One of the top Republicans in the Kansas Senate says it’s time to fix the causes of the state’s ongoing budget problems.
During an appearance on the KCUR podcast Statehouse Blend, Sen. Jim Denning, an Overland Park Republican and vice chairman of the Senate Ways and Means Committee, said recurring budget shortfalls have convinced him that the income tax cuts the Legislature passed in 2012 aren’t working.
“We obviously went too deep. It’s not producing what I thought it would produce,” Denning said of the governor’s tax plan, which cut individual income tax rates and business taxes.
Denning is particularly critical of what he calls a “loophole” that exempted more than 330,000 business owners and farmers from paying taxes on pass-through income.
Continuing a trend triggered by the tax cuts, revenue collections have fallen short in each of the first three months of the current fiscal year. To date, collections for the budget year that began July 1 are running $61 million behind official projections.
Making matters worse, collections are failing to hit revenue targets that have been lowered several times.
When the state’s official revenue estimating group met in April, they lowered the 2016 revenue target by nearly $100 million. The previous November, they lowered their final estimate for the 2015 budget year by more than $200 million.
“If these trends continue next month, we could have a zero balance in the checking account and that will by statute trigger the governor to cut,” Denning said.
Faced with a budget crisis at the end of the 2015 legislative session, Gov. Sam Brownback blocked attempts led by Rep. Mark Hutton, a Wichita Republican, to eliminate the business tax exemption. He instead pushed lawmakers to raise taxes to generate the $400 million necessary to balance the budget.
In an interview with the Wall Street Journal in May, Brownback defended his push to raise sales and tobacco taxes rather than scale back his tax cuts.
“If your objective is to grow the economy, would you rather put more money into government, or leave it in the hands of small business?” Brownback said.
Eileen Hawley, the governor’s communications director, said Brownback would continue to oppose attempts to scale back the income tax cuts or repeal the business tax exemption.
“The governor continues to believe that raising taxes on small businesses is not good policy for the economic growth of our state,” Hawley said. “As he has done every year since he became governor, he will present a plan to balance the budget when the Legislature returns in January. The administration’s primary focus between now and then will be to hold the line on state government spending.”
The governor’s opposition won’t deter lawmakers from making another attempt in the 2016 session to repeal or scale back the business tax exemption and make other changes to stabilize the budget, Denning said.
“I think legislators – me included – are very fatigued from it,” he said, referring to the ongoing budget problems.
“I want to fix it, and I don’t want to mess around with the little Band-Aids that we were forced to do last year,” Denning said. “We’ve got to get our financial house in order.”
Jim McLean is executive editor of KHI News Service in Topeka, a partner in the Heartland Health Monitor team.