Let’s dance

Syndicated to Kansas newspapers Feb. 6, 2017

Martin HawverThis may be the week when you grab your wallet—or maybe consider buying a smaller one—as the House but mostly the Senate start assembling their tax-increase bills to boost the state’s cashflow.
The House Tax Committee will start assembling its bill this week, but the Senate has one all glued together, ready for committee hearings this week and maybe debate in the full Senate by week’s end.
Nobody’s scrapping much about the provision which will tax the non-wage income of owners of those cute little LLCs that nobody knew anything about until they were declared income tax exempt in 2012. Key is that apparently most folks who actually pay Kansas income tax would like those LLCs and similar firms (farms, the self-employed and such) to chip in some tax money to the state.
But it’s the other taxes that are spine-tingling for some.
The Senate bill plans to increase tax rates on the state’s now-two income tax brackets, which were trimmed of a third, higher-rate bracket back in 2012 when the LLCs were taken off the leash.
Pulling money out of those LLCs, well, that’s one thing. But raising general state income tax rates on folks who have been paying state income tax the last four years while their LLC neighbors bought Buicks and took cruises?…that’s a whole different issue.
That’s where the Senate floor debate fun will start.
The Senate’s bill proposes to raise the rates on joint filers with less than $30,000 in income by a total of about $54 million. More than $30,000 taxable? Look for the rate increase of the same 0.3 percent to pull about $150 million out of their pockets. But, that is only if the estimates of the effect of those tax increases is accurate.
So, however you want to define it, the (relatively) poor pay more and the low end of the moderate-income tribe pays a little more, too.
But what’s noticeable is that the Senate’s GOP leadership isn’t willing to add a third bracket at higher rates for the crowd that sends its shirts to the laundry instead of washing and ironing them at home. Maybe those with incomes of $70,000 or $100,000 or more.
The measure doesn’t “tax the rich,” significantly, does it?
That might be for a very good reason. Some higher, third bracket would cost wealthier Kansans money that they might choose to contribute to political campaigns. Or, taxing at a higher rate above-average incomes might be expressed in economic-development argot as making Kansas a “high-tax” state for the wealthy who probably won’t lease beach-front retirement villas in Trego County because of that tax burden.
That’s the scrap. Remember, it was individuals who got major income tax reductions back in 2012, and the LLC business? That was primarily an economic development wrinkle, designed to bring businesses into the state and to free up enough money for those generally small businesses to buy a new lathe or hire an extra worker with money that would otherwise be spent on taxes by the business owners.
So, what’s this week look like, providing that the Senate actually gets its bill out of committee and onto the floor for debate? The bill won’t raise enough money to solve the revenue shortage—that’s almost certain to require spending cuts that so far aren’t clear in either amount or whether they will happen.
That’s still a strategy for lawmakers who don’t want to read about raising taxes on their opponents’ campaign flyers in two or four years. Not enough information, not willing to vote for tax increases if they don’t know how much money the Legislature intends to spend. Not enough information to see whether the budget will balance, which is the real job here.
Not sure anything gets settled this week, but we’ll at least see the start of this dance.

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