TOPEKA, Kan. _ Kansas Gov. Sam Brownback will veto a bill that sought to raise income taxes and roll back his signature tax policies.
Brownback called the plan a "big, retroactive, income tax increase."
"I won't sign it and I will veto this bill," he said to applause at the annual dinner of the Kansas Chamber of Commerce, one of the groups that has lobbied to maintain the tax cuts ushered into law in 2012.
"This is bad policy for Kansas. This will hurt growth in this state. Growth is what we need.
"This is what causes people to move to other places," he added.
Brownback said he would work with legislative leadership to come up with a different plan "to fix our budget."
"I put forward one (but) we'll make further adjustments and we'll work with the leadership of the House and the Senate to do that," he said.
The bill passed the Legislature last week, but not by veto-proof margins. It would raise income taxes, create a third tax bracket and eliminate a tax exemption for owners of certain businesses, including LLCs.
The veto sets up a battle with lawmakers and raises doubts about how Kansas will fill its long-term budget gap, which stands at more than $1 billion through June 2019.
"The path forward is not clear," said GOP Rep. Steven Johnson, who chairs the House Taxation Committee.
Johnson's committee held a quick meeting late Tuesday to talk about other tax plans the panel could consider later this week in expectation of a veto.
"I don't have a vote count to say that I know that it'll happen in the House," Johnson said. "I think that I lose some of the willingness to take a hard vote on taxes again and again when someone is confident it doesn't go anywhere across the hall."
Other lawmakers are ready for a fight.
"We should continue to send him the bill that the people of Kansas voted for in the last election," said House Minority Leader Jim Ward, a Democrat.
Brownback ushered in tax cuts during his first term with the promise that it would spur job growth, but the policies have faced backlash as the state struggled with shortfalls. Moderate Republicans and Democrats gained seats in the most recent election campaigning on the promise to end Brownback's tax experiment.
Lawmakers could attempt to override the governor's veto, which requires a two-thirds majority in each chamber, but Ward said "it may be better strategically to just send it to him again, again and again."
There's no limit on the number of times the Legislature can send Brownback the bill, said Ward, who compared it to a parent refusing to let a child leave the dinner table until he has finished his vegetables.
The bill passed the House with a 76-48 bipartisan vote on Thursday.
The Senate took up the bill the next day and approved it 22-18. Senate President Susan Wagle, a Republican, voted against the bill but encouraged the governor to let it become law or find a "real structural budget fix."
Brownback's own plan for fixing the budget shortfall would primarily rely on sources of one-time money to get the state through 2019, but he has previously indicated that he may be open to a tax plan that taxes a business owner's income above a certain threshold, while exempting the rest.
Brownback's office received the bill, the substitute for HB 2178, Tuesday afternoon. That started a 10-day period for the governor to sign or veto the bill. If he had done neither by the end of the 10 days, it would have become law.
The plan adds a third bracket and increases rates for the middle bracket. For married people filing jointly, income between $30,001 and $100,000 would be taxed at 5.25 percent, up from 4.6 percent. The top rate, for income above $100,000, would be taxed at 5.45 percent. The tax rate for the bottom bracket would remain 2.7 percent.
It also eliminates the exemption that allows the owners of limited liability companies and other businesses to pay zero state tax on their business income.
Scott Drenkard, director of state projects at the Washington, D.C.-based Tax Foundation, said that the legislation would have given the state a sustainable tax system.
Drenkard, who came to Kansas to testify before the Legislature earlier this session, said the state's "previous attempts at fixing this problem have been temporary short-term solutions, and every indication is the problem is a systemic one that cannot be patched over."
Sen. Lynn Rogers, a Democrat, said he wasn't surprised by the governor's veto.
"This is really his lynchpin," he said of Brownback's tax cuts. "I hope the Senate and the House has the political will to do what's right."
"They (my constituents) want a fair tax system," he said.
Freshman Rep. Susan Humphries, a Republican, voted against the bill.
"I feel the working people of Kansas don't deserve a tax increase," she said.
