AP: Alternative tax plan advances through committee

3/15/2013

TOPEKA (AP) — A legislative committee approved its Republican chairman's plan for cutting Kansas' sales and income taxes on Tuesday, advancing an alternative to the governor's proposal that more aggressively slashes income taxes.

TOPEKA (AP) — A legislative committee approved its Republican chairman's plan for cutting Kansas' sales and income taxes on Tuesday, advancing an alternative to the governor's proposal that more aggressively slashes income taxes.

The plan drafted by Rep. Richard Carlson, chairman of the powerful House Taxation Committee, would reduce individual income tax rates over the next four years only if state revenues grow by at least 2 percent each year. Republican Gov. Sam Brownback's proposal calls for cutting income tax rates each of those years regardless of state revenue.

But Carlson's proposal also would allow the state's sales tax to decrease to 5.7 percent in July, as scheduled by state law. The governor wants to keep the tax as its current 6.3 percent rate.

The committee's voice vote sent the measure to the entire House for debate, a day before the Senate was to debate its own tax legislation.

Senators are considering a bill that contains most of Brownback's plan, including his proposal to continue the sales tax rate at its current rate.

Brownback and many Republican legislators want to follow up on massive individual income tax cuts enacted last year to stimulate the economy, but they also need to stabilize the state budget. Republican leaders in the House, including Carlson, have said they don't think their chamber will support keeping the current sales-tax rate.

Carlson's plan also would phase out all individual income tax deductions as tax rates decline, rather than target specific deductions for homeowners, as Brownback did. In addition, Carlson is proposing to divert $370 million over two years from highway projects to the rest of the budget.

"The path that we're on, to me at least, is the path that is the right direction," Carlson said just before the committee's vote. "Perhaps none of us get there as fast as I want to go either, but we have to go there, I believe, in a responsible fashion."

Brownback has said he wants to position the state to eventually phase out individual income taxes. Many GOP legislators have endorsed that goal, and some want to eliminate corporate income taxes as well.

"Governor Brownback has clearly stated his administration's priorities — create jobs, grow the economy, protect core services, and reduce the size of government," spokeswoman Sherriene Jones-Sontag. "He welcomes other ideas on how we can get to a zero state income tax and accomplish his priorities."

The proposals to eliminate income taxes are designed to stimulate economic growth. But they also would force the state to rely most heavily on its sales tax to finance its programs — and poorer families tend to pay a higher percentage of their incomes to that tax than wealthy ones. Kansas also is among a few states that taxes groceries, making its sales tax even more regressive.

In the Senate, Democrats hope to counter such concerns by offering their own proposal to drop the sales tax in July, as well as measures to restore income tax breaks eliminated last year for renters and families using child care. Democrats also want to revive a rebate that poor families had received for the sales tax they pay on groceries.

"You've got clear choices here to make," said Senate Minority Leader Anthony Hensley of Topeka, who outlined Democrats' proposals in an interview with The Associated Press on Tuesday. "Do you want to lessen the burden for low-income people or cut taxes for the rich?"

Many legislators in both parties don't want the sales tax to stay at 6.3 percent. Lawmakers boosted the tax three years ago to balance the state budget and promised that the higher rate would be temporary.

Other sticking points for legislators are Brownback's proposals to eliminate income tax deductions that homeowners can claim for the property taxes they pay on their residences and the interest on their mortgages.

But by sidestepping those problems, Carlson also is ditching Brownback's guarantee that individual income tax rates will drop significantly again over the next four years. Instead, his plan says that the state automatically will reduce income tax rates if its revenues grow more than 2 percent in a given year.

Tax Committee members from both parties questioned whether the annual decreases would be significant and whether the state would ever phase out income taxes.

"I'll be dead, I'll tell you that," said Rep. Arlen Siegfreid, an Olathe Republican.

But Rep. Marvin Kleeb, an Overland Park Republican, called Carlson's plan "a reasonable approach."

"No, it's not as fast as any of us would like, but it does not gut state services," Kleeb said.

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House Taxation Committee's plan is contained in House Sub for SB 84. The legislation before the Senate is HB 2059.

Online:

Kansas Legislature: http://www.kslegislature.org

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Follow John Hanna on Twitter at www.twitter.com/apjdhanna

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