Kansas Week of Feb 3, 2017

Revenues up $24 million

Kansas January tax collections were $23.8 million above estimates, the Kansas Department of Revenue reported this week. The $543 million January receipts were 4.59% above estimates.

The tax collections were led by corporate and sales tax receipts.

January is the third month of receipts exceeding estimates after November's Consensus Revenue Estimating Group's sharp reduction in estimates of state revenues for the remainder of this fiscal year.

The three-month streak of above-projection receipts is likely to spur lawmakers to move the rescission and budget bills now that they have more confidence in revenue estimates.

Big leaders: Corporate income taxes of $18.5 million, 131% above estimates of $8 million, and likely holiday-spurred sales taxes of $216.5 million, $13.5 million or 6.68% above estimates of $203 million.

Overall, January revenues were $8.5 million above last January, and fiscal year-to-date receipts are $14 million less than last year.

 

Senate leadership tax bill

The Senate's GOP leadership this week introduced a tax plan that eliminates the LLC exemption and raises individual income taxes for a total of about $430 million for its first year in effect.

Nearly everyone expected a closure of the four-year-old LLC non-wage income exclusion, but the bill, which Senate President Susan Wagle, R-Wichita, said represents a consensus of the 31-member GOP caucus in the Senate, stretches into individual income taxes, too.

It is believed to be the first bill of the session to propose increases in individual income tax rates-which produced a larger hole in state revenues than did the LLC provisions which were passed in 2012.

The proposed rates for individual income taxes for tax year 2018 would, for married couples filing jointly, boost the rate from 2.7% to 3% for those with taxable income of up to $30,000, and for joint filers with income over $30,000, from $780 plus 4.6% to $900 plus 4.9%.

The new rates are predicted to draw about $54 million in additional income taxes from Kansans with incomes of less than $30,000 and about $150 million more from Kansans with joint incomes of more than $30,000. Best estimates are that a hike of 0.1% in tax rate draws $18 million from the under-$30,000 group, while the same 0.1% increase raises $50 million from the over-$30,000 earners.

Wagle said the bill appears to be about where a majority of the GOP caucus is, but it still has to emerge from the Senate Tax Committee and face debate on the Senate floor.

Adding in individual income tax hikes may be a key to attracting moderate Republicans, but it isn't likely that Senate Democrats, who are on board with the LLC provision, will be interested in a combination measure that includes raising more than $50 million from the state's low-income taxpayers.

The leadership bill sticks with two brackets, not a return to three brackets that were in place before the 2012 tax cut bill.

Generally, the measure marks that "flat and broad-based as possible" provision in the Senate Republican moderate campaign plan last year that has reduced the number of hard-right members in the chamber.

Wagle said she hopes that the Tax Committee can get moving on the bill next week, and get it to the floor for debate in mid-month.

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Meanwhile, the House Tax Committee wrapped up hearings on a wide range of tax provisions, and Chairman Steven Johnson, R-Assaria, said he wants his panel to start assembling the House version of a tax plan next week.

 

Kiegerl to resign seat

Rep. Mike Kiegerl, R-Olathe, said today he will resign his District 121 House seat on Feb. 15. He has health problems and also is going to have to move, after his home was bought by the city of Olathe recently.

Kiegerl said he is going to have extensive medical treatment and didn't believe he would be able to serve the district as he recovers. Republican precinct committeemen and committeewomen of District 121 will elect a successor to Kiegerl, and he said John Resman, Olathe, who was an unsuccessful GOP primary candidate for Johnson County sheriff, is campaigning for the seat.

Kiegerl has been active for years on child care and child protection issues, and has a bill or two he wants to get to the House floor before his resignation date.

Kiegerl has served in the House since 2005, except for a year when he didn't seek re-election. That was 2012, because he didn't want to run against Rep. Arlen Siegfreid, R-Olathe, in a reapportionment-blended district. Kiegerl was later appointed to the seat in 2013 after Siegfreid was named a hearing officer on the State Board of Tax Appeals by Gov. Sam Brownback and resigned the House seat.

 

 

 

House Tax talks sales

There didn't seem to be much support from many committee members this week as the House Tax Committee heard solid opposition to eliminating several sales tax exemptions to boost state revenues for the two upcoming fiscal years.

The committee last week pared to a handful exemptions to look at, including big-ticket sales tax on labor in most construction projects worth about $280 million. Construction industry officials said the tax would make a $350,000 home, including about $150,000 in labor, cost an additional $15,000, which would put many Kansans out of the possibility of financing that home, and for lower-cost new homes which boost their county's property tax base, the effect would be proportional.

Ag lobbyists said a projected $76 million take from taxing farm machinery and equipment would hurt the farm economy and likely increase food prices. They said the concept behind the exemption is similar to the exemption for manufacturing machinery and equipment-which avoids about $180 million in sales taxes.

Tax Chair Steven Johnson, R-Assaria, has been focusing committee hearings on specific areas of taxation, broadening members' background.

But so far, beside the LLC non-wage income tax exemption, most committee members don't appear to be warming to other revenue-raisers.

 

Cigarette tax cleanup bill

draws queries

A relatively simple bill to streamline enforcement of the state tax on cigarettes necessary for Kansas to continue receiving about $60 million a year in tobacco settlement monies hit a snag in the Senate Tax Committee this week.

The measure, largely technical about where taxes are paid and enforcement demanded by cigarette manufacturers to continue sending money to the state, contained a provision that sets the threshold for illegally bringing non-Kansas taxed cigarettes into the state. That threshold in the bill would go from two cartons of cigarettes to five cartons, at which level the carriers would be subject to fines or prosecution.

Sen. Dan Goddard, R-Parsons, questioned the increase in allowable import of smokes.

He said in border areas-especially near Missouri-that cigarette buyers would save at least $10 per carton of cigarettes taxed at 13 cents a pack in Missouri and $1.25 a pack in Kansas.

The Department of Revenue said the bill was mostly aimed at meeting requirements for the tobacco settlement agreement, and apparently not much thought was given to cross-border cigarette buyers.

Goddard said he's going to be watching for a return to the two-carton limit, because it tends to protect Kansas-based cigarette sales.

 

Tobacco/liquor hearings open

The House Tax Committee opened hearings on Gov. Sam Brownback's plans to double the tax on liquor-worth $52 million next year-and to boost the tax on cigarettes/tobacco products worth an estimated $48 million.

The so-called "sin taxes" brought proponents and opponents for different reasons.

Anti-smoking groups including the American Cancer Society prefer a $1.50 a pack hike in cigarette taxes rather than Brownback's $1 a pack hike, saying that the bigger the increase the more likely that "sticker shock" will discourage young Kansans from starting smoking and older Kansans to quit.

Proponents of the tax also said the 50-cent a pack hike in 2015 probably encouraged many to quit smoking, lowering costs for health care for Kansans.

Opponents of the tax generally talked jobs to Kansas businesses and the stream of Kansans who will drive to Missouri to get cigarettes with just a 17 cent a pack tax, rather than Kansas, which would grow to $2.29 per pack. It was a commerce/border crossing appeal. One witness said that large tax difference would encourage criminals to smuggle cheap smokes to Kansas.

The liquor enforcement tax, now 8%, would go to 16% under the tax plan; again, that was touted as a reason many Kansans may cross state lines to buy their liquor, and restaurant and bar owners said it would drive up the cost of drinks, discouraging going out to eat/drink.

Liquor store owners said it would cost their industry about $95 million in sales across the more than 700 outlets, and committee members were repeatedly told that 47% of the state's take from liquor taxes now comes within 50 miles of the Missouri border.