KEPC UPDATE: Weather, tax debate, constitutional amend passes Senate, fixtures bill, deadline, income tax cuts don’t cause growth

In this issue …

  • Weather shortens the legislative week
  • Tax plan will be debated in Senate
  • Education constitutional amendment passes Senate
  • Legislative Post Audit released on fixtures bill
  • Deadline coming up
  • Study: income tax cuts don’t grow small business
  • Find your legislator


Weather shortens the legislative week

This has been a very short week.  Due to the weather, the legislature and much of state government was closed down Thursday.  There will be little activity on Friday.  Much of next week will be spent on the floor of the House and Senate debating bills.  Much of the committee work scheduled for Thursday and Friday will be pushed into next week.


Tax plan will be debated in Senate

Most of Governor Sam Brownback’s proposed tax plan is expected to be debated in the Kansas Senate next week after coming out of the Senate Taxation Committee this week.  House Bill 2059 will cut Kansas individual income taxes even more in the future, but raise revenue sooner to fund the budget.

It’s basically the Governor’s tax plan.  It raises money by extending the temporary statewide sales tax increase enacted in 2010.  It also eliminates the individual income tax deduction for mortgage interest, a change strongly opposed by the Kansas Association of Realtors.  The bill does NOT include elimination of the real estate property tax deduction, as proposed by the Governor.  That was removed in committee.

House bill 2059 was originally the cleanup trailer bill to last year’s income tax bill.  It corrects the tax basis problem and fixes the unexpected $2.5 million tax increase on individuals who are owners of bank holding companies.

The Senate Taxation Committee amended Senate Bill 78 (most of the Governor’s plan) into House Bill 2059.  This is widely seen as a parliamentary maneuver to send the bill to the House and put it into a conference committee.  Such a move would avoid a full debate in the House of Representatives where amendments could be debated and voted up or down.


Education constitutional amendment passes Senate

By a vote of 27 to 13, a constitutional amendment designed to sidestep the recent school finance court decision has passed the Kansas Senate.  The court decision requires Kansas to put $480 million more into K-12 education.  It is being appealed to the Kansas Supreme Court.

Senate Concurrent Resolution 1608 would change the Kansas Constitution to make it clear that education financing is exclusively a legislative power.  Constitutional amendments must be approved by a 2/3 vote of both the House and Senate in order to go to the voters.  If approved by the Legislature, the vote would take place in the April statewide elections this year.

It now goes to the Kansas House of Representatives, where its chances of passage seem slim.   Speaker of the House Ray Merrick is quoted as saying it’s a “tossup” whether the resolution could get the 2/3 majority needed to pass.

84 votes is a 2/3 majority in the House.  42 votes would stop it.  All 33 House Democrats are likely to oppose it.  All it would take is at least nine Republicans to vote no.  It’s believed there are a minimum of a dozen moderate Republicans.


Legislative Post Audit released on fixtures bill

The Legislative Post Audit report on the machinery and equipment vs. fixtures issue has been released and was reviewed by the House Taxation Committee on Wednesday afternoon.

The audit stems from a legal dispute between Montgomery County and a nitrogen fertilizer company over the firm’s 2008 tax assessment.

Machinery and equipment acquired after 2006 is exempt from property tax in Kansas.  The appraiser said some property previously classified as machinery and equipment was actually fixtures, and thus real property subject to property tax.  The quarrel started after the Kansas Court of Tax Appeals upheld the Montgomery County Appraiser’s valuation and classification. 

Major findings of the Post Audit report:

  • Targeted review of three ethanol plants identified a number of problems with how county appraisers classified certain property (including problems within the same plant).
  • Inconsistencies in the way county appraisers valued property.
  • Although the state’s computer assisted mass appraisal system works well for most properties, it does not work well for complex manufacturing plants. This contributed to the classification and valuation issues identified.
  • The state’s Division of Property Valuation does not provide sufficient oversight and guidance for appraising complex manufacturing plants.
  • Last year’s Senate Bill 317 would reduce property taxes between $170 million and $500 million annually, over the long term.  It would have broadly redefined commercial property.
  • The Post Audit report makes a number of recommendations to the Division of Property Valuation aimed at improving their assistance and guidance on how to classify and value complex manufacturing plants.

During the House Taxation Committee meeting on the Post Audit report, the auditor provided some additional information, saying that last year’s SB 317 would have affected apartments, day care facilities, and other non-manufacturing properties.  Local government officials say the audit supports their concerns about property tax shifts.

Meanwhile, a hearing on this year’s fixture bill, House Bill 2085, has been postponed until Monday afternoon.  It had been scheduled for a Thursday hearing, but was cancelled due to the weather.


Deadline coming up

An important legislative deadline is coming up next week that will mean many bills will not move forward in the Legislature.  March 1 is the “turnaround” or “House of Origin” deadline.  That means House bills must have passed the House, and Senate bills must have passed the Senate.  If not, they are dead for the rest of the session, but can carry over into 2014.

There are exceptions for bills that come from certain committees, such as Taxation, Federal and State Affairs, and the budget committees.


Study: income tax cuts don’t grow small business

A study released this week by the Center on Budget and Policy Priorities cites extensive evidence that state income tax cuts do not grow small business.  The paper pounds away at the assertion that state income tax cuts, such as those that have passed in Kansas and are proposed elsewhere, have a positive impact.

Some legislators who have read the CBPP report say the evidence presented is stunning.

The study concludes, in part:

“There is almost nothing in economic theory or empirical research to support an assertion that cutting state personal income taxes will have a significant impact on the emergence, success, or job-creation performance of small businesses. The vast majority of any revenue forgone from such tax cuts will flow to people who don’t own businesses, and of the limited tax savings that does happen to flow to business owners, the vast majority will be received by people with no intent or authority to hire additional people.”

Read the full study here.


It cites studies by the U.S . Small Business Administration, the Kansas City based Kauffman Foundation, and even a 2006 study published in the journal of the libertarian Cato Institute to support its conclusions.


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