Saturday, January 26, 2013

Democrats battle Brownback over tax plan

By SCOTT ROTHSCHILD, The Lawrence Journal-World

Democratic legislative leaders on Friday criticized Gov. Sam Brownback's tax plan, saying it increased taxes on middle- and low-income Kansans to benefit the wealthy.

Meanwhile, the Brownback administration sought to frame the tax package as benefitting all Kansans by growing the economy.

Referring to a report by the non-partisan Kansas Legislative Research Department on the governor's tax proposal, Senate Minority Leader Anthony Hensley, D-Topeka, said, "These numbers show that in reality it is a tax shift onto the middle class, at the expense of the middle class to benefit really wealthier Kansans and, of course, corporations."

Brownback, a Republican, has proposed reducing the top rate on the personal income tax from 4.9 percent to 3.5 percent and the low rate from 3 percent to 1.9 percent by 2017.

Already facing a revenue shortfall because of tax cuts he signed into law last year, the governor has proposed, as a way to balance the budget, keeping the state sales tax at 6.3 percent, instead of allowing it to fall to 5.7 percent as is required under current law.

Brownback also wants to eliminate income tax deductions for the property taxes that Kansans pay on their homes and the interest charged on their mortgages.

The plan would cut personal income taxes by $1.8 billion over five years, according to the legislative research figures.

But keeping in place the higher sales tax rate and eliminating the homeowner deductions would cost Kansans approximately $2.5 billion.

That means the state would see an increase in revenues of approximately $700 million.

"The income tax cuts that he is proposing really disproportionally benefit the wealthiest of Kansans," said House Minority Leader Paul Davis, D-Lawrence.

Davis shared figures from the Kansas Association of Realtors that show 93 percent of Kansans who claim the mortgage interest deduction earn less than $200,000 per year, and 65 percent earn less than $100,000.

Even Republicans, who hold huge majorities in the House and Senate, had voiced concerns this week about Brownback's plan.

On Friday, Kansas Department of Revenue Secretary Nick Jordan sought to counter the criticism. Jordan held a briefing with reporters, saying the goal of Brownback's tax plan is to grow the Kansas economy, increase jobs and increase net income of Kansans.

He said studies show the best way to do this is reduce state personal income taxes. Jordan noted that governors in Oklahoma, Nebraska and Louisiana are following this strategy, and Texas has no state income tax.

Asked if Kansas could still maintain a high-quality public school system while reducing revenue through tax cuts, Jordan said the state could.

He said a study by economist Arthur Laffer, whom Brownback hired last year as a consultant on his tax cuts, shows that some states that lower income taxes see an increase in tax revenue through economic growth and more personal spending.

Asked about Brownback's elimination of the food sales tax rebate program and other tax credits meant to help the poor, Jordan said Brownback has a heart for low-income Kansans. "He's not out to hurt them at all," he said.

He said Brownback wants to get "social engineering" out of tax policy and fund accountable programs that help the poor.

Jordan distributed charts that showed how Brownback's tax plan would work. The revenue department put together statistics based on average salaries and average home valuations for several counties, including Johnson County.

A person in Johnson County earning an average salary for that county of $91,500 with an average home valuation of $238,743 would lose $407 through the elimination of homeowner deductions, but would realize a tax savings of $552 through the income tax cuts.

The net tax reduction would be $145, Jordan said.