Kansas lawmakers pass plan to boost sales, cigarette taxes after Brownback's budget warnings

Republican legislators in Kansas narrowly approved tax increases Friday, responding to pleas from their leaders and a warning from GOP Gov. Sam Brownback's aides about draconian spending cuts that could result if they didn't erase a budget deficit.

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The budget troubles arose after the Republican-dominated Legislature slashed income taxes in 2012 and 2013 at Brownback's urging. The governor and his allies argued that Kansas is benefiting from a "pro-growth" climate even as GOP legislators' disagreements over filling the budget gap for the fiscal year beginning July 1 made this the longest annual legislative session in state history.

The budget package approved Friday preserves most of the income tax cuts Brownback championed. The plan, drafted by Republicans, raises sales and cigarette taxes to generate $384 million in new revenues during the next fiscal year.

Critics described it as the largest tax increase in state history, but Republican leaders said it should viewed in the context of the past income tax cuts, which one legislative analyst said could be worth about $900 million annually.

"This is a correction," Republican Sen. Forrest Knox, of Altoona, said during a meeting of GOP senators Friday.

One bill raises the state sales tax to 6.5 percent, from 6.15 percent. The House approved that bill 63-44 early Friday, and the Senate passed it 21-19 Friday afternoon.

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A second bill raises the cigarette tax by 50 cents a pack, to $1.29. It also includes a modest increase in taxes for business owners and farmers. The Senate approved it Sunday, and the House approved it 63-45 early Friday.

Final approval of the plan came on the 113th day of the Legislature's annual session, 23 more than the 90 days lawmakers traditionally schedule.

Republicans were deeply divided and struggled to reconcile their push for tax increases with their party's low-tax, small-government rhetoric.

"I congratulate them on coming together in a spirit of cooperation and compromise to do what is right for Kansas," Brownback said in a statement issued after the final, crucial Senate vote in favor of the plan.

One contentious issue was how much to increase taxes for the 281,000 business owners and 53,000 farmers who no longer pay income taxes on their profits under a 2012 policy championed by Brownback.

Democrats argued the state should reverse the policy; many Republicans agreed that it's unfair to allow business owners to pay no income taxes when their employees' wages are taxed.

Lawmakers agreed to raise their taxes by $24 million during the next fiscal year, the top amount acceptable to Brownback.

Meanwhile, Democrats said the sales tax increase hurts poor and middle-class families.

"Clearly, a move away from income taxes toward consumption makes an already unfair tax system more so," said Matthew Gardner, executive director of the Washington-based Institute on Taxation and Economic Policy.

Brownback made a personal plea to GOP legislators during a meeting Thursday afternoon. Some legislators believe warnings from top administration officials finally broke resistance to proposals the governor favored.

Lawmakers were told that uncertainty about the budget would invite a downgrade of the state's bond ratings and that Brownback could be forced into making $400 million in cuts, including $197 million from aid to public schools.

Budget Director Shawn Sullivan said Brownback also could line-item veto all operating funds for state universities. They could rely on tuition to pay staff for a while, but lawmakers likely would have been called into special session.

Republican Sen. Jeff Longbine of Emporia, home to a state university, called the tactics of Brownback's aides and fellow lawmakers "political blackmail." Yet he cast a crucial vote for the plan to protect institutions and state workers in his district.

"Politically, it'd be a lot of fun to watch it burn," Longbine said. "But my constituents sent me here to make choices."

As of July 1, Kansas will have among the highest statewide sales tax rates in the nation. Only eight states will have a higher one, led by California's 7.5 percent. With local sales taxes, the total tax in some areas of Kansas could reach 10 percent.



Senate vote on bill with sales tax increase: http://bit.ly/1FZhSwz

House vote on bill with cigarette tax increase: http://bit.ly/1B7fng2

House vote on bill with sales tax increase: http://bit.ly/1KJSTUd


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