AP Analysis: Kansas fiscal work hitting key phase

2/11/2013

By JOHN HANNA

By JOHN HANNA

AP Political Writer

TOPEKA (AP) — Kansas legislators are entering a crucial but messy phase of interlocking debates over conservative Republican Gov. Sam Brownback's tax and budget proposals.

Brownback is promoting his package of tax initiatives as a five-year plan for committing the state to eventually phasing out personal income taxes after aggressive income tax cuts last year.

But he's also proposing changes that will generate $1.1 billion in net new revenues over the three years beginning in July to stabilize the budget, ahead of most of the relief he's promising.

It's not hard for Brownback's critics to argue that his tax plan is in trouble, particularly his proposals to eliminate two popular income tax deductions for homeowners and to cancel a drop in the state sales tax scheduled for July. Some of the governor's allies in the GOP-dominated Legislature are resisting those ideas, and lawmakers are searching for alternatives.

And if the governor's tax plan is in trouble, his budget is, too, because without the new revenues, his spending blueprints for the next two fiscal years collapse.

House and Senate budget committees will make decisions over the next few weeks, with members knowing they may have to seriously revise what they draft now as tax committees wrestle with their bills.

Republican leaders see trial balloons, digressions, wool-gathering and even some false starts as necessary on such complicated issues.

"You have a tendency to go on these intellectual odysseys and get lost in the weeds," said Senate Majority Leader Terry Bruce, a conservative Hutchinson Republican. "This is just part of the process."

Both chambers have Republican supermajorities and conservative leaders, generating solid support for Brownback's goal of phasing out individual income taxes as a way to make Kansas economically vibrant. Most GOP lawmakers also appear to agree that the state was on the right path when it enacted massive income tax cuts last year and should follow up this year.

Brownback sought last year to offset the tax cuts that eventually were enacted by eliminating income tax deductions and credits and keeping the state's sales tax at 6.3 percent. The state boosted the tax three years ago under Brownback's Democratic predecessor to balance the budget but mandated that the tax drop again to 5.7 percent in July.

Legislators rejected all of Brownback's proposed "pay fors" last year and sent him the most aggressive package of cuts they'd considered. He signed it, arguing that the state would be better off economically if it cut taxes than if it didn't, but the outcome put him and lawmakers in a difficult position this year.

Without adjustments in tax policy the state faces budget shortfalls for at least two years — and, according to some critics, far longer.

But some lawmakers contend Brownback's proposal to eliminate income tax deductions for the interest on home mortgages and the property taxes on Kansans' homes are unpopular with their constituents, and some don't want to break the promise to decrease the sales tax. The powerful, conservative-leaning Kansas Chamber of Commerce is criticizing Brownback's revenue-raising ideas.

"The Legislature also is going to need to make some decisions about whether they're going to move forward with the governor's tax plan or any other tax plan that may be offered, because the appropriations process is largely predicated on that kind of revenue coming in," said House Minority Leader Paul Davis, a Lawrence Democrat. "They're going to need some time if we're going in a different direction."

The Kansas Chamber is urging legislators to trim back Brownback's proposals for budgets exceeding $14 billion for each of the next two fiscal years. The House Appropriations Committee is assuming for now that it will reduce spending, said Chairman Marc Rhoades, a conservative Newton Republican.

"We're looking for efficiencies in government," he said. "We're kind of cloistered in that sense."

The Legislature's budget-writers know they can't remain isolated from the tax debate, and the tax committees expect to sift through perhaps dozens of ideas in drafting the final version of any legislation.

"Typically, on a tax plan, you put 10 people in a room, and there are 10 different ideas of where to go," acknowledged Senate President Susan Wagle, a conservative Wichita Republican.

Some legislators have suggested eliminating exemptions to the state sales tax — always a contentious debate. Luke Bell, a lobbyist for the Kansas Association of Realtors — a vocal critic of Brownback's plan to eliminate the two income tax deductions for homeowners — said his group could accept a plan to phase out all personal income tax deductions and credits as tax rates drop.

House Taxation Committee Richard Carlson, a conservative St. Marys Republican, said: "At this time, we're still exploring those alternatives, and we'll have to see where the votes are to put together a plan that meets all of our goals."

Legislators are likely to leave an impression that they're floundering on tax issues over the next few weeks, particularly if no bill emerges from committee. Also, work on budget issues is likely to plod along for a few weeks.

But lawmakers also will be moving closer to resolving the biggest issues of their annual session.

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