Thursday, June 29th 2017
Senate Bill 30 has put an end to the most disastrous parts of the Brownback tax experiment and is a crucial first step on Kansas’ road to financial recovery. Here’s why SB 30 is such an important victory for Kansas:
- It restores a top income tax bracket. The Governor’s plan eliminated the top income tax bracket of 6.45%, moving multi-millionaires to the same tax bracket as Kansans earning just over $30,000 per year. By restoring a top income tax bracket and adjusting the income tax rates, Senate Bill 30 is a major step forward in re-stabilizing Kansas’ revenue stream. Even after rebalancing Kansas’ income tax structure, income tax rates are still lower than they were prior to 2012.
- It closes the “LLC Loophole.” The LLC exemption was an unfair “loophole” that enabled some Kansans to avoid paying any income tax at all. SB 30 closes the LLC loophole beginning on January 1, 2017, restoring fairness to our tax system and ensuring 330,000 taxpayers contribute to Kansas schools, roads, and communities.
- It ends the “March to Zero.” The “glidepath” component of Governor Brownback’s tax experiment would have eliminated the state’s income tax over time. This formula would have limited investments in communities drastically, preventing Kansas from fulfilling the most basic services. SB 30 repeals the March to Zero, ensuring that Kansas can stabilize its budget following nine consecutive rounds of cuts.
- It restores the Child and Dependent Care Credit. The Brownback tax plan did more than destroy the state’s finances; it also weakened the tax code by eliminating important deductions and credits that help hardworking Kansas families – all to pay for tax breaks for top income earners and businesses. One of those policies was the Child and Dependent Care Credit, which allows families to claim a portion of the expenses incurred in caring for a child, spouse, or dependent while working or looking for work. SB 30 restores this important credit over the next three years.
- It restores other important deductions. Governor Brownback’s tax policy also eliminated other important tax components that help Kansas taxpayers. By restoring the medical deduction, SB 30 helps Kansans struggling with major health problems or unexpected medical expenses. The mortgage interest and property tax deductions help off-set the cost of homeownership. SB 30 phases in the restoration of these important deductions through 2020.
RESPONDING TO CRITICS
- MYTH: Senate Bill 30 fails to fix the state’s fiscal damage.
- FACT: It will take time to dig out of the deep hole caused by the 2012 tax experiment. Since 2010, the overall bond debt of the state has gone up over $2 billion. This resulted in three credit rating downgrades and a negative outlook for the state from credit agencies. Just two days after lawmakers courageously passed SB 30, Moody’s responded by saying it was a “credit positive” move.
- FACT: SB 30 goes a long way towards fixing the state’s fiscal problems. Without comprehensive tax reform, lawmakers would have had to resort to risky fiscal gimmicks or yet another round of devastating cuts to balance this year’s budget.
- GENERAL GUIDANCE: SB 30 is a major step toward repairing the tremendous damage done by the Brownback tax plan. SB 30 ends the most harmful provisions of the failed tax experiment, and puts Kansas squarely on the path to recovery.
- MYTH: Senate Bill 30 places more of a burden on low-income families than the Brownback tax plan.
- FACT: The Brownback tax plan cut income tax so much that the state had to rely more on sales taxes to get by. Sales taxes are inherently more regressive, which impact low-income households the most. Comprehensive tax reform is a necessary first step toward rebalancing the state’s overall tax policy to reduce our reliance on sales tax.
- FACT: SB 30 restores a third income tax bracket. This allows the state to better differentiate income tax rates by ability to pay, so that higher-income Kansans contribute tax dollars at a higher rate.
- FACT: SB 30 restores an important credit for child care and dependent care.
- FACT: All Kansas families will benefit from putting more money into schools and the services every community relies upon. The state’s budget crisis has especially damaged our ability to provide necessary services for vulnerable Kansans.
- GENERAL GUIDANCE: A well-balanced tax code will build shared prosperity for all. Even after rebalancing Kansas’ income tax structure, income tax rates are still lower than they were prior to 2012.
- MYTH: Senate Bill 30 doesn’t raise enough money to meet Kansas’ obligations.
- FACT: SB 30 raises a significant amount of money for schools and is an important first step to satisfy the short- and long-term needs of the state. Paired with the omnibus budget bill, Kansas is set to address issues that have been ignored for years: supporting long-overdue raises for state employees, restoring cuts to the Senior Care Act, increasing funding for community mental health centers and safety net clinics, increasing resources for Osawatomie State Hospital, increasing reimbursement for those who provide services to the intellectually and developmentally disabled, funding for the State Water Plan, and funding KPERS pension payments at the statutorily-required rate for the next two years.
- GENERAL GUIDANCE: SB 30 is an important first step, but repairing the damage caused by the Brownback tax plan will take years. SB 30 gets Kansas well on our way to doing just that.
- MYTH: Senate Bill 30 will worsen the state’s spending problem in FY 2018 and beyond.
- FACT: SB 30 raises enough revenue for Kansas to begin to pay its bills more responsibly. The state will now rely less on short-term gimmicks (i.e, KPERS payment delays) and other costly maneuvers, like taking on debt on the state’s “credit card.”
- FACT: This year’s budget reflects a commitment from lawmakers to pay for investments from recurring revenue.
- GENERAL GUIDANCE: Kansas does not have a spending problem. Adjusting for inflation and population growth, state spending has been stable since 1995.
TargetSmart Poll (March 2017)
The governor and his signature tax plan remain incredibly unpopular. In the absence of any specific information, 67 percent of Kansas voters oppose the changes Brownback made to Kansas tax policy in 2012 (51 percent strongly oppose), while just 20 percent favor them
Roughly 7-in-10 voters believe these changes have harmed the state’s economy (73 percent) and middle class (70 percent), while 6-in-10 believe they have helped the wealthy (60 percent).
When asked about specific forward-looking revenue proposals, majorities support closing loopholes that exempt businesses from paying income taxes (55 percent favor) and creating a new top income tax rate for the highest income earners in Kansas (56 percent favor).
Kansas voters are broadly supportive of the legislature’s recent efforts to roll back most of the governor’s changes to tax policy in order to fund schools and avoid deeper budget cuts (64 percent favor, just 27 percent oppose). Again, even registered Republicans are majority supportive (56 percent) of rolling back Brownback’s changes to tax policy.