We've now reached the end of the first month of the legislative session, and as expected, the prospect of a large tax increase has reared its ugly head in the Kansas Senate. Thus, this week's newsletter will focus on tax policy and why the road to prosperity in Kansas cannot be paved with taking more money out of your pocketbook.
Casual observers of Kansas politics would likely take look at the party membership of the Kansas Senate and assume that Republican principles reign in the Sunflower State. After all, in a body of 40 members, 31 are Republicans, which is more than 75%. Of those 31 Republicans, almost all of them called themselves fiscal conservatives in their campaign material, and were elected in conservative-leaning districts based upon that contention.
Those same casual observers would, upon hearing of a new proposal to increase income tax rates across the board on Kansas families, as well as a complete repeal of the small business exemption that is responsible for bringing new jobs to Kansas and a record number of business startups, likely assume that proposal came from the nine Democrats that make up the minority in the Kansas Senate.
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A Republican Tax Increase?!
That very proposal was introduced late on Friday - yet it didn't come from Democrats. Sadly, it was introduced by the Senate Republican Leadership as the "Republican plan" - and will be heard in the Senate Taxation Committee this coming week. Even more shockingly, the Senate President had the audacity to suggest to a reporter that it was the consensus of the 31 Republicans.
Here is what the tax plan does:
- Completely repeals the small business tax exemption for all businesses, regardless of income. Not only would this result in a massive tax bill on these businesses, it would immediately halt the new trend of business startups and job creation in Kansas, just as it's taking off.
- Increases income tax rates on both tax brackets. For married couples filing jointly and making up to $30,000 a year, the tax would increase from 2.7% to 3.0%. For income over $30,000, the tax would increase
from 4.6% to 4.9%. These new rates would start in 2018.
- The bill would eliminate the low-income exclusion after tax year 2017 that generally eliminates all income tax liability for single filers with taxable income of $5,000 or less, and for married taxpayers filing jointly with taxable income of $12,500 or less.
As I told the Sentinel (https://sentinelksmo.org/) in a press release, this plan may have been offered by certain Senators who call themselves Republicans, but it is not a Republican plan. The faux campaign slogans of tax fairness and economic growth have been set aside, replaced by the reality of a tax scheme that would not only cost us jobs, but increase rates on the very people filling those new jobs, including those who are at lower incomes. It's so disappointing that a tax increase is the first public proposal we see - no cuts, no efficiency, no deeper examination of tax policy in Kansas - just a big take hike to fund more government.
I won't pretend to know what kind of support Senate leaders may have cobbled together from left-wing Republicans, but I can say with great confidence that a great number
of Senate Republicans are absolutely opposed to this proposal, and will fight it.
Tax increases, particularly of this magnitude, are not the answer. They surely aren't the answer right now, just as the economy is showing signs of life in the wake of the election and inauguration of President Trump, At the same time, just as we are receiving yet more indications that the small business incentives are working and that our revenue projection system has been fixed.
What is perhaps most egregious about the tax increase proposal is that it comes from the same people who have been beating the "tax fairness" drum for the last two years. As Ronald Reagan said, "Simple fairness dictates that government must not raise taxes on families struggling to pay their bills."
If passed, the "sticker shock" of this massive income tax hike would have a devastating impact on those who are taking the risks to make our economy grow, while making it harder for struggling families to pay their bills.
This proposal may have come from Republicans, but it is not a Republican plan. In my view, the word "Republican" must mean something beyond the title of a political party - it represents a set of ideas, of core principles, among which are the belief that taxes should be low and government barriers to job creation should be removed. This proposal does the exact opposite, and I will be opposing it.
Here is a quote to keep in mind as we debate and discuss tax and economic policy in Kansas, that should give you some insight into how I view these topics:
"All of economics rests on one simple principle: that incentives matter. Altering incentives, the costs and benefits of making specific decisions, alters people's behavior. Understanding incentives is an extremely powerful tool for understanding why people do the things they do because the impact of incentives can be seen on almost every level, from simple family decision making to securities markets and international trade."
-James Gwartney, Common Sense Economics
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Beyond the tax increase news, here is other notable information from the past week:
Revenues Up in Kansas
The Department of Revenue reports that Kansas collected $544 million in taxes last month - $24 million more than the $520 million anticipated. This is a good sign, as past years were plagued with monthly reports of revenues being well under estimates. The estimation process has been fixed and now we're getting data that will allow us to construct the state budget with a higher degree of certainty regarding revenues.
2nd Amendment Rights Upheld by Senate Federal & State Affairs Committee
The Senate Federal & State Affairs Committee refused to advance SB 53, the bill to exempt college campuses from concealed carry law passed in 2013. Meanwhile, the House Federal & State Affairs Committee also conducted a fair and productive hearing on a similar bill, HB 2074, and proponents and opponents presented their arguments. Those supporting 2nd Amendment rights again reaffirmed the importance of self-defense on college campuses. Under current law, colleges can choose to secure buildings if they wish, but have chosen not to do so for cost reasons.
High Praise for Gorsuch Nomination to United States Supreme Court
Many Kansas leaders, including Governor Sam Brownback, reacted positively to the nomination of Neil Gorsuch to the United States Supreme Court by President Donald Trump. Judge Gorsuch currently serves on the Court of Appeals for the 10th Circuit, which includes Kansas. He has had a distinguished career, both academically and on the bench, and principled conservatives across the country reacted positively to the news. If confirmed, he would likely return the court to a position that is more likely to respect the rights to religious liberty in the 1st Amendment, the right to bear arms in the 2nd Amendment, and the rights of states in the 10th Amendment. This is good news for Kansans.
Jobs Up Nationwide
227,000 jobs were
added in January
, according to the United States Department of Labor. This signifies a possible uptick in the economy, which should not only guide our federal officials on tax and economic policies, but here in Kansas as well. Jobs and new business startups are clearly on the rise, and Kansas unemployment range below that of the national average.
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With left-wing Republicans and Democrats increasing their numbers last November, they have introduced a series of progressive bills. One of the more egregious progressive bills is the SOAR Act. The SOAR Act has the goal of repealing multiple positive reforms from the Kansas Hope Act that were enacted into law recently, threatening to end some of the work requirements for individuals receiving welfare benefits.
The Kansas Hope Act was comprehensive welfare reform, intended to move individuals from poverty to prosperity through work and self-sufficiency. The undeniable successes of that comprehensive reform must not be undone.
40,665 new employments were reported for TANF clients since strong work requirements were implemented in 2011. The number of children in poverty has decreased by 12,000 and the childhood poverty rate has dropped from 19 to 17 percent.
Key points of the SOAR Act:
- SOAR Act strikes language from the HOPE Act that requires child care assistance recipients to be employed 20 hours per week. Removal of the minimum work requirements diminishes the ability to move individuals towards full-time employment, which studies show is the most effective way to lift people out of poverty.
- SOAR would limit the Department of Children and Families' ability to assist families in finding employment by reducing the work participation requirements for women with children under one year old. There is a current 3-month exemption, which is a timeframe common in the private market. However, when SOAR increases that to a one-year exemption, it will encourage dependency on government which can easily turn into generational poverty.
- SOAR eliminates the 24-month time limit for child care assistance and 15-hour work requirement for post-secondary students. It hurts the dignity of women when there are such low expectations.
Conservatives believe strongly in giving a hand up, but not a hand out. The HOPE Act gives that hand up, while ensuring a pathway to work, which should be our goal.
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Attorney General Schmidt Fights for 2nd Amendment Defense Act
In a letter to United States Attorney General Dana Boente, and Attorney General-nominee Jeff Sessions, Kansas Attorney General Derek Schmidt has weighed in on the recent conviction of Shane Cox and Jeremy Kettler, who are due to be sentenced today. In the letter, Schmidt noted that Cox was convicted of, among other things, unlawfully making and transferring unregistered firearms suppressors, and Kettler was convicted solely of possessing an unregistered firearms suppressor. According to the defendants , the suppressors in question were made in Kansas and did not cross state lines, and Schmidt noted that particularly in reference to Kettler, the United States did not mention his posesssion had any
interstate implication.
The letter indicates that in their defense, both defendants relied on the 2nd Amendment Defense Act, which was passed in 2013 and asserts the authority of the State of Kansas regarding 2nd Amendment rights regarding items that fall outside the scope of federal law, specifically items made and kept within the borders of Kansas.
Interestingly, as the letter points out, the federal district court has ruled that in this case, the Second Amendment Protection Act does not apply, but the United States has persisted in trying to challenge the law. Even the defendants have acknowledged now that it does not squarely fit their case, but that they acted reasonably in relying on the statute in any event.
Because the case at hand involves challenging the potential validity of a Kansas statute, Attorney General Schmidt filed a post-trial brief defending the validity of the statute, but the United States has continued to argue that the statute is invalid.
Attorney General Schmidt continues in the letter by mentioning the two individuals have not faced any state prosecution, and that the United States even acknowledges the two individuals caused no harm. He mentions that the case was preceded by the political dispute between the Governor of Kansas and then-Attorney General Eric Holder.
Because of these circumstances, Attorney General Schmidt asked the Acting Attorney General and Attorney General-Nominee Sessions to review the case to see if prosecution was even warranted in the case, noting that both Kettler and Cox have been caught up in political dispute and reasonably relied upon a state statute, even if it did not specifically apply.
I applaud Attorney General Schmidt for weighing in on behalf of both defendants as well as defending the validity of the Second Amendment Protection Act and the attempt by Obama's federal prosecutors to attempt to invalidate it in this case.
Here is a copy of the letter.
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Despite the media focus on more controversial items, much of the legislation we vote on is not controversial at all. It is that type of legislation that we discussed on the Senate floor this week. Here is a rundown:
INSURANCE CODE DATE CHANGE -
SB 15
would amend the effective date specified in the Insurance Code for risk-based capital instructions for life insurance companies and property and casualty insurance companies. The bill passed the Senate 39-0.
FAIR PLAN ACT -
SB 17
would amend law and add a section relating to the Fair Access to Insurance Requirements (FAIR) plan, which would make basic property and casualty insurance available to individuals who hold property in Kansas through the voluntary market. This bill passed the Senate 39-0.
REINSURANCE REGULATION UPDATE -
SB 19
would replace current language in statute with model language from the National Association of Insurance Commissioners (NAIC). This bill passed the Senate 38-0.
THIRD PARTY ADMINISTRATOR (TPA) ACT -
SB 22
would create new law which would allow the Kansas Insurance Commissioner to license third party administrators who specifically underwrite, collect, or charge premiums from, or settle claims for Kansas residents, concerning life, annuity, or health insurance coverage. This bill passed the Senate 38-0.
FILING DATE CHANGE -
SB 28
would change the due date for filing of certain annual withholding tax forms from January 31to the last day of February. This bill passed the Senate 38-0.
TAX TECHNICAL FIX -
SB 30
would replace statutory reference to the North Central Association of Colleges and Schools with a reference to its successor organization, the Higher Learning Commission. This bill passed the Senate 38-0.
SEDGWICK COUNTY ELECTIONS BILL -
SB 43
would amend statutory provisions concerning elections, whereby county-level canvass dates would coincide with the dates of special elections to fill congressional vacancies. This bill passed the Senate 38-0
.
I voted Yes on each of these bills.
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What's Next?
This week, Senate Taxation will be debating the tax proposal I mentioned at the outset, and I will be sure to keep you updated. Other legislation continues to work through the committee process, and I have my eye on several bills introduced at the request of left-wing groups that would undermine conservative principles. With left wing groups feeling emboldened, this is definitely a session where conservatives are largely playing defense.
In honor of your liberty,
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