Purchase photos

Kan. lawmakers have new tax plan; doubts linger

5/17/2012

TOPEKA, Kan. (AP) -- Kansas legislators drafted a new plan Wednesday for cutting income taxes, backing off aggressive reductions approved by lawmakers only last week, but senators questioned whether they can sell it to the chamber.

House and Senate negotiators kept the main features of the legislation already approved -- a cut in individual income tax rates and the elimination of income taxes for 191,000 partnerships, sole proprietorships and other businesses. But the new plan phases the cuts in over six years.

Gov. Sam Brownback's fellow conservative Republicans engineered approval of the aggressive package, fearing that GOP moderates and Democrats in the Senate would block any cuts. Its passage came despite warnings from the Legislature's staff that the income tax cuts -- coupled with an already-planned sales tax reduction -- would spawn a budget shortfall by mid-2014 that will balloon to nearly $2.5 billion by July 2018.

Legislative researchers project the new plan's milder cuts would leave the state with a budget surplus at least into 2018. Brownback has pushed the GOP-controlled Legislature to cut income taxes, and he immediately embraced the newest proposal.

"Conferees have developed a compromise that gets Kansas on the path to a pro-growth tax policy that will grow the economy and create jobs," Brownback said in a statement.

The House will vote first on the newest proposal, possibly as early as Thursday, the 96th day of the Legislature's session -- six more than leaders had scheduled.

Conservative Republicans hope prospects for more aggressive tax cuts will pressure reluctant senators to accept the lesser plan. Many senators remain skeptical that tax cuts will generate enough economic activity to offset revenue losses, which could force cuts in spending on schools and social services.

Legislators formally presented the more aggressive package to Brownback on Wednesday, and he has until May 26 to decide its fate. He had promised to sign it if lawmakers passed nothing else.

"Kansans will have a pro-growth tax cut this year," he said.

But senators still had doubts. Sen. Pete Brungardt, a moderate Salina Republican, called the new plan's chances "even money, maybe."

The skeptics believe the tax cuts won't stimulate robust growth, and, with the elimination of income taxes for thousands of businesses, are tilted against poor and working-class families.

"It's just way too big," said Sen. Tom Holland, a Baldwin City Democrat and one of the negotiators. "There's no money for anything else."

The sales tax is already scheduled to drop to 5.7 percent from 6.3 percent in July 2013. Legislators made that pledge two years ago when they raised the rate to close a budget shortfall, before Brownback took office. He proposed keeping the rate at 6.3 percent to offset aggressive income taxes, but lawmakers balked.

The plan on Brownback's desk drops the top individual income tax rate to 4.9 percent from the current 6.45 percent. The latest plan phases in the cut by 2018.

The more aggressive cuts would provide $231 million in tax relief during the fiscal year beginning July 1, growing to $934 million in six years. The plan drafted Wednesday provides only $23 million in tax relief during the next fiscal year and $564 million after six years.

"What we need to do is -- somehow, some miracle -- convince enough people on the Senate side to vote for this," said lead Senate negotiator Les Donovan, a Wichita Republican often at odds with moderate GOP leaders on taxes. "This is good for everybody in the state of Kansas."

------

Online:

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

------

Follow John Hanna on Twitter at www.twitter.com/apjdhanna