Members of the Kansas Legislature
head back to Topeka next week for a session finale that is sure to be a super imbroglio. (That's not the word I
wanted to use, but this is a family blog. I just know scores of 4th graders are
pouring over my scribblings.)
Anyway, the big item on the
legislative agenda will be (again) filling an enormous budget hole -- projected
at the time of this scribbling to be $300 million over the next 15 months.
Some members of the legislature
want to close an unintended consequence from the 2012 tax bill. 2012's HB 2117
encouraged businesses to restructure to LLCs to avoid paying income taxes. No
one can blame business owners for a savvy business decision, and I certainly
don't blame these poor souls, many of whom were summarily overtaxed for
decades, for wanting to hang onto the tax advantage. However, these
legislators have a point – this LLC tax advantage is creating a situation in
which the same work is taxed differently.
It’s also a very strange issue in
which the western half of the state is seeing greater advantage from this
loophole than the folks who live in the populated areas. So there’s an
underlying agricultural vs. urban economy issue. Here’s what I mean: a farmer
who once had his income taxed, can now restructure his farming business as an
LLC and avoid paying any income tax. Urbanites can do this too, but it’s a
little less common. For example, a hair stylist can choose to work for a salon
or someone else, which results in having to pay an income tax. OR, the stylist
can hang a shingle, form an LLC, and pay none.
It’s a conundrum.
Meanwhile, there are other forces
creating undue pressure on the state budget. Ironically, low gas prices are
wreaking havoc on the state’s revenue. As every driver knows, the state takes 24 cents from the sale of every gallon of gas. When the price drops, often due to decreased demand, the government receives less!
A lot of big government types are
bemoaning the loss to state revenues, and if we’re being honest, I have to
refrain from screaming bad words at these people. I care way less about the
state revenue feeding trough than I do about the people who must fuel their
cars to get to work and must buy food (with fuel costs built in) to feed their
families than I care about the poor, whining bureaucrats getting fat off the
gas tax. I’m sorry, but I just can’t seem to find a single tear for those
people. I can’t. I won’t. Don’t ask.

The other giant elephant sucking
the life out of the state budget is, of course, school funding. In a feat of
epic proportions, Gov. Sam Brownback and the state legislature came up with a
public indoctrination camp funding plan that maintains existing school funding
levels and “keeps schools open.” (Seriously, the Republicans sent out memes and
newsletters announcing the plan that would “keep schools open,” as if the
members of the Kansas Supreme Court were going to close schools under some
mythical authority heretofore unknown. The suggestion should have been
thoroughly mocked and scored. Instead, Republicans took the bait and pretended
that the KS justices could close the schools. PR fail.)
So, conservatives maintained
school funding. The state will spend more than it ever has before – though less
than projections and therefore less than budgeted – and this automatically for
some, means the solution is increasing revenues by eliminating an unintended
consequence in a 2012 tax bill.
Closing the LLC-loophole is
necessary, but this loophole should be closed based on sound fiscal policy –
not based on the wailings of liberals who just want to take all the money and
give it to their pet causes. The loophole was an unintended consequence. The
loophole is allowing some income earners to unjustly subsidize others who do
the exact same job. The loophole is forcing the urban part of the state to
subsidize (to a greater extent than ever before) the rest of the state. These are
reasons to close the loophole.
The state is not broke. The state
overspends. When revenues don’t meet projections in my own budget – which has happened
– the answer is to cut spending. Immediately. In my household, that may mean
buying less lean beef, or worse, the beef sold in tubes. Gross.
Or it may mean cutting my cable
package, driving the more fuel-efficient vehicle more often than the big one,
cutting monthly gym membership, or eating out less frequently. It may even mean
adding a second job, selling stuff on Ebay, or asking for a raise. But if I don’t
get that raise, you won’t see me kicking and screaming and whining.
The liberal, big government
answer isn’t asking for a raise. It’s demanding
that everyone else pony up more at the point of a gun. There are no efforts to
create greater efficiencies – ahem. School consolidation. There are no attempts
to pare down an already bloated budget. It’s just hand over your wallet, all
day every day.
Gov. Brownback has announced a
few options for filling the budget hole. Brownback’s preferred choice is
essentially a payday loan, using the state’s tobacco settlement. Meh. I see one
positive to this potential solution: If the tobacco settlement is used to fill
today’s budget hole, it can’t be used tomorrow to further bloat government.
This is what typically occurs when government somehow gets a windfall. The
bureaucrats use the windfall for some recurring budget item, like adding staff
or increasing salaries, and all of a sudden when the windfall runs out,
taxpayers are stuck with a bill that can’t be eliminated.
The problem with using the
tobacco settlement to fill the budget hole, however, is that it doesn’t really
solve the budget problem. It’s a short-term solution for something that
requires a long-term fix. (Ahem. Less spending.)
The Gov’s second option would
push back pension funding. We have a pension problem already. This exacerbates
it while simultaneously kicking the can down the road. Dislike.
A third option is across the
board cuts to state government. This plan makes the most sense, solves the
problem long term, and does what should have been done back in 2012 when
legislatures enacted the tax bill with the unintended consequences.
I sincerely hope that whatever
agreement legislators and the Governor come to – they enact cuts as well. Cuts
should be a major part of the solution, because the problem is overspending.
All three Brownback proposals
include taking $70 million from the state highway fund this year and another
$115 million next year. This will mean delaying some projects. To which I say:
Thank heavens. Last summer traversing the highways around the Jo was like a
trip through Purgatory. It was impossible to get ANYWHERE without weaving and
sitting in orange cones. If last summer was Purgatory, this summer will be
hell. It’s going to be hard for me to lose any sleep over one season without
dodging orange cones. (We’re number five
in the nation in highways. Yay? Kansas will be just fine if we lose a few
slots.)
Legislators return to Topeka on
April 27, and they’re going to face a hailstorm from the Whining Whiners Who
Whine™. This is likely to be a very short wrap-up session, as I have it on very
good authority that legislators are going to be in a super hurry to get out of
Topeka before May 1 when April’s revenue numbers are released.
Conservatives should be reminding
anyone who will listen that this “budget hole” is really a projection
shortfall. The state is spending more money than ever before, and that’s a story
that needs to be continually told.