Taxes and plans to address the roughly $400 million budget gap consumed the day.

The House Tax Committee started at 9:00 am and met most of the day. Their meeting started with a motion to put Rep. Kleeb’s “global solution” into SB 270. But immediately, Rep. Brunk offered a substitute motion with his own solution.

The Kleeb “Global Solution” Plan would:

  • Tax passive business income at 4.6% and other business income at 2.7% (this would end the situation under which over 330,000 Kansas businesses pay no income tax at all).
  • Accelerate itemized deduction “haircuts” – a recommendation from the Governor.
  • Increase sales tax to 6.5% while reducing it on food to 5.9%.
  • Increase the motor fuel tax by $0.05 per gallon.
  • Increase the cigarette tax by $0.75 per pack.

Brunk’s proposal would:

  • Raise the sales tax on everything to 7.15%.
  • Eliminate all itemized deductions except mortgage interest, property taxes paid, and charitable contributions.
  • Drop the bottom income tax rate from 2.7% to 2.55%.
  • Keep the 330,000 businesses exempt from income tax.

Brunk’s proposal failed on a voice vote after which Rep. Rhoades offered a modified Brunk proposal.

The Rhoades proposal included all of Brunk’s but added the Governor’s tax amnesty proposal and dropped the food sales tax to 5.9%. The Rhoades plan failed on a 9 to 11 vote.

Next came a plan from Rep. Hutton. The Hutton plan would:

  • Tax the exempt businesses at 2.55%.
  • Raise the sales tax to 6.8% with food at 5.9%.
  • Eliminate all itemized deductions except mortgage interest, property taxes paid, and charitable contributions.
  • Drop the bottom income tax rate from 2.7% to 2.55%.
  • Include the Governor’s tax amnesty proposal.

The Hutton plan failed on a vote of 4 to 16.

At this point the House Tax Committee broke until 3:30 as the staff was due in a Senate Tax Committee meeting.

The Senate Assessment and Taxation Committee was given a proposal by Senator Donovan.

The Donovan plan would:

  • Replace the non-wage business income tax exemption with a payroll credit (this costs the state far less than the income tax exemption).
  • Raise the sales tax to 6.5% with food at 6.0%.
  • Repeal the homestead exemption from the 20 mill school levy.
  • Add the 20 mill levy to car property tax.
  • Increase the cigarette tax by $0.50 per pack
  • Accelerate itemized deduction “haircuts” – a recommendation from the Governor.
  • Increase the motor fuel tax by $0.05 per gallon.
  • Increase the liquor enforcement tax to 10%.
  • Increase the liquor gallonage tax (various levels).
  • Increase the tobacco products tax to 15%.
  • Include the Governor’s tax amnesty proposal.

Donovan had trouble getting someone to offer his plan (as the chair he doesn’t make the motion) but eventually Sen. Powell made a motion to insert the Donovan plan into HB 2109. After a long pause, Sen. Bruce seconded the motion.

The motion appeared to fail on a vote of 5 to 5 with Sen. Peterson apparently not voting.

The Committee adjourned but after a brief time on the floor, Donovan announced a meeting “at the rail” to correct his mistake in counting the vote. They voted again and the motion passed 6 to 5.

At this point the only motion was to put the proposal into HB 2109. It has not yet been passed out of committee.

Back then to the House Tax Committee where Rep. Kleeb asked the members to get any plans they had to the staff so that the numbers could be crunched over night. The Committee then adjourned until 8:30 tomorrow morning.

So after a full day in Tax Committees, a tax plan to address the budget gap has yet to pass either committee. Perhaps tomorrow!