Kansas Senate committee reviews proposal to reinstate state tax on 'passive' business income

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TOPEKA, Kansas — A Kansas legislative committee has broached the idea of reversing part of a big break for business owners and farmers to help close a budget shortfall that arose after lawmakers aggressively cut personal income taxes to help stimulate the state's economy.

The Topeka Capital-Journal reports (http://bit.ly/1x0eK5N ) that the Senate Assessment and Taxation Committee had a hearing Thursday on a bill that would revive the state's tax on passive business income, including income from rental property. The measure would raise $65 million for the fiscal year beginning July 1 and a total of $115 million over two years.

"We're going to be looking at things like this (that are) distasteful to people," said Committee Chairman Les Donovan, a Wichita Republican. "We don't have any choice."

Legislators must close a projected shortfall of nearly $600 million in the budget for the next fiscal year. Lawmakers cut personal income taxes in 2012 and 2013 at Republican Gov. Sam Brownback's urging, and one key policy exempted 281,000 business owners and 53,000 farmers altogether.

Some lawmakers now argue that the latter policy went further than intended, exempting income from rents and royalties and earnings from a business when the taxpayer isn't directly involved in its management.

Representatives of the Kansas Chamber of Commerce, the National Federation of Independent Businesses and the Kansas Policy Institute, a low-tax, small-government think tank, denounced the bill as premature and potentially unnecessary.

"Until we have a clear picture of what the budget looks like after reductions in spending, we cannot accurately say what additional revenue, if any, is needed," said Eric Stafford, a Kansas Chamber lobbyist.

Donovan said lawmakers won't consider raising taxes until later this spring, near the end of their annual session. But he also predicted that they wouldn't be able to close the budget shortfall through spending cuts alone.

Brownback has proposed backing off future cuts in income tax rates and increasing the alcohol and tobacco taxes.


Online:

Income tax bill: http://bit.ly/1FVf45m


Information from: The Topeka (Kan.) Capital-Journal, http://www.cjonline.com

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