Gov. Sam Brownback fully backs the aggressive tax-cutting plan that has emerged after months of debate, and he said the state can afford it – though it may force the state to hold down costs.
“I think we can do it,” he said. “I think we’re going to have to continue to be aggressive on holding our costs down.”
The plan negotiated by lawmakers last week would phase out nonwage income taxes on businesses large and small, reduce individual income tax rates and give money to local governments for property tax relief.
House and Senate negotiators are expected to sign off on the plan this week, sending it to the Senate for a vote, most likely within two weeks.
A precise price tag isn’t available yet. But the plan appears poised to cost more than $500 million a year when it is in full effect. The Department of Revenue has forecast enough growth in revenue to afford that level of tax cuts.
If the state has an unexpectedly tough year, Brownback said, he’d look to further control costs, a move that would come after several years of belt-tightening that has included an early retirement program, consolidation of computer systems and reductions in state services.
“I don’t think we have done that well enough,” he said of controlling costs. “I think we’re getting there.”
Kansas hasn’t seen the growth Brownback would like. He said tax cuts would help.
“This gets us on a path to growth,” he said. “You get growth taking place, those numbers will improve. You get decline taking place, those numbers are going to be in trouble.”
Democrats have suggested trouble is the more likely scenario. They’re skeptical about the Department of Revenue’s projections and they note that the estimated impact of the tax cuts doesn’t consider how many businesses may reorganize to avoid paying taxes.
House Minority Leader Paul Davis, D-Lawrence, said Democrats estimate annual shortfalls in the $450 million to $600 million range.
“The major concern I have about the tax plan is I think it eviscerates our ability to restore cuts to public schools,” he said. “What the leadership of the tax committees elected to do is to really spend our entire surplus and perhaps more on the income tax reduction and really leave our schools in the dust.”
Sen. Tom Holland, D-Baldwin City, is serving on a House-Senate conference committee that has agreed in principle to the deal. He said the two Democrats on the six-member committee won’t vote for it, triggering what is called an "agree to disagree," that will then allow the four Republican members to vote it through and send it back to both chambers for a final floor vote.
Democrat leaders say the plan is heavily weighted toward the state’s richest taxpayers.
"It’s shifting basically, the burden from the wealthy and the businesses in the state to our middle class, particularly our working poor,” Holland said.
Senate President Steve Morris, R-Hugoton, said it’s too early to know whether the Senate would support the wide-ranging tax bill because precise analysis of it is not yet available.
He said lawmakers need to look at the likelihood for increased expenses in the state’s pension system, Medicaid and other programs while also considering funding for education.
“In my view, we need to look at what the long-term outlook is if those things are passed,” he said.