Budget plan moving slowly forward?

Things are finally starting to move on the budget and tax plans. Although the budget is primarily in a holding pattern, talks about taxes are front and center as the budget shortfall issues are addressed.

The Appropriations committees met early in the week, mainly to review what is on the table and to get an update on the current budget profile. The budget profile is a short, one-page list of numbers showing expected revenue and expenditures, and also showing the anticipated excess, or shortage, of operations funding for the State.

Since the revenue department has finished opening all the envelopes with tax payments, the revenue shortfall now appears to be about $406 million, down from the $422 million.

The Tax Committee is the main focus now. That committee met often, usually several times per day, to figure out what to do to close the budget/revenue gap. A number of proposals are on the table, including some income tax on the so-called pass throughs, as well as some sales, motor fuels and cigarette taxes.

One that is not as obvious is a possible tax on insurance policies. That has been talked about for a while and would be very much a hidden tax.

Please keep in mind that as I write this, all these are only proposals and have not been passed into law.

The proposed tax on pass-through income, also known as passive income because it is often derived from rent or some other form of unearned income, is scaled down to about half of the original amount and is HB 2430.

Another income-tax piece is to not allow as many itemized deductions on income taxes. The sales tax portion would increase sales taxes while reducing sales taxes on grocery items. Another proposal increases motor fuels taxes by 5 cents per gallon for two years, and increases cigarette taxes by 75 cents per pack.

Each of these proposals has been introduced individually, but those parts are being combined in various combinations to see how palatable any particular combination may be for legislators.

By including several different sources of taxes, it tends to spread out the overall burden rather than focusing on only one source.

While there are those who would like to see everything in sales (consumption) taxes, from a tax-policy perspective this proposal spreads out the increases and tends to broaden the base.

HB 2430 passed out of the Taxation Committee and SB 270, which is an increase in sales taxes, also passed out of the House Tax Committee. SB 270 proposes to raise sales taxes from 6.15 percent to 6.85 percent while reducing sales tax on grocery items down to 5.9 percent. The bill also removes many itemized deductions and there are a few other minor moving parts.

SB270 would raise $362 million of the $406 million needed to break even. Additional funding of $60 million would come from what is being called an increase in privilege fees on insurance policies. The reality is that this would be an increased tax on insurance policies. Of course, the tax would be in addition to any policy increases requested by the insurance companies.

SB 270 failed on a voice vote Friday. Remember that none of these proposals has passed the full legislature yet. Raising taxes is always difficult in a political environment and doing so tends to bring out critics.

The bottom line is that the Legislature must have a balanced budget. Figuring out at what level state programs are funded adequately compared to reasonable tax amounts is most difficult.

No one knows what the magic combination may be to bring the 2015 session to a conclusion. My hope is that reasonable policies are advanced to improve the overall long-term well-being of Kansans.

Rep. Don Schroeder represents District 74, which includes much of the southern half of Marion County.

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