Before the start of this year’s legislative session, few would have predicted that Wichita Republican Mark Hutton would spearhead an effort to roll back some of the income tax cuts championed by Gov. Sam Brownback. Hutton, after all, is a conservative businessman whose campaign website boasts of his efforts to lower taxes. But as Jim McLean reports from the Statehouse, Hutton is taking the governor on because he doesn’t believe the tax cuts are fair.
Hutton is one of many legislators who are also business owners. He owns a construction company and doesn’t pay taxes on his non salary income thanks to the 2012 tax-cut law.
But he doesn’t think that’s fair.
“It’s an equity issue," Hutton says. "I don’t believe that we can ask the people of Kansas to step up anymore in the way of paying higher sales taxes and continue to allow businesses to pay nothing.”
So Hutton is pushing to roll back the business tax cuts -- but not all the way. He just wants to tax business profits at the bottom income tax rate of 2.7 percent. And he says most of the business owners he’s talked to want to pay something to help solve the state’s budget problems.
“I’ve had a lot of emails from business owners that want to be included in that part of the solution. They don’t like the fact that people out there believe they’re getting a free break," he says. "That’s not good for their business and it’s not good for Kansas and they understand that.”
When Gov. Brownback signed the tax cut law he predicted it would jump start the Kansas economy. At a signing ceremony he made a special point of emphasizing the part of the law that exempted certain kinds of businesses.
“The tax rate on small business income, it’s zero. Zero," Brownback said. "That’s better than Texas.”
Brownback continues to argue that the tax cuts are starting to work as advertised. He says personal income is up and Kansas is creating private-sector jobs at a faster clip than many other states.
But on most measures of economic growth, Kansas continues to lag behind.
Hutton was one of the first Republicans in the Legislature to say the law isn’t working.
When Hutton stepped up it changed the debate, says Wichita Democrat Tom Sawyer. Among other things it got the issue onto the agenda of the House tax committee, something, Sawyer says, Democrats couldn’t have done in a Legislature where Republican super majorities control the agenda.
“Oh, he’s done a great job with this issue," Sawyer says. "I mean, he has really gotten has facts and I think he really educated the committee and that’s why the only issue that came out with a strong vote on tax policy is closing that business loophole. And a lot of it has to do with the hard work and background that he has done.”
The tax committee endorsed Hutton’s business income tax. But that’s as far as it got in large part because Gov. Brownback is opposed to it. He doesn’t want the Legislature to roll back any part of his signature legislation. Instead, he wants to raise most the roughly $400 million needed to balance the budget by increasing the sales tax.
“We need to continue our drive off taxes on productivity and on to consumption based taxes," Brownback says.
The governor has threatened to veto any effort to reinstate taxes on business income. But he may have to reconsider that position. The House sent him a strong message Thursday by rejecting his tax plan. And the vote wasn’t close.
“I think everybody has to step up to the plate including businesses," says Wichita Republican Les Osterman.
Many of those who voted “no” want to see a smaller sales tax increase coupled with Hutton’s business tax. Osterman says that’s what it will take to get his vote.
Hutton jokes that he is no longer on Gov. Brownback’s Christmas card list, but says he will continue to push for what he believes is a fairer solution to the state’s budget problems. “I don’t see my job as to worry about what he (Brownback) wants to do," Hutton says. "My vote is going to be for a plan that I believe moves Kansas forward, and if he wants to exercise his veto right then that’s his prerogative to do so. But it’s not going to change my mind.”