The Weekend Warriors at Work!

Jun 1, 2015 by

Friday saw things fall apart under the dome after House leadership crafted a plan by which they could end tax debates on the floor and push the whole of decision making into a conference committee.

Having watched the Senate debate a tax plan crafted by Sen. Les Donovan (R-Wichita) only to kill it on a vote of 1 to 30, legislators came up with the idea of putting a minimalist bill into conference. In this way, they would have tax conference committee reports to act on and not bills – a conference committee report cannot be amended so this action would dramatically limit what happens in floor debate.

The House passed a small tax plan – basically only the amnesty program – in SB 29 and shot it over to the Senate. Since this was a bill that the Senate had already passed in another form, all they could do was vote to concur in the House changes or non-concur and form a conference committee.

Senate leadership offered a motion to non-concur and form a conference committee but Sen. Anthony Hensley (D-Topeka) immediately offered a substitute motion to concur in the bill. If adopted the Hensley motion would send the bill to the Governor and if defeated, it would kill the bill outright.

Hensley argued that it was wrong to simply put all decision making into the hands of the six members of the conference committee and essentially deny a real voice to all the other Senators and Representatives. He was joined in this argument by the hard right conservatives including Mary Pilcher-Cook (R-Shawnee), Greg Smith (R-Overland Park) and Dennis Pyle (R-Hiawatha).

Sensing their best laid plans going haywire, it was decided to break and go to caucus to discuss the issues. Upon returning, Republicans had united. They voted down the Henlsey motion and then reconsidered their action, passing a motion to non-concur and send the bill to conference.

Now we are at a point where the bill will be taken up in conference. We expect that the conferees will assemble a comprehensive plan and send it out in a report to be voted up or down in both chambers. Each plan that fails will send the conference committee back to craft another, attempting to figure out how to get 63 votes in the House and 21 in the Senate.

On Saturday, things went very slowly with very little progress noted.

Probably the most important event was the Governor’s press conference at which he finally stepped in and suggested a plan.

The Governor’s plan would:

  • Tax the “guaranteed payment” provisions in the now-exempt businesses at the lowest income tax rate, 2.7%.
  • Raise the sales tax to 6.65%.
  • Raise cigarette taxes by 50 cents/pack.
  • Eliminate income tax deductions except home mortgage interest, property taxes paid, and charitable contributions. Charitable contributions would be at 100%, mortgage and property taxes at 50%.
  • Raise the bottom income threshold at which income tax is owed thereby eliminating about 388,000 individuals from the income tax rolls.
  • Slow the reduction in the income tax rates but continue the “march to zero.”

Much of the rest of the day was spent in caucus meetings.

There were two committee meetings at the rail.

The conference committee on HB 2353 (containing technical clean-up to the block grant bill and the education community’s consensus PNA bill) met to correct a mistake made in the bill drafting. HB 2353 will be considered once again.

The Senate Ways and Means Committee met to introduce a tax bill that would provide an income tax check-off for K-12 education. Think Chickadee Check-off for schools!

And that brings us to Sunday.

Despite being set to begin at 1:00 (House) and 2:00 (Senate), both chambers gaveled in and almost immediately recessed.

House Republicans decided to provide their members with a survey in an attempt to find out what taxes might get the support of 63 members. The Senate Republican caucus heard from Revenue Secretary Nick Jordan who assured them that the Governor would veto any bill that taxed the businesses now exempt.

The House came back at 4:00 and by 4:30 had adjourned until 10:00 Monday.

The Senate came back in at 4:13 to take up Sen Sub for HB 2109, a tax bill.

Several amendments were quickly offered and adopted:

  • Senator Tyson (R-Parker) offered an amendment to require people to hold a social security card and work for a full year before qualifying for any tax credits.
  • Senator Pilcher-Cook (R-Shawnee) offered an amendment to repeal a tax exemption for alumni associations.
  • Senator Smith (R-Overland Park) offered an amendment that would end the opportunity to double dip when making charitable contributions (someone buys something for a non-profit using the non-profit tax exemption and then takes an income tax deduction for the contribution).
  • Senator Holmes (R-St John) offered an amendment allowing Christmas tree farmers to benefit from the LLC business income tax exemption.
  • Senator Baumgardner (R-Louisburg) offered an amendment directing the Department of Revenue to continue sending out detailed car registration letters; the DOR had recently decided to change to simply sending a reminder postcard to save money.

These amendments were all adopted.

Then came the biggie. After a long dinner break, the Senate reconvened at 8:00 to begin debate on an amendment from Sen. Abrams (R-Arkansas City).

The Abrams amendment was 81 pages long and contained a number of provisions. Essentially, it repealed many sales tax exemptions and used the savings to decrease the sales tax rate and accelerate the march to zero.

The repealed exemptions would have had the effect of forcing schools, non-profit hospitals, and youth development organizations (Girl Scouts, Boy Scouts) to pay millions of dollars in sales taxes. Debate was heated with some conservatives blasting the legislature for granting these exemptions to “special interest groups with big lobbyists.”

The debate showed deep divisions within the Republican caucus. Senator Melcher insisted that non-profit hospitals should pay up just like for-profits and Senator Donovan argued that non-profit hospitals take care of the poor and uninsured as part of their charitable mission.

Minority Leader Anthony Hensley (D-Topeka) called for the question to be divided, separating the sales tax decrease from the repeal of the exemptions. The sales tax decrease was adopted but the debate over exemptions raged on until it was finally defeated on a vote of 9 to 30.

At this point, the Senate recessed to hold caucus meetings. It was becoming increasingly clear that this was a disaster in the making.

Press reports indicate that the Republican caucus meeting was raucous.

In an attempt to cobble something together that the whole caucus could support, Senator Donovan offered a version of the Governor’s plan.

The first part to be attacked was the taxing of guaranteed payments on some of the exempt businesses. Senator Denning (R-Overland Park) called that “fictitious,” saying that it was simple to get around that and avoid paying taxes. They would be in the same position next year. He is reported to have asked, “Are we going to fix this turd or not?”

Senator Greg Smith (R-Overland Park) said the plan was “smoke and mirrors” and reportedly said, “You can take this plan and shove it!”

The biggest sticking point appears to be the conflict between Republicans who believe that businesses should be put back on the tax rolls in some fashion and the Governor who has vowed to veto any bill that does.

With things going south and tempers getting frayed, leadership decided to halt the proceedings and, at about 2:00 am, they put the debate on hold and went home for some much needed sleep.

Today should be interesting!

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Things Just Don’t Seem to Go Quite Right

May 28, 2015 by

House Plans for Tax Bill Fall Apart
Yesterday we watched the Senate debate and destroy a tax plan, ultimately voting 1 to 30 to kill it.
Today we learned that the House had their tax bill – SB 29 – up for debate. Apparently mindful of the events in the Senate, it was decided that the House would gut SB 29, put only the tax amnesty program into it and pass it out on emergency final action. If successful this would put a bill in conference that had just one provision that touched on most sources of taxation. The conference committee could then craft a new plan which would be subject to simple up or down votes in both chambers. No amendments could be offered.
If they did things right, the bill could be rejected and sent back to conference where a new agreement could be assembled and run up the flagpole.
Before debate could take place they had to manage a procedural vote allowing them to move the bill up for debate and emergency final action.
That motion was made and on a division vote got 72 yes votes to 40 no votes. A motion of this type takes a supermajority of 84 votes so the motion failed.
Legislators gathered on the floor and the chamber stood at ease for some time. It appeared that there might be an effort to call for a reconsideration and try again to get the bill up for debate and a vote. But when it became clear that the votes were not there, the body was adjourned until 9:00 tomorrow morning.
House Tax Committee Makes Plans for Tomorrow
After the failure to move SB 29, the House Tax Committee got together to talk about the next steps.
It was agreed that they would bring SB 270 (another tax bill) up on the floor and open it up to amendments and a full-blown tax debate.
Representatives Rhoades and Brunk both suggested amendments they might be interested in trying and the Committee adjourned for the day.
Anyone Have Weekend Plans?
Well, apparently not legislators or lobbyists! Senate President Susan Wagle told the Senate to hold on to their hotel rooms. She hopes to keep going through the weekend and get this show wrapped up.
Similar talk is happening in the House.
It’s hard to imagine a scenario in which things get finalized over the next three days given the multiple factions in both chambers and the degree to which each faction has decided what they will and will not fall on the sword over.
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Another Tax Bites the Dust

May 28, 2015 by

The House went in yesterday morning and, after reading in the new tax bill (SB 29), broke for the day. Not much you can do when there are 30 asbsences! Their work day was a full seven minutes. They are scheduled to return today at 11:00 am.

The Senate began their debate of Senate Sub for HB 2109, the tax bill crafted by their tax committee.

Beginning at 10:00, the Senate heard a description of the bill by Tax Chair Les Donoovan (R-Wichita) and then immediately took up an amendment by Senator Pyle (R-Hiawatha) to strip out the enactment clause. This action would kill the bill. The enactment clause, which comes at the end of each bill, sets the date upon which the bill would take effect. The amendment failed on a vote of 13 to 25.

They broke for lunch and returned at 2:00.

The first amendment in the afternoon was offered by Senator Anthony Hensley (D-Topeka). The Hensley amendment would reduce the state sales tax to 5.7%, with Hensley stating that this had been the intent of the legislature in 2010 when the rate was raised to offset the revenue lost due to the great recession.

In response, Senate President Susan Wagle (R-Wichita) asserted that the reckless cuts from 2012 just “need more time to work” and that the problems facing Kansas are due to President Barack Obama. This is the standard ALEC/Brownback blame gimmick. Wagle explained that the Republican way was to put money in the hands of the people so they can use it. Hensley responded that this is exactly what his amendment would do.

Hensley’s amendment failed on a vote of 16 to 20.

A second amendment by Hensley would take the food sales tax down to 5.7%. The bill lowers it to 5.9% and Hensley’s amendment again would take it to the same rate as it would have been if Brownback had not raised the sales tax in 2012. The amendment passed 27 to 10.

Senator Pat Pettey (D-Kansas City) then offered an amendment that would remove the motor vehicle tax provision from the bill. This provision is especially dear to Sen. Donovan, a car dealer. The concern is that enactment of this provision would cause large losses to local units of government and, of particular concern to some, public libraries that use the motor vehicle property tax. The provision lowers this tax by 40%. The Pettey amendment passed on a vote of 27 to 5.

Senator Hensley next offered an amendment that would restore the percentage of sales tax that would go to the highway fund. As written, the bill would increase motor fuel tax by 5 cents which raises $82 million that can only be spent on highways allowing the legislature to move $82 million from KDOT to the state general fund. The amendment would provide that KDOT could use the full $164 million on road and highway maintenance. The amendment was adopted on a voice vote.

The next amendment came from Senator Michael O’Donnell. It would match the House tax bill language on taxing businesses. It would apply the 2.7% income tax bracket to the businesses that are currently exempt from income taxes. The provision would not, however, be retroactive to the start of 2014 as in the House position.

The O’Donnell amendment angered everyone including Sen. Wagle. Usually each chamber sets its own position and then goes to conference to work out the differences. It is not typical for one chamber to offer the other’s positions in debate. After a long debate, the O’Donnell amendment failed on a vote of 0 to 32.

Next up was an amendment by Senator Marci Francisco (D-Lawrence) that would encourage hiring in Kansas. This was considered a friendly amendment and adopted on a voice vote.

The last amendment came from Senator Steve Abrams (R-Arkansas City). Abrams’ amendment changed the increase in the cigarette tax from $0.50/pack to $0.18/pack and earmarked the revenue for cancer research at the University of Kansas. This amendment was adopted on a voice vote.

At that point the handwriting was on the wall. The bill had been amended to reduce its impact on the budget gap and it was voted down 1 to 30 with only Tax Committee Chairman Les Donovan voting for it.

Senator Pyle then made a motion to reconsider the bill. That motion failed. As a result the bill stays on the calendar and is available for use as a tax proposal vehicle later.

So what about today?

Both chambers convene this morning; the House at 11:00, the Senate at 10:00. Neither chamber has any bills on the debate calendar – there will be no general orders. The House plans to vote on at least two conference committee reports. One of those is HB 2353 which contains clean-up provisions for B 7, the school finance block grant bill, and modifications to the professional negotiations act modeled on the consensus agreement among KNEA, KASB, KSSA, and USA/KS.

Friday is likely to be pro-forma day; check in and go home. It looks like the Legislature will be back for yet another week of overtime!

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On a Very Slow Day a New Tax Plan Emerges

May 26, 2015 by

This has been a slow day under the dome with both chambers starting up at 11:00 am, breaking and then returning at 2:00 pm.

During the “recess,” the House Tax Committee met and passed out a new revenue plan without recommendation.

The new plan, proposed by Rep. Hutton (R-Wichita) and seconded by Rep. Johnson (R-Asaria), contains the following components:

  • All state income tax deductions repealed except home mortgage interest, property taxes paid, and charitable contributions (mortgage interest and property tax deductions would be at 50%; charitable contributions at 100%).
  • Non-wage business income (currently not subject to income tax) would be taxed at 2.7%.
  • Income tax brackets would stay at 2.7% and 4.6% through 2020.
  • Statewide sales tax would increase to 6.45% for most products and be reduced to 5.9% for food. The 6.45% rate would revert to 6.15% in 2019.
  • Increase the cigarette tax by 46 cents (from $0.79 to $1.25 per pack).
  • Instituting the tax amnesty plan.
  • Assuming passage of the MCO tax agreement.

This proposal was put into Senate Bill 29 and passed out of committee without a recommendation. Usually committees pass bills “recommended favorably for passage” sending a message to the floor that the committee supports the bill. No recommendation essentially tells others, “use your own judgement.”

Before the proposal was discussed, Chairman Kleeb (R-Overland Park) asked staff to review any problematic timelines with tax increases that could impact how much revenue was generated. Staff informed the committee that under the streamlined sales tax agreement to which Kansas is a party, increases can only be implemented at the start of a fiscal year quarter. That means if it is not implemented by July 1, it could not go into effect until October 1, reducing the potential income. Additionally, Kansas retailers must be given 30 days notice before a rate increase. That is likely impossible for the July 1 deadline. (There is some debate about whether the 30 days starts from passage of the bill or signing by the Governor or publication in the register.)

The last time the sales tax was increased in 2010, the same problem existed. Staff reported however that most, if not all, Kansas retailers went ahead and implemented the new rate immediately.

There could be a problem with a bifurcated sales tax. As an example, supermarkets would need to program their systems to charge 5.9% for food and 6.45% for general merchandise. This might require some time. The state could not force a retailer to charge the new rate until the 30 days have elapsed. Again, the state would hope that retailers will be able and willing to comply quickly.

This bill won’t be ready for debate tomorrow. The Senate is still expected to debate their tax plan.

 

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