus meeting.

In other tax news, the House Tax Committee met at its usual 3:30 p.m. time and had an open dialogue discussion of what possible topics the committee would want to include in a tax plan. A majority indicated agreement that the LLC pass through exemption and some income tax reform would have to be part of the plan but other topics then began to be floated.

Rep. Erin Davis, R-Olathe, began the discussion with a suggestion that a cigarette tax be discussed, indicating that it would raise revenue, improve health and help decrease long term KanCare costs.

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