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TOPEKA — The House Tax Committee advanced a Republican tax plan Monday that would eliminate taxes on the first $100,000 of nonwage income most small businesses make, starting next year.
But amendments to the bill could erode aspects of the bill that made the House GOP tax plan more appealing for low-income Kansans than the tax reduction plan pitched by Gov. Sam Brownback.
Under the House GOP plan approved Monday, individual income taxes would be slightly reduced in 2013 and further reduced in later years by capping state spending growth at 2 percent and using any extra revenue to buy down rates. The plan delays several major transportation projects by two years in order to make up for the state revenue lost by cutting taxes, a move opposed by most cities, counties and construction companies.
The committee narrowly approved an amendment rushed through by Rep. Caryn Tyson, R-Parker, which makes all refundable tax programs nonrefundable. That, in essence, would mean those who benefit from the earned income tax credit, historic tax credits and other popular credits could not get a refund worth more than what they paid in, Tyson said.
She said that affects credits for earned income tax, bulk food sales, historic preservation, community service, telecommunications and railroads, small-employer health care and disabled access. That would result in $97 million not going to those qualifying for the credits.
The plan pitched by House Republican leaders already would cut in half the earned income tax credit that flows to low-income working families starting in 2014. Tyson’s move reduces that more, making the program worth about $30 million a year, or about a third of its current size, according to a department of revenue official.
“For the state to be writing checks back to people for more than they paid in, we clearly can’t afford it,” Tyson said.
Meanwhile, another change renamed the bill from HB2747 to SB177, a move that allows the Senate to vote on the bill without vetting it through the traditional committee process.
Rep. Nile Dillmore, D-Wichita, sharply criticized the bill for borrowing money from the state’s 10-year T-Works transportation plan, which Democrats and Brownback have said creates jobs and takes advantage of lower construction costs available now.
Dillmore said that it is “intellectually dishonest” for the bill’s supporters to advocate supply-side economics yet allow for growth in government spending. He said if the concept truly works by spurring enough economic growth to not cut into important government services, then the state shouldn’t have to allow for 2 percent growth in government spending.
“To cap it, what it really says is that I don’t believe that this supply-side thing really works,” he said.
Rep. Richard Carlson, R-St. Marys and chair of the House Tax Committee, said the House plan is designed to spur the economy by reducing tax burdens.
But he withheld comment on how amendments to the plan affect its political viability or how changes could affect poor Kansans. He said he needs to wait until legislative researchers provide more fiscal analysis of the bill with all amendments built into the calculations.
Carlson said it’s unclear when the committee may debate and vote on Brownback’s proposal.
