It's a new day in America!
On Friday, I know many of you joined me in watching the inauguration of President Donald Trump. While he was maybe not the first, second, or third choice of many of us, his ascendancy to the White House is certainly historic and worth studying. He was consistently able to speak to average Americans who felt left behind, and his inaugural address spoke to them again. Furthermore, what many of us love about him the most, is his ability to communicate directly to the American people without first passing through the filter of the mainstream media.
The fruits of his election were immediately demonstrated after he was sworn in, when he officially nominated his cabinet heads and sent them to the Senate, and then signed an Executive Order directing all federal agencies to ease the burden of ObamaCare. While this is still well short of repeal, which must be done through Congress, it has the prospect of further weakening the law, particularly as it applies to the penalties Americans face via the individual mandate.
President Trump's Obamacare Executive Order also serves to protect the efforts we've made here in
Kansas with KanCare. KanCare is our Medicaid program, providing health care services to over 360,000 of our most vulnerable citizens. The Obama Administration was seeking to stop our efforts, by refusing to extend our plan authorization, as one of their last actions as they were heading out the door.
Trump's executive order endorses KanCare, and has saved the plan.
In addition, his cabinet appointments display a clear conservative direction on a number of fronts, from a new appreciation for the 10th Amendment to the prospect that our efforts to cut taxes at the state level may soon be matched by a similar effort at the federal level.
It is truly an exciting time to be an American, and I know many of you join me in being optimistic about what President Trump's first 100 days in office will bring.
Home on the range here in Kansas, things are not as rosy when it comes to the direction our legislative leaders may be taking us.
Ironically, during most of Obama's time in office, we had a conservative Legislature and governor here in Kansas, and many of our frustrations centered around combating the overreaches of the federal government on many fronts - on health care, on the 2nd Amendment, on EPA regulations, etc.
Now, that situation has reversed - the federal government may be finally ending those things we fought against, but our Legislature in Kansas has taken a leftward tilt, and those conservatives who are left are fighting them tooth and nail.
Just in the first two weeks, we've seen left-wing forces propose to undermine the 2nd Amendment, propose a $250 million tax increase on small businesses (and that's just a start!), propose an expansion in Obamacare Medicaid, and push for increases in spending on education, roads, and other social services. Many of you have already written me out of profound concern for some of these liberal proposals, and I join with you in opposing them. Rest assured that I, along with my conservative colleagues in both chambers, will do everything we can to resist these initiatives to turn back the clock on everything we've accomplished.
Just two weeks in, here is where we are on several fronts...
Last week, I discussed the debate over the Senate rules that leadership was seeking to change, rules that would have consolidated power among those in powerful positions, and severely weakened the representation of individual Senators.
The good news is that on Tuesday, when the rules were debated, we were able to stop most of these radical changes. We preserved the right of individual Senators to remove items from the Consent Calendar and we kept the threshold for removing bills from committee at 24 votes - leadership had wanted to raise it to 27. The only vote we lost was a close 21-17 margin on keeping the threshold at 24 votes to bring a bill "above the line" that had been adversely reported, and it will now take 27. Overall, the rules were adopted at 39-0 and I was not unhappy with the result.
A non-controversial bill was passed 40-0 that dealt with state election law on how to handle vacancies created by the mid-term resignation of a Congressman, such as is expected by Congressman Mike Pompeo once he is confirmed as CIA Director. This bill streamlines the time frame for calling and then holding the election, as well as lowering the threshold for independent candidates to get on the ballot. Due to this bill, which also passed the House and was signed by Governor Brownback, we will have a new Congressman in place for the 4th District by May 1st.
An important role the Senate plays is in confirming nominations by Governor Brownback to different agencies and commissions. I'm posting this list partially to give you an idea about the large number of agencies, boards, and commissions that exist in Kansas and the large amount of influence a governor has to shape them via appoinments.
Here is the list of people we approved this week. With the exception of Richard Carlson, the voters were unanimous:
- Debra Beavers, Director, Division of Alcoholic Control, Department of Revenue
- Richard Carlson, Secretary, Department of Transportation - Yeas 32; Nays 6; Present but not voting 2
- Tim Keck, Secretary, Department of Aging and Disability Services
- Joseph Norwood, Secretary, Department of Corrections
- Shari Albrecht, State Corporation Commission
- Beverly Gossage, Member, State Board of Indigents' Defense Services
- Dr. Romano Delcore, Member, University of Kansas Hospital Authority
- Dr. Kirk Benson, Member, University of Kansas Hospital Authority
- Frank Carson, Member, State Banking Board
- Barbara Hickert, Long-term Care Ombudsman
- Casey Lair, Member, Pooled Money Investment Board
- Rodney Miller, Member, Pooled Money Investment Board
- David Moses, Member, Kansas Racing and Gaming Commission
- Norman Pishny, Member, State Banking Board
- Roman Rodriguez, Member, State Board of Indigents' Defense Services
- Suzanne Valdez, Member, Kansas Crime Victims Compensation Board
I voted yes on all the nominations.
The Small Business Tax Exemption & The Budget
The Tax Committee in the House is already debating a massive $250 million tax increase via their attempt to repeal the exemption for small businesses. This brazen attempt, which some are attempting to ram through the Legislature before freshmen legislators know any better, would have a devastating impact on families and businesses in Kansas by having a
retroactive tax that is both bad policy and fundamentally unfair to new entrepreneurs who are creating jobs and bringing economic activity to Kansas. This dramatic new tax will have an immediate negative impact on businesses and families throughout Kansas.
Some of you have written me in opposition to this exemption, and it may surprise you that I actually share many of your frustrations. While I oppose repealing the exemption, there is no question that we have never told the story of why the exemption was enacted in the first place nor how the law is already having great success, even while a large number of politicians and left-wing interest groups seek to continually undermine it. Unfortunately, the left has been able to completely own the public discussion over this issue, using terms such as "fairness" and "loophole" to paint a false picture about the original intent of the law as well as its impact.
Here are many of the facts surrounding the subject:
AN INCREASE IN BUSINESSES
- Remember, a huge part of our population resides in the Kansas City metro area. Prior to the implementation of this law, we had two decades of job losses to the state of Missouri. One of the original intents of the exemption was to reverse this trend and bring jobs back to Kansas. This has worked. (In 2013, Kansas had a positive reversal in migration of wealth between Kansas and Missouri. According to IRS data, Kansas took in nearly $85 million in income gains from Missouri, a significant reversal from 1995 to 2009 when more than $263 million left Kansas for Missouri.
- We have had 5 consecutive years of record business formation, and 37 consecutive months of unemployment under 5%! Much of this growth is due to the tax plan specifically. (Net first time small business tax filings combined 2013 and 2014 is 20,412. First time filings means social security number, name or name of business have not previously appeared on a Kansas tax return. New income to Kansas was over $1.13 billion, $900 million taxable income.)
AN INCREASE IN JOBS
- Most job growth in Kansas comes from pass-through businesses (LLCs, sole proprietorships, S-corporations and joint partnerships). The latest data from the U.S. Census Bureau indicates the 36,135 jobs created represent 82 percent of all the private sector jobs created in 2013 and 2014 - growth that is three times greater than before tax reform. Finally, Kansas is either on top or compares well with other states in terms of private sector job growth.
- The term "loophole" that some legislators use is a false term, as that implies it was an intentional oversight, or a 'mistake' that we need to 'correct'. It was not a loophole, it was a specific remedy to a problem that was plaguing our state - 1) we were falling behind economically with our neighboring states, and 2) it was designed to reward and incentivize entrepreneurial activity, activity that requires more risk than being employed by someone else's business.
- The term "fairness" is misused in this case. Unlike many targeted tax incentives like TIFs or abatements, which are only available to certain narrow interest groups, this exemption is available to everyone in Kansas who seeks to use it. Anyone can form a sole proprietorship or an LLC, if they simply have an idea and a dream and the wherewithal to persue it. This tax policy, properly promoted, is really an opportunity scholarship for those who want to be an entrepreneur. As Republicans, we often talk about creating an "ownership society" and maximizing opportunity. This tax policy fits within that goal and we should embrace it.
- However, rather than embracing it, many legislators have sought to undermine it from the very day it was passed. This constant drumbeat of "repeal, repeal, repeal" discourages the very businesses we need from moving to Kansas - because they think the law is going to be undone. Remember, businesses just don't pack up and move - they must plan ahead, dealing with things like leases and other considerations. So, while the economic statistics certainly prove that the policy is working in its initial years, there is no telling what the growth could be in the future if we promoted the policy rather than constantly talking about how unfair it is.
- There is another important aspect of the new legislation to repeal the tax cuts, which the media usually does not mention. There is language included that allows the ability to claim losses against tax liability. In other words, what often happens is that wealthy business owners will create a business with no intention of making a profit, and the losses from that business can then be used against the profit from another business, decreasing or eliminating their tax liabilities. It has the effect of rewarding non-productivity. If the goal of the left is truly to claim more revenue for the state, why would this provision be a part of the bill?
A DECREASE IN REVENUE
- The current tax policy is not responsible for the budget struggle - in fact, many states are facing similar budget constraints - 25 states had budget balances which fell below forecasts in FY 2016, and that trend is continuing in 2017. 19 states had to make mid-year budget cuts. This is due a range of concerns, most of which has been centered around the sluggish economy.
- In Kansas, during the last three fiscal years (FY 2014 thru FY 2017), tax receipts have only grown by 0.3%, which is twelve times LESS than the average of the last 25 years. The small business tax cuts were firmly in place before then and cannot be blamed for the state's reduced tax collections.
- What has been happening in Kansas are lower sales tax receipts because of declines in oil and agriculture prices, which have caused farm income to drop sharply, as it is at its lowest level since 1981. Every 1% drop in agricultural prices has meant a $7.7 million drop in sales tax receipts.
- Kansas is one of the few states that use government employees to generate revenue estimates, and these estimates have been consistently incorrect over a long time period. That can throw off budget planning by a large margin when calculations are significantly greater than what they should be. This is being addressed by Governor Brownback, who has tasked a special group of financial service professionals and CPA's to come up with a new revenue estimating process. Some of their recommendations have already been implemented and there is no question the estimates have a higher degree of accuracy.
- It is inappropriate and bad policy to consider a massive tax increase at the beginning of session. This is not conservative and not Republican behavior. Rather, the first step should be to adopt further spending reductions and implement further recommendations from the efficiency study, not immediately turn to Kansas citizens to pay the tab.
- Finally, it would be one thing if proponents of repeal simply felt we should have offset the tax hikes with tax cuts elsewhere, such as in the sales tax. But, that's not the case here - it is simply a measure to grow government. Republicans of any stripe should oppose this.
- Assertions and a media narrative has developed that give myths that massive cuts have been made to the budget. Here are the facts:
- K-12 education spending has increased by $300 million between fiscal year 2012 and FY 2016.
- KanCare serves over 25% more individuals and costs have increased by over $100 million since fiscal year 2012.
- By the end of 2019, there will have been $1.0 billion more spent in employer contributions to the state pension system (KPERS) as compared to the previous administration.
- Expenditures from the state highway fund were more in fiscal year 2016 than they had been in several years and Kansas has the 3rd best highway system in the nation.
As this debate moves along quickly, I look forward to continuing to stand up for small business entrepreneurs and families so they are not hit with a massive tax increase.
It is a tenuous time for life in Kansas. While the March for Life will be taking place this Monday, on March 16 the Kansas Supreme Court will be hearing arguments on the dismemberment abortion ban we passed in 2015. Remember, both a lower court and the Kansas Court of Appeals (on a split decision) have ruled there is a state right to abortion, including dismembering babies in the second trimester. This case will not only have an impact on this procedure, but on all other laws we have enacted in Kansas. If the Kansas Supreme Court finds an independent right to abortion in our Kansas Constitution, that threatens to undermine all of our laws protecting the unborn child.
The session will continue to heat up as the debates on these issues and others continue. I will update you as various bills make it through the committee process and reach the floor, and also provide you information on how you can be of assistance.
In honor of your liberty,