Tuesday, May 28, 2013

Kansas Legislature returns to face tax, budget decisions

By SCOTT ROTHSCHILD, The Lawrence Journal-World

The current legislative session is tied into knots over taxes and spending because legislators are trying to unravel what a Republican majority led by Gov. Sam Brownback did last year.

Last year, following a political standoff, Brownback signed into law what was called "the nuclear option": deep income tax cuts that projected revenue deficits for years to come.

One year later, Republicans, who hold super majorities in the House and Senate, are trying to figure out how to balance the state budget and continue Brownback's goal to eliminate the state income tax.

On Tuesday, after taking off the Memorial Day weekend, legislators will continue their overtime session to consider a plan that would increase the state sales tax, reduce popular income tax deductions and decrease the standard deduction, while lowering income tax rates. Over a five-year period, the package will increase taxes by $857 million.

"This is shifting the tax burden from the wealthy to lower and middle class," said State Sen. Tom Holland, D-Baldwin City.

But Senate President Susan Wagle, R-Wichita, insists the plan will lower the tax burden on Kansans after 2018 through the decreasing income tax rates.

"We are implementing large and continuous tax cuts," Wagle said.

Wagle, Brownback and House GOP leaders subscribe to the tax philosophy that elimination of the income tax will grow the economy and produce jobs.

Democrats say lowering income taxes increases pressure to hike the state sales tax and local property taxes, both of which hit low- and middle-income Kansans harder.

Both the tax and budget plans pushed by Republicans this session are only the beginning, they say.

The current state sales tax rate of 6.3 percent was established in 2010 and meant to be a temporary three-year rate to offset huge revenue drops during the Great Recession. The 6.3 percent rate is scheduled to fall to 5.7 percent on July 1.

But the plan agreed to by House and Senate tax negotiators last week would set the rate at 6 percent, reduce income tax deductions, such as those for charitable contributions, mortgage interest and property taxes, and slash the standard deduction. It also cuts over a five-year period the top individual income tax rate from 4.9 percent to 3.5 percent, and the low rate from 3 percent to 2.3 percent.

On the budget side, the spending plan that has been developed by House and Senate Republican leaders would administer an across the board cut to higher education of 3 percent over two years. It also sweeps funding of all vacant positions, which universities say will produce double-digit funding cuts in some areas.

Under the proposed budget, public schools will receive no increase in base state aid in the next school year.

The proposal essentially ignores a court order to increase school funding by approximately $500 million. That order has been appealed by the state to Kansas Supreme Court, which could issue a ruling during the next legislative session.

And even those within Brownback's administration are decrying proposed budget cuts.

In a memo distributed to legislators, Kansas Secretary of Corrections Ray Roberts says a proposed $12.5 million cut would force the closure of a prison in northwest Kansas and leave unsupervised low- and medium-risk offenders, including sex offenders, who are on parole.

Democrats adamantly opposed to Brownback's income tax cuts last year, especially the elimination of income taxes on nonwage income for about 190,000 businesses, which is reducing revenue to the state by about $180 million per year.

Brownback has stated the business tax break will result in businesses adding jobs and that Kansas will lure businesses from other states.

Earlier this session, Brownback did interviews with various national media organizations, touting the lower income tax rates. "We're seeking tax refugees," he told Bloomberg TV. "So anybody watching this show, whether you're in New York or anywhere, come to Kansas."

House Minority Leader Paul Davis, D-Lawrence, said the budget cuts and tax increases proposed this year by Republicans "are what happens when the governor pushes through a reckless income tax plan."