Friday, May 31, 2013

House rejects another tax increase, negotiations to continue

By SCOTT ROTHSCHILD, The Lawrence Journal-World

Another day, another proposed tax increase shot down in the House.

This one, which would have raised taxes nearly $700 million over 5 years, was the product of a mini-revolt among Republicans and died Thursday on an 18-94 vote.

The bottom line is the Kansas Legislature will enter its 98th day of what was supposed to be a 90-day session and one that GOP leaders said earlier would last only 80 days.

House Speaker Ray Merrick, R-Stilwell, (left) speaks with state Rep. Mark Hutton, R-Wichita, after a tax increase proposal by Hutton and state Rep. Gene Suellentrop, R-Wichita, was defeated on Thursday. Merrick voted against the plan.

Republican Gov. Sam Brownback and GOP legislative leaders are pushing for another round of cuts in income tax rates, saying that will stimulate the economy.

But to do that, they want to increase the state sales tax and slash income tax deductions. So far, House and Senate Republicans have't been able to agree on how to do that. Democrats, who are vastly outnumbered in both chambers, have opposed Brownback's tax policies.

On Thursday, state Reps. Gene Suellentrop and Mark Hutton, both Wichita Republicans, crafted a wide-ranging tax-and-spend measure that would increase taxes by $698 million over 5 years and cap state budget increases to a maximum of 2 percent per year.

The measure would have set the sales tax at 6.3 percent, which would repeal the current law that says the state sales tax is to decrease to 5.7 percent on July 1.

The bill would also have lowered the state sales tax on groceries from 6.3 percent to 4.9 percent on Oct. 1. Over 5 years, the proposal would phase out half of the itemized tax deductions, such as charitable contributions, mortgage interest and real estate property taxes, and slash standard deductions from $9,000 to $5,000 for head of household and $6,500 for married, filing jointly.

And it would have ratcheted down over 5 years the top income tax rate of 4.9 percent to 3.5 percent, and the bottom rate of 3 percent to 2.5 percent.

Hutton and Suellentrop said the plan would be accepted by the Senate and Brownback.

But the proposal got attacked on several fronts.

"This is still a $700 million tax increase on the citizens of Kansas," said state Rep. Julie Menghini, D-Pittsburg.

State Rep. John Rubin, R-Shawnee, said making permanent the temporary 6.3 percent state sales tax rate "breaks our promise to the voters of Kansas." The 6.3 percent rate was adopted in 2010 as a 3-year rate to offset historic revenue declines during the Great Recession.

But Hutton, a freshman legislator in his first session, urged colleagues to endorse his proposal, telling them to "man up" to fix the "mistake" from last year. Hutton was referring to the massive income tax cuts signed into law by Brownback in 2012 despite warnings that the cuts would cause revenue shortfalls for years to come.

State Rep. Scott Schwab, R-Olathe, opposed Hutton's plan, criticizing the proposed lower sales tax rate for groceries as inconsequential and "doesn't help the poor."

House Speaker Ray Merrick, R-Stilwell, voted against the tax package. He said the House and Senate need to continue working on tax proposals in a conference committee. "This is a process," Merrick said.