To keep our readers better informed about the state government actions that impact our communities, we feature an update columns each Monday from one of northeast Johnson County’s elected officials: Rep. Barbara Bollier, Rep. Stephanie Clayton, Rep. Jarrod Ousley, Rep. Melissa Rooker and Sen. Kay Wolf. Rep. Ousley submits this week’s update:
In 2012, these same groups pushed for massive tax exemptions for income that passes through LLCs and S-Corps to the business owner, as well as for the elimination of Kansas’ highest tax bracket/rate. Some estimated this would cost $800 million dollars in tax revenue annually. The Governor called it a “glide path to zero,” as lower brackets would be eliminated later.
This session our revenue was indeed $800 million dollars short. Thus, $400 million in one-time funds were swept from the Kansas Department of Transportation and other agencies to the general fund. Changes to the school finance formula passed, lowering funding to Districts throughout Kansas. Our Judiciary budget was separated from the general budget, was underfunded, and was unconstitutionally burdened with a severability clause threatening the independence of our Courts. Our State Hospitals are critically understaffed, and our Highway Patrol is short 100 Troopers, with 29 counties lacking a designated officer.
Let there be no doubt, these cuts are crippling Kansas.
Yet, the Governor and the majority bowed to lobbyists and refused to touch the 2012 tax changes.
At Rep. Mark Hutton’s request, legislative researchers analyzed the impact of the 2012 exemptions used by 333,771 businesses. Their results indicate 80% of the State’s lost income tax benefits the top 5% of revenue generators.
Which businesses are these?
Recent calculations show Koch Industries has the largest revenues in Kansas. On June 8, 2015, Broadview, a phone system company, released an analysis on businesses in each state in 2014 and 2015. Their data sets came from Hoover, a company that reports on industry for research and investment purposes. For most states, the revenue difference between the top business in 2014 and 2015 was minimal, as close competitors held the spots. Not so in Kansas, where in 2014, Sprint was the top revenue generator with $34.56 billion, and in 2015 Koch Industries was the top revenue generator with $115 billion in revenue.
The below chart is an excerpt of the revenue chart compiled by Broadview. To see the full chart, click here.
For Hoovers’ list of Koch related businesses in Kansas click here, or see an excerpt below:
How did Koch surpass Sprint with $81 billion in revenue in one year? Did Koch Industries restructure some of its business entities from outside the State, to be located in Kansas (at least on paper) to avoid pass through income tax?
If they did, it may explain why our session ran until the historic 113th day.
Governor Brownback pledged to veto any roll back of the business tax exemptions. He then created a false choice. He threatened to cut the missing $400 million via a 6 percent cut across the board, including a $200 million cut to K-12, or to cut, by line item veto, the Board of Regents budget, eliminating funding for all State Universities, unless the legislature raised the missing funds via a sales tax package.
The People’s House was at a draw, and there was some hope we’d hold them off.
On Wednesday, June 10, the sales tax increase was failing dramatically in the House, when we recessed at midnight. We reconvened at 8 am on Thursday, June 11, and it did fail that morning. The Governor and lobbyists increased their pressure on Republican Reps. We gaveled in and out throughout the day, as backroom meetings were held. We gaveled in a final time at 11 pm. The rule prohibiting work after midnight was suspended. The House approved SB 270, the “trailer” bill that allegedly fixed problems with the tax plan from the Senate.
Around 2 am, a call of the house went out, requiring missing legislators to come vote on HB 2109, the largest tax increase on Kansas families in our State’s history. Three JoCo Representatives were absent and did not cast votes. One by one, nay votes switched to ayes. At 4 a.m. on June 12, the minimum 63rd vote was cast, and the bill passed.
They threatened our children’s future when they held our education system hostage for this ransom: Kansas families pay for tax breaks for the rich. We now have the second highest sales tax on food in the country. They literally reduced how far Kansans’ grocery dollars go, so the elite top 5 percent of business owners could abandon their responsibilities. Not one of the 28 Democratic or 17 moderate Republican House Representative voted for this. Not one.
There is nothing left to sweep. We will again be short $800 million due to the 2012 changes. They generated $400 million with this sales tax. Who pays the next $400 million?