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Kan. lawmakers pass tax cuts, but more work seen

5/10/2012

TOPEKA, Kan. (AP) -- Massive tax reductions cleared the Kansas Legislature on Wednesday, but even as Gov. Sam Brownback and his conservative Republican allies marked a political victory, they scrambled to start containing possible future budget problems.

TOPEKA, Kan. (AP) -- Massive tax reductions cleared the Kansas Legislature on Wednesday, but even as Gov. Sam Brownback and his conservative Republican allies marked a political victory, they scrambled to start containing possible future budget problems.

The House narrowly approved a bill to cut income and sales taxes by an estimated $233 million in the fiscal year that begins July 1, with the annual tax relief growing to $911 million after four years. Although the vote ended acrimonious debates in both legislative chambers, it came on a political maneuver by conservatives.

The Senate had approved the same plan in March but only to keep debate moving. Its moderate GOP leaders and Democrats didn't like large parts of the plan and worried about its potential effects on the budget, but they allowed the bill to go forward so negotiators from both chambers could work out a compromise.

The House's conservative GOP leaders had initially favored a less aggressive plan drafted by negotiators, but fearing that proposal would fail in the Senate -- where rumors floated that leaders would let any tax bill die -- they forced a quick vote on deeper tax cuts Wednesday in a maneuver that bypassed the Senate. With the bill most legislators don't like headed to Brownback, conservatives hope to push Senate GOP leaders to pass something else.

One financial forecast from the Legislature's staff predicted that the plan would produce a budget shortfall by July 2014 that would grow to almost $2.1 billion by July 2017; another staff projection estimated it could exceed $2.7 billion. In either scenario, the state would be forced to slash aid to public schools and spending on social services and other programs.

Still, Brownback and House Speaker Mike O'Neal, a Hutchinson Republican, said the bill's passage was a step toward meaningful tax reform that will stimulate economic growth and create jobs.

"I am prepared to sign the bill," the governor said in a statement, but he said the GOP-controlled Legislature should keep working on tax issues and send him additional legislation with offsets to the tax cuts they've approved.

The bill cuts individual income tax rates, dropping the top rate to 4.9 percent from the present 6.45 percent. It ends some tax credits and deductions but increases the standard deduction for all individual filers, and it eliminates income taxes for 191,000 partnerships, sole proprietorships and other businesses. It drops the sales tax to 5.7 percent in July 2013, from its present 6.3 percent.

The House started debating the plan as the Senate prepared to take up the less aggressive, compromise measure. The alternative phased in lower income tax rates and the business tax break over six years.

Senate leaders had conceded that their chamber's vote would be close. Democrats and some Republicans had misgivings about how it would affect the budget, and some believed it would shift part of the state's tax burden from the wealthy to working-class and poor families.

A report Tuesday from the Washington-based Institute on Taxation and Economic Policy reached the same conclusion. The state Department of Revenue released figures Wednesday in line with the institute's data, though it said the sales tax reduction would offset any adverse changes.

O'Neal and his fellow GOP conservatives in the House said later that they believed Senate leaders planned to let the less aggressive plan die -- and block any tax package as the Legislature's annual session winds down. Wednesday was the 88th day, out of 90 scheduled.

"The House took necessary action to ensure Kansas is moving in the right direction when it comes to reforming our state's income tax policy," O'Neal said in a statement after his chamber's vote.

He and Rep. Richard Carlson, a St. Marys Republican and the House's lead negotiator on tax issues, said they're hoping to resume talks with senators to draft another package.

"If they are serious about having good tax policy in Kansas, we will negotiate," Carlson said.

But Sen. John Vratil, a Leawood Republican who was skeptical of the less aggressive tax plan, said he assumed that when House members approved the more aggressive plan, "They were willing to live with what they passed."

And Senate President Steve Morris, a Hugoton Republican, said he and other senators never said they'd block tax cuts.

In the House, O'Neal's fellow conservatives cut off debate on the more aggressive tax plan to accelerate a vote on it. In the Senate, GOP moderates and Democrats did the same thing to conservative Republicans to try to force a vote on the less aggressive before the House acted.

Under the Legislature's rules, the chamber voting first on a tax plan controlled the outcome, and the House acted first.

The debates grew unusually bitter, as lawmakers vented outrage and hurt feelings over their opponents' tactics.

Sen. Les Donovan, a Wichita Republican and his chamber's lead negotiator on tax issues, said its debate was "like mob rule."

"Shame on all of us," he said. "We can't get along well enough to do good work."

In the House, a few hoots of protest greeted O'Neal when he ordered the vote recorded. Democrats and moderate Republicans derided his handling of the debate, called the tax bill reckless and predicted Kansans would object.

"The people of Kansas are not stupid cows," said Rep. Ann Mah, a Topeka Democrat.

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The tax bill that passed is Senate Sub for HB 2117. The less aggressive version is the Conference Committee Report on the same bill.

Online:

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

John Hanna can be reached at www.twitter.com/apjdhanna