Rush, rush, ruin.

May 2, 2018 by

What’s the rush?

When it comes to tax policy, what’s the rush is indeed the question of the day.

Last night at a 9:00 tax conference committee meeting, Sen. Chair Caryn Tyson (R-Louisburg) was insistent that urgency was necessary, demanding that the committee return at midnight after giving the staff a couple hours to draft extremely complex amendments dealing with the repatriation of overseas profits for tax purposes. Corporations, many of which don’t believe they should have to pay taxes and are notorious for using “shelters” to avoid taxes, are determined to stop tax provisions that make them pay their fair share of the responsibility for funding services. Tyson is determined to do whatever corporations want. Hence, the urgency. Let’s pass something after midnight without giving anyone the time necessary to really review a proposal and determine its impact on the state budget both immediately and long-term.

Fortunately House members, led by Committee Chair Steven Johnson (R-Assaria), are trying to be more deliberative and resisted the call by Tyson to continue into the wee dark hours of the morning when everyone would be sleep-deprived and unable to do such important work thoughtfully.

We all know the quality of work done after midnight. The Kansas Legislature is known for waiting until the last minute to get down to work and often ends up very late at night or early in the morning frantically passing the most important bills of the year. And they end up making grave errors in the process. One need only look at this year’s school finance bill with an $80 million error.

It would appear that Tyson’s goal is to maximize the depression of revenue to the state. Perhaps she wants to demonstrate her commitment to exploding deficits as if that is a qualification for a member of Congress (she is a candidate for Congress). The problem, of course, is that, unlike the federal government, the state cannot deficit spend. Kansans know better than anyone what that means thanks to the failed Brownback tax experiment.

Since the budget is being built on the assumption that all of the revenue available or predicted to be available is there to be spent, the passage of tax cuts will push the budget under water, jeopardizing any progress being made on school funding or the restoration of other state services.

We would remind the Legislature of the 2013 lower court decision in Gannon when the State argued that they did not have the revenue to increase school funding or honor the promises of Montoy. Here’s what the Court said to that argument:

The State has argued and asked us to find the  coming limitation on the State’s resources require the Legislature to make difficult appropriation decisions. The State has proposed that we find “the Legislature could reasonably conclude adjustment of state education aid to the Levels demanded by the plaintiffs would have disastrous consequences to the Kansas economy and its citizens” (P. 34 of the State’s Proposed Memorandum and Order). However, at the same time that the States attorney was advancing that argument, the Legislature passed the income tax cut.  According to one of the States experts, Dr. Art Hall, the Executive Director of the Center for Applied Economics at the University of Kansas School of Business, the tax cut bill will cause a revenue reduction in the first year (2013) of $800,000,000 to$1,000,000,000. See TR: Arthur Hallat pp.2421-2424. While Hall was called by the State to present evidence of the disastrous effect a 1.2 billion dollar infusion of money in a single year for education would have to the State, the same reasoning should apply to an $800,000,000 to $1,000,000,000 reduction in State revenue.

It seems completely illogical that the State can argue that a reduction in education funding was necessitated by the downturn in the economy and the states diminishing resources and at the same time cut taxes further, thereby further reducing the sources of revenue on the basis of hope that doing so will create a boost to the states economy at some point in the future. It appears to us that the only certain result from the tax cut will be a further reduction of existing resources available and from a cause, unlike the Great Recession which had a cause external to Kansas, that is homespun, hence, self-inflicted. While the Legislature has said that educational funding is a priority, the passage of the tax cut bill suggests otherwise and, if its effect is as claimed by the State, it would most certainly conflict with the States Article 6 § 6(b) constitutional duties.

So it would seem to us – and to most reasonable people – that enacting large tax cuts at this time would be a bad decision. We believe that lawmakers should take a “wait and see” approach. Let’s see if the recovery from the Brownback disaster continues and what the real impact of the federal tax changes will actually be for Kansas.

The tax conference committee met or attempted to meet several times today without making any progress. Tyson was bitterly angry with the House members at the 9:00 meeting last night and again at the 8:30 meeting this morning. At 11:30 this morning she made an offer to the House that was seen as backtracking on some earlier Senate offers. When questioned by Johnson, she said, “Sometimes when you reject an offer the next offer might be worse.”

In response Johnson and the House members left, telling Tyson that if she wanted to meet again she could let him know. She immediately called out for a 12:30 meeting. At 12:30, we gathered for the meeting only to be told it was postponed until 1:30. At 1:30, it was postponed until 3:00.

As of this posting, the two sides continue to negotiate, but not much progress is being made.  We will continue to update you as negotiations continue.  It’s also important to be aware and ready to take action if and when we put out the call to do so.

 

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