Tax impasse continues as Kansas House rejects latest tax plan

05/30/2013 10:47 AM

08/08/2014 10:17 AM

A tax plan pushed by two Wichita legislators failed dramatically in a floor vote in the House of Representatives late Thursday, returning the Legislature to an impasse over how much and how to tax Kansas wage earners.

The floor vote was 94-18 against the plan promoted by Wichita Republican Reps. Gene Suellentrop and Mark Hutton. It would have collected about $700 million more from state taxpayers through the next five years, compared to the current tax law that was passed by the Legislature last year.

That was a smaller overall take from taxpayers than the two other two other tax plans voted down in the House in the past week.

House and Senate negotiators will return to the bargaining table Friday morning to consider another plan, the details of which have not yet been released.

Following Thursday’s vote, Suellentrop said he will compare his and Hutton’s plan to whatever goes to the committee next, but he’s certain the upcoming plan will be more expensive for taxpayers.

He also said he had received assurances that the Senate would have approved the plan and the governor would have signed it if it passed the House.

The Suellentrop-Hutton plan would have followed the Senate’s lead and set the state sales tax at 6.3 percent for general purchases and 4.9 percent for food. That would make the effective sales tax rate 5.8 percent to about 6.1 percent depending on income bracket, according to a Republican analysis distributed to lawmakers Thursday.

The proposal also proposed reducing income tax rates and at the same time reducing tax deductions, including a major cut in the standard deductions used by lower- and middle-class families who don’t itemize on their returns.

In an effort to bring aboard small-government conservative Republicans who have resisted previous tax plans, the plan proposed to cap the growth of government spending at 2 percent a year starting in 2016. Proponents wanted to use that money to further buy down income tax rates.

Rep. John Rubin, R-Shawnee, was among several representatives who went to the podium to speak against the Suellentrop-Hutton plan. He said it would go back on the Legislature’s 2010 promise to revert the sales tax to 5.7 percent this year and “this is a regressive tax increase hitting hardest the lower and middle classes who can least afford it.”

Rep. Virgil Peck, R-Tyro, spoke in favor of the plan, saying “this is the best plan we can get.” He said it represented a substantial tax cut for the average family compared to 2012 rates.

Republicans have struggled to come up with a plan to fund desired state services while preserving Gov. Sam Brownback’s proposed “glide path to zero” on state income taxes.

The plan was circulated around the Capitol on Wednesday, and Suellentrop and Hutton led a rare “informal meeting” of lawmakers from both parties Thursday morning to take questions and try to convince their colleagues to support it.

The move represented an end run around House leadership because ordinarily, such negotiations are limited to six members of a House-Senate conference committee appointed by leaders.

At the informal meeting, Hutton told fellow lawmakers the decision is “whether you’re in the camp of, ‘This stands on its own as a tax increase’ or in the camp that says, ‘We’re fixing the sins of 2012.’ ”

He said he thinks it’s better for Republicans than earlier plans because lowering the sales tax on food is a tangible benefit for middle-class voters.

“The House plan that was voted on earlier this week had the $20 million for the sales tax credit,” Hutton said. “I mean, that’s great for that very-low-income group, but what about our base? The people that vote to put us here, the bulk of those people are in that middle class and this bifurcated (sales tax) rate really addresses that.”

In a House Democratic caucus meeting, Rep. Nile Dillmore, D-Wichita, drew astonished gasps when he relayed the comment.

“He (Hutton) said we’ve been worried about what’s the tax impact of this going to be on lower income families; what we really need to do is focus on our base and that’s the upper- and middle-income because they’re the ones that vote,” Dillmore said. “They’re the ones that elected us. He said it right out loud.”

Democrats presented their own analysis that the proposal would constitute a slight tax increase on the bottom 40 percent of wage earners and would basically be a wash for the middle 20 percent.

Their analysis said that the top 40 percent would see tax savings ranging upward from $125 for a person making $76,000. The average taxpayer in the top 1 percent, with earnings of $1.17 million a year, would see a $5,800 tax reduction, the analysis said.

House Minority Leader Paul Davis, D-Lawrence, said the caucus turned to the Kansas Center for Economic Progress to run the report “because the Department of Revenue will not give us these numbers anymore.”

Revenue Secretary Nick Jordan said his department has no policy against running such reports for lawmakers. He said last year there was a delay on a report a Democratic lawmaker asked for due to heavy workload, but added, “We haven’t been asked this session, that I know of.”

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