Sunday, April 29, 2012

Brownback urges passage of tax cut plan

By SCOTT ROTHSCHILD, The Lawrence Journal-World

TOPEKA — Gov. Sam Brownback on Friday urged the Legislature to approve an estimated $2.9 billion cut in taxes over the next six years.

“We just haven’t grown for 30 years,” said Brownback, a Republican. “This gets us on a path to growth.”

Democrats were critical of the proposal, saying such a tax cut would rob funding for schools, social services and public safety, all of which have been reduced in recent years because of the recession.

And, they said, the way the proposed tax cuts are structured would benefit the wealthy at the expense of the poor.

“In effect, we are taking from the poor and helping the rich through this tax plan,” said House Minority Leader Paul Davis, D-Lawrence.

Sen. Tom Holland of Baldwin City, the ranking Democrat on the Senate tax committee, criticized the plan, saying, “This is a tax plan for Koch Industries.”

Republican leaders in the Senate said any tax-cutting proposal must be considered against the state’s long-term funding needs.

“In my view, we need to look at what the long-term outlook is,” said Senate President Steve Morris, R-Hugoton. “It’s too early to make any prediction on taxes.”

Morris noted the state is committed to increased funding in many areas, such as the public pension system. Those commitments must be balanced against proposed tax cuts, he said.

The complexity of the package, which was produced by the tax conference committee, was daunting to some. Senate Majority Leader Jay Emler, R-McPherson, said he expected it would take a while for legislators to understand what is in the measure. A vote in the Senate on the plan is likely the week after next.

Both Democratic and Republican legislators said the size of the tax plan may be more than the $2.9 billion over six years that the Kansas Department of Revenue had figured. More calculations were expected to be made over the next several days.

The proposal would cut individual income tax rates and phase out income taxes over five years for 191,000 partnerships, sole proprietorships and other businesses. Brownback proposed those measures and has repeatedly emphasized his support of the business tax cut, likening it to a shot of adrenaline to the heart.

“It’s got the key pro-growth features that I think are important,” Brownback said. “Gets the tax off of small business and lowers the overall rates,” he said.

The legislation also would maintain current law by reducing the state’s sales tax to 5.7 percent in July 2013 from 6.3 percent. It would also provide $180 million over four years in state aid to cities and counties to provide property tax relief.

Democrats said it was impossible to determine how much tax revenue the state would lose because of the business tax cut. Supporters of the business tax cut have said it is directed at small businesses, but tax studies have shown many large corporations would benefit by it and many businesses would likely reorganize to take advantage of the proposal.

Democrats also said the package would hit the poor the hardest. It would eliminate the homestead exemption for renters, restrict low-income families to receiving either the Earned Income Tax Credit or food sales tax rebate, but not both, and toss out the child care tax credit.

Under the plan that was agreed to by Republican members of the tax conference committee, taxpayers earning less than $30,000 per year would pay 3 percent in state income tax; while those earning more would pay 4.9 percent. The state’s current top rate is 6.45 percent.

Now that tax revenues are increasing and the state is seeing a budget surplus, Democrats say it is time to increase the pay of state employees, who have not had a raise in several years, restore cuts to schools and reduce waiting lists for services for those with disabilities.

But if the proposed tax cut package were approved, Davis said, “There is no hope for any of those folks that are looking to state government to provide what I think people expect of their state government.”

Supporters of the tax cut, including Brownback, have said it will help Kansans by increasing jobs and boosting the economy. Brownback said he didn’t fear the revenue loss would hurt state government.

“The numbers look doable,” Brownback said. He said that he and the Legislature must “continue to be aggressive in holding our costs down.”