KEPC UPDATE: Income tax bill fails, education discussion continues

In this issue …
  • Income tax bill fails in House Monday night
  • Senate education discussion continues
Income tax bill fails in House Monday night
A conference committee report on an income tax increase failed to pass the Kansas House of Representatives Monday night by a vote of 53 to 68.  The measure, Senate Bill 30, was returned to the tax conference committee for more work and the Legislature will return at 10 a.m. Tuesday morning.
Democrats were split on the bill.
This bill was very similar to what the tax conference committee agreed to on May 2 for Senate Bill 30. 
Here’s what was in this version of the bill.
  • The business pass-through income exemption is repealed retroactive to January 1
  • The March to Zero trigger mechanism is repealed
  • Medical deductions are at 100 percent, beginning in 2018
  • The low income threshold is reduced from $12,500 to $5,000 for married filers and from $5,000 to $2,500 for single filers
  • The rates increase to 3.1 percent, 5.25 percent, and 5.7 percent.  These are retroactive for business pass through income to January 1, 2017.  A half-rate would be applied to individuals
  • The three brackets are below $30,000 married/ $15,000 single; Between $30,000 and $60,000 married/$15,000 and $30,000 single; and above $60,000 married/$30,000 single
  • The bill raised an estimated $591 million in FY 2018 and $626 million in FY 2019
The bill also includes a one year “pause” for using STAR Bonds, followed by a five year renewal of the program.  No new districts could be started until July 1, 2018.  STAR Bonds projects already in the works would be allowed to continue.
The conference committee had considered adding a three cent per gallon motor fuels tax increase but left it out because it was an appropriation and that would cause a technical problem with the bill.
The Senate negotiators also rejected a House proposal to include House Bill 2168, the Ad Astra Rural Jobs Program.
In the end, there were two basic camps for those who voted no.  They either oppose a tax increase or didn’t think the bill raised enough money.
In his closing remarks, House Taxation Committee Chair Steven Johnson (R-Assaria) said, “What is next?  I’m not entirely sure.”
Meanwhile on Monday morning, the Kansas House introduced HB 2428, a bill that repeals several sales tax exemptions.  We presume this might be similar to the bill that passed the House last week that put the sales tax on some services.
A quick reading of the bill indicates that, beginning in 2020, computer software and bingo cards will be subject to sales tax.  Based on new language on page 43, it appears several sections of current law will go away after June 30, 2020.  We presume that means a lot of exemptions go away.
We will have to wait to see how the bill is interpreted.
Senate education discussion continues
The Senate Select Committee on School Finance spent most its meeting Monday asking questions about SB 251 of legislative staff lawyers who write laws; and staff from the Department of Education.  The plan is to meet again Tuesday to begin working on amendments.
The scheduled meetings are from 9 a.m. to 10 a.m.; from first recess until noon; and from 1:30 p.m. until 3 p.m.