TOPEKA — You could eventually pay less in state income tax under a bill the state House passed on Friday.
On a 73-47 vote, representatives approved Senate Bill 1, which would establish a formula to reduce individual and corporate income taxes as other forms of tax revenue rise.
The bill still must go to the Senate.
The bill passed over Democrats' objections that it would lead to billion-dollar deficits in future years and increase pressure on sales and property taxes to fund state operations.
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"When it (income tax) is gone, our three-legged stool is cut to two — and the worst two we can choose," said an explanation of vote filed by Reps. Ann Mah, D-Topeka, and Vince Wetta, D-Wellington. "Sales tax is a regressive tax that impacts low-wage earners most. Property tax is the most hated tax as it makes sure you never really own your property."
Supporters said if tax revenue doesn't rise naturally from growth, the income tax will stay where it is.
"Income tax does not get cut by a dime until revenues increase," said Taxation Committee Chairman Richard Carlson, R-St. Marys.
"There's very little risk to the state," added Rep. Kasha Kelley, R-Arkansas City. "If we don't grow, we don't reduce."
Supporters also said the income-tax reduction would help Kansas compete for business with states such as Texas and Oklahoma, which have lower or no state income tax.
The bill is an amended version of a proposal considered Thursday.
The original bill would have continued indefinitely the three-year, 1 percent sales tax approved last year as the state struggled with the recession.
Under the new version, the increased sales tax will end on schedule, and the rate will drop from 6.3 to 5.7 percent at the end of the three years, Carlson said.
Four-tenths of a percentage point will continue, to fund highway projects, as specified in current law.
Rep. Jim Ward, D-Wichita, said the state faces a $500 million shortfall, and cutting income taxes and the sales tax both will make the situation worse.
"Yesterday, when they brought this bill forward, the only way it made fiscal sense at all — and didn't blow a billion-dollar hole in the budget — was they brought it down by making the sales tax permanent," Ward said.
Under the bill, the state would calculate the percentage growth in its major tax sources after each fiscal year ends. Then, it would cut individual and corporate income tax rates by that percentage.
The top corporate income tax rate could drop over time from 7 percent to 3.5 percent. Individual income taxes could eventually be phased out.
Also Friday, the House voted 105-27 to approve a bill rewriting state income tax laws to help businesses that purchase new machinery.
The change deals with the income tax deductions that businesses receive to account for the annual depreciation in the value of machinery and equipment. The bill allows companies and partnerships to use a more aggressive depreciation schedule, resulting in larger deductions.
The bill pays for the tax break by narrowing other tax breaks that benefit large corporations.
The Senate already has approved a version of the measure, but House members made numerous amendments, so the two chambers will have to negotiate a final version.