Kansas Lawmakers Talk Taxes on LLCs

Three Kansas senators introduced a bill last week to reinstate taxes on owners of limited liability companies.

Senate Vice President Jeff King (R) said it was an issue of tax fairness—and necessary given the state’s budget.

“Wage income should be taxed whether the person earning it has an LLC or is someone’s employee,” King said. “It’s time to make sure every person who earns a wage pays the same low income tax rate.”

After passing a bill to fill a huge shortfall in the fiscal year 2016 budget, legislators learned that tax receipts for February were $50 million below estimates.

Critics have blamed the loss of tax revenues from LLCs as one of the major culprits in the state’s budget challenges.

Gov. Sam Brownback (R) has staunchly defended the income tax exemption.

“As the governor has previously said, he will not support or call for a tax increase on small business in Kansas,” said Eileen Hawley, Brownback’s spokeswoman.

King said Kansas became the lowest income tax state in the region as a result of an income tax rate cut in 2012 led by Brownback. The current rate is 4.6%.

The plan to eliminate individual tax on nonwage business income for LLCs created a loophole that exempted some 330,000 businesses from income taxes, King said.

Source: Kansas City Star S