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Monday, April 21, 2014

Budget chief seeks end to Kansas income tax

BY DION LEFLER
The Wichita Eagle

Gov. Sam Brownback's budget chief is working on a renewed effort for next year to dramatically reduce or do away with state income taxes — a proposal Democrats are calling shameful.

Budget director Steve Anderson praised efforts in this year's session to pass Senate Bill 1 — which would have phased income taxes down over time — and said his office is working on similar plans for next year.

SB 1 passed the House 73-47, but stalled in the Senate, where moderate Republicans hold more sway.

"I would expect it to be revived this next year," Anderson said. "I would hope that we also have a plan in our (governor's) budget that shows some significant (income tax) cuts and I think we will. We have a tax study committee working on it right now."

SB 1 would have essentially capped state revenue at the 2010 level and gradually eliminated personal income taxes as property and sales tax revenue rose over time.

The bill also would have reduced corporate taxes, from the current 4 to 7 percent range, to as low as 3.5 percent, according to a bill analysis by the Legislative Research Department.

"I think it was a pretty solid plan," Anderson said. "I suspect the governor probably would have signed it if it passed."

Anderson said he does not support repeal of the 1 percent, three-year emergency sales tax passed two years ago during the Democratic administration of former Gov. Mark Parkinson.

He said he sees income taxes as a drag on the economy, while sales taxes are a measure of economic success because they're based on the amount of commerce taking place in the state.

Rep. Jim Ward, D-Wichita, who spoke against SB 1 on the House floor, said Friday that "It's not only a bad idea, it's shameful."

He said it would require hundreds of millions of dollars more in cuts to schools and vital health and safety-net programs for the poor, the disabled and the elderly.

Capping state revenue at the 2010 level "would be like saying, 'why can't I pay what my electric bill was in 1990?' " he said. "You can't because the costs have gone up in the last 20 years."

Ward also said reducing the income tax in favor of sales tax would shift much of the tax burden from out-of-state and international corporations onto Kansas residents.

Taxes and business

In a speech to the Republican Pachyderm Club on Friday, Anderson said he learned the value of low income taxes as an adviser to former Oklahoma Gov. Frank Keating.

He said that as Kansas often does, Oklahoma offered a lucrative financial incentive package to oil and gas titan Kerr-McGee Corp. to keep it from moving its headquarters to Texas, which has no state income tax. At the time, Oklahoma's state income tax was 7 percent, Anderson said.

"When we went to visit with the CEO of Kerr-McGee, Luke Corbett, he told us: 'I'll stay just long enough to spend your giveaway, but when I cross the Red River... my employees get a 7 percent pay raise on a billion-dollar payroll. That's an advantage you guys cannot match year after year.' "

Kerr-McGee ultimately kept its headquarters in Oklahoma, but Anderson said Corbett's comment stuck with him and "definitely drove home to me how important it is to get (income tax) down to that point that you're at the lowest rate you can be, hopefully zero."

Ward said numerous studies show that for most businesses, taxes are only one of many factors, which also include quality of schools and government services, that figure into corporate relocation decisions.

Businesses that hop borders for lower taxes alone "aren't the kind of businesses that are going to, long term, build your community," he said.

Politics in play

Although Republicans dominate the Legislature and the governor's office, Anderson said that as newcomers, the Brownback administration didn't have enough time this year to go as far as it wants in cutting government spending and taxes.

"I would ask that some of you who are a little impatient we didn't move fast enough to wait for this next budget and see if you aren't getting more of what you want," he told the predominantly conservative club members.

Anderson cited Brownback's effort to abolish the Kansas Arts Commission as an example of the kind of political surprise where the administration could have used more grassroots support from conservatives.

"I think you can see the fight we had over what I think many of us would have thought would have been an easy subject," he said. "In hard economic times, I would have thought that cutting funding for the arts would have been a fairly easy thing to do. Boy, I got an education up there at the Capitol."

Rep. Nile Dillmore, D-Wichita, said the heavily outnumbered Democrats will "continue to carry the banner" of opposition to swapping income taxes for sales and property taxes.

He also said he was surprised to learn of a group working in the administration toward revising tax policy, since the Legislature had approved appointing a committee to do that.

He said he's received no notices of any appointments or meetings of that group.

"I do fully expect they're going to come up with some pretty god-awful tax schemes to continue to reduce income taxes," Dillmore said. "We'll just have to wait and see what it is."

Reach Dion Lefler at 316-268-6527.

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